Court Denies En Banc Rehearing of Order Vacating FERC Demand Response Compensation Order

The U.S. Court of Appeal of the D.C. circuit has denied en banc rehearing of its earlier order striking down FERC Order 745, FERC's order which provided that demand response shall be paid full LMP.

Ostensibly a win for generators, the strategy could backfire as states, now with sole jurisdiction for compensating demand response, could aggressively procure and compensate demand response as part of integrated portfolio planning, procuring demand response in situations where it was not economic to do so under FERC Order 745, but is economic to do when valuing externalities such as environmental considerations and distribution system benefits.

New York PSC Staff have already proposed immediately requiring the utilities to file tariffs for the procurement of demand response for both capacity and energy.

For more discussion on how the vacating of Order 745 could actually harm generators by encouraging greater state and utility-administered procurement of demand response, see RetailEnergyX.com's commentary on the issue, as well as commentary on a similar issue regarding FERC jurisdiction.