Generator Immediately Seeks to Apply Court Ruling on Demand Response to Capacity Market

FirstEnergy Service Company filed a complaint at FERC requesting that the Commission issue an order requiring the removal of all portions of the PJM tariff allowing or requiring PJM to include demand response as suppliers to PJM's capacity markets, with a refund effective date of May 23, 2014

FirstEnergy filed the complaint in response to an Appeals Court's ruling on Friday that FERC exceeded its authority when it set rules for compensating demand response at full LMP in the energy market under Order 745 (see related story today).

"While Order No. 745 involved energy markets, the Court's rationale necessarily extends to include capacity markets as well. Like energy markets, the PJM Reliability Pricing Model includes retail demand response as a component of the capacity auction parameters and registered demand response providers are paid to reduce retail demand to a specified level in order to qualify as capacity resources. This directly affects the demand for, and price of, capacity supplies," FirstEnergy said.

"FirstEnergy therefore requests that the Commission direct PJM to remove all portions of its tariff allowing or requiring the inclusion of demand response as suppliers in PJM's capacity market," FirstEnergy said.

FirstEnergy had also requested that the Commission issue an order requiring PJM to delay the release of its auction results pending rehearing of the D.C. Circuit's Order, but FERC did not act on this request prior to the scheduled release of the results

PJM issued a statement Friday on the Court ruling, which did not specifically cite the FirstEnergy complaint. PJM said that it is aware of the Court decision, and that PJM is still reviewing the order and its ramifications with respect to PJM's energy, ancillary service and capacity markets.

"PJM's view is that the order is not yet in effect given that the court issued a second order on May 23, 2014, directing the Clerk of the Court to withhold issuance of the mandate on the order until seven days after disposition of any timely petition for rehearing or petition for rehearing en banc," PJM said.

"Therefore, PJM hereby advises that it will continue to abide by the terms of its Tariff and Operating Agreement as relates to demand response in its markets. In other words, PJM will continue to operate business as usual," PJM said.