Energy Choice
                            

Matters

Direct Energy Offers Novel Interpretations of Court's Order Vacating Order 745, Future of Demand Response

September 23, 2014

Email This Story
Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

In its comments to the New York PSC on a straw proposal in the Reforming the Energy Vision proceeding, Direct Energy offered several novel interpretations of the impact of a Court's order which vacated FERC Order 745, as the Court said that FERC lacked authority to set compensation for demand response, since demand response concerns retail ratemaking.

Direct Energy's comments were prompted by a discussion in the REV straw proposal concerning demand response and Staff's suggestion that, due to the Court's ruling that FERC cannot set compensation for demand response, the PSC immediately direct utilities to file tariffs for the procurement of demand response (click here for story).

Direct Energy said that it was premature to undertake such action.

"While we agree that the Commission should monitor the status of FERC Order 745 closely and be prepared to take action should there ultimately be a permanent impairment of the NYISO's ability to operate its demand response programs, we are not convinced that having all of the utilities develop DR tariffs is an appropriate response to the situation at this time. This is especially true if the utility DR tariffs are meant to go beyond the reliability programs currently operated by the NYISO (and Consolidated Edison, for that matter) and into the realm of purely economic DR. (This appears to be the case, as 'economic demand response' is listed in the Staff Proposal as one of the functions of the utility in its role as DSP. Staff Proposal at 20, Table 1.)," Direct Energy said.

"There are many interpretations of the impact of the DC Circuit's May 23, 2014 decision on the DR market in the RTOs subject to FERC jurisdiction, and we tend to agree with those who see it as having a more limited impact than that envisioned by the Staff Proposal. As the Proposal notes, the court's decision implicates FERC's jurisdiction over DR to the extent it is a retail product, which would be subject to state control. If upheld, the decision might prevent NYISO from allowing retail customers to participate directly in its reliability DR programs, the Special Case Resource and Emergency Demand Response Program. In our view, even this result might not have a major impact on the DR market in New York, for several reasons," Direct Energy said.

"First, one interpretation of the DC Circuit's decision is that it would not affect in any way the ability of demand response providers (like Direct Energy) that are load serving entities from continuing to interact with the NYISO as they do today. When Direct Energy or another DR provider aggregates DR assets and incorporates them into its portfolio of resources that it bids into the ISO markets, it is engaging in wholesale activities over which FERC and the NYISO have clear jurisdiction. There is no reason to believe the DC Circuit's decision would prevent these activities from continuing," Direct Energy said.

"Second, regardless of the ultimate disposition of the DC Circuit's decision, the NYISO will remain a single-state ISO which, in conjunction with the Commission, has sufficient authority to ensure the reliability of the grid. Should the NYISO lose the ability to operate its reliability DR programs as it does today, in our reading there is nothing in the DC Circuit's decision that would prevent the Commission (which would, by definition, have jurisdiction over whatever aspect of the NYISO programs that had been found to be retail in nature and, thus, outside the jurisdiction of the NYISO) from delegating to the NYISO the authority to operate the DR programs required to maintain the reliability of the grid. In this view (which we acknowledge that everyone might not share), the affirmation of the DC Circuit's decision would only be a problem for the NYISO DR programs if the Commission decides to make it a problem," Direct Energy said.

"The alacrity with which Staff intends to involve the utilities more directly in the DR market could cause as much concern as the DC Circuit's decision itself," Direct Energy said.

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Director of Channel Development
• NEW! -- Energy Sales Representative -- Texas -- Dallas
• NEW! -- Vice President, Operations
• NEW! -- Pricing Analyst
• NEW! -- Sr. Pricing Analyst -- Retail Provider -- Houston
• NEW! -- Regional Sales Manager - Texas -- Retail Supplier
• NEW! -- Vice President of Sales & Marketing
• NEW! -- Regional Sales Manager-PA -- Retail Supplier
• NEW! -- Regional Sales Manager- IL
• NEW! -- Regional Sales Manager - New England -- Retail Supplier
• NEW! -- Vista Energy Controller - Retail Energy Supplier -- Houston
• NEW! -- Energy Consultant
• NEW! -- Power and Natural Gas Scheduler L-1 -- Retail Provider -- Texas