As expected, yesterday the Solicitor General filed a petition for certiorari to the Supreme Court in FERC v. Electric Power Supply Association, asking the Supreme Court to review a May 23, 2014 decision from a divided panel of the D.C. Circuit that invalidated FERC’s Order 745.
Order 745 directs Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to establish rules that compensate demand response resources at the wholesale market price—the same rate that electric power suppliers receive for selling electricity. A group of organizations affiliated with generators of electricity sued FERC, alleging that Order 745 had overstepped the agency’s authority. A majority of the D.C. Circuit panel (Brown, Silberman) agreed, holding that Order 745 exceeds FERC’s jurisdiction over wholesale electricity markets under the Federal Power Act, 16 U.S.C. § 824. The panel majority reasoned that, because demand response involves decisions by end users regarding their energy use, it is inherently “part of the retail market.” Judge Edwards dissented.
Full textLast Friday (May 23), in Electric Power Supply Association v. FERC, a D.C. Circuit panel split 2-1 and vacatedOrder 745, a Federal Energy Regulatory Commission (FERC) rule designed to promote “demand response” (DR). DR is a rapidly growing and valuable means of reducing electricity demand, thereby benefiting consumers and the environment. It is also an important part of the Smart Grid, in which smart meters and devices that communicate with one another and energy service providers can further promote these goals. Indeed, former FERC Chairman Jon Wellinghoff has called DR the Smart Grid’s “killer app.”
The case tested a question of near first impression about the Smart Grid: which level of government regulates it? For now, the D.C. Circuit has held squarely for the states, concluding that DR regulation is a matter of exclusive state jurisdiction. If the decision stands, it will have many adverse implications for federal regulation to advance the Smart Grid and use the wholesale electricity markets to achieve energy reductions and environmental goals.
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