The United States Supreme Court ruled in January, 2016 that the Federal Power Act (FPA) authorizes the Federal Energy Regulatory Commission (FERC) to regulate wholesale market operators’ compensation of demand response participants. It also upheld FERC’s 2011 Demand Response Order 745 which states that demand response providers must be reimbursed at the same price paid to generators. In other words, demand response providers will be compensated for the amount of electricity load that was reduced at the full locational marginal pricing (LMP) rate at the time of load cutback.
Directly following the announcement of the decision, FERC Commissioner Tony Clark issued a statement suggesting regulators should reconsider how demand response is compensated calling into question whether Order 745 would be reopened to possibly changing the compensation mechanism. However, three of FERC’s four commissioners, including FERC Chairman Norman Bay told attendees at the National Association of Utility Regulatory Commissioners winter meeting that they have no intention to reconsider how demand response is valued.
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