In a 2-1 decision with potentially broad ramifications for power markets, the U.S. Court of Appeals for the D.C. Circuit has overturned the Federal Energy Regulatory Commission’s rule requiring ISO and RTOs to pay electricity consumers for “demand response,” that is, to pay them for reducing their electric usage during certain periods. The case was brought by a group of industry trade groups including the American Public Power Association, Edison Electric Institute, Electric Power Supply Association and the National Rural Electric Cooperative Association.
As D.C. Circuit Judge Harry Edwards, one of the presiding judges, pointed out in his dissent, the court’s decision is an “unfortunate consequence” resulting in a “promising rule of national significance… laid aside on grounds that… are inconsistent with the statute, at odds with applicable precedent, and impossible to square with our limited scope of review.”
Demand response has allowed utilities and grid operators to alleviate grid load by incent consumers who use less electricity during times of peak energy demand, increasing reliability.
“Demand response relies on people, not power plants, to meet electrical demand, and is cleaner and more cost-effective than building new generation. As the U.S. advances into the clean energy economy, demand response should play an increasingly larger role in how our electricity is produced, delivered, and consumed,” the Environmental Defense Fund said in a “friend of the court” brief.