SCOTUS Demands Response from Demand Response

Posted by on February 3, 2016

The United States Supreme Court recently issued a key decision in favor of clean energy and grid modernization in a case between the Federal Energy Regulatory Commission (FERC) and the Electric Power Supply Association (EPSA). In a masterpiece of accessible language and compelling logic, Justice Elena Kagan’s January 25 majority opinion captures the essence of what Demand Response is, explains why it matters enough for FERC’s regulatory approach to remain viable. If you’ve never read a Supreme Court decision before, this one is worth giving a look for its readability and clarity about a topic, Demand Response, which most usually find too arcane to tackle.

Demand Response (DR) refers to the ability of grid operators to compensate customers for reducing electricity consumption in response to price and reliability conditions. In wholesale markets, DR can provide much the same value to the grid as generation, but does so in a unique way that reduces prices, bolsters reliability, and avoids emissions. As such, FERC exercised its jurisdiction over wholesale power to require wholesale market operators to value DR at the same price as generation. EPSA, representing power generators who risk losing market share to DR, argued that FERC had overstepped its authority by effectively regulating retail rates, responsibility for which clearly rests with the states.

We applaud the Court’s thoughtful conclusion that Demand Response should be recognized for its full value, and we support the Court’s decision that FERC can regulate wholesale DR markets without stepping on states’ rights. For DR to provide its benefits as broadly and quickly as possible requires simultaneous modernization of our grid infrastructure and regulatory frameworks. We are optimistic that this Supreme Court decision underscores the principle that innovation, both in technology and policy, should not be unduly impeded by historical habits when it comes to the energy system that serves as the provider of comfort, enabler of commerce, and engine of our modern economy.