Constantine Gonatas’s article “A Buyer’s Market” (May 2011) takes the view that the March 15 Federal Energy Regulatory Commission (FERC) Order 745 on demand response compensation is “flawed.” However, many of the arguments Gonatas advances to support this view are, themselves, flawed.
Gonatas asserts that “it isn’t obvious how a wholesale tariff could make explicit distinctions among end-user customer classes, taking into consideration retail rate questions FERC studiously finessed.”
In fact, however, there is no way under the current regulatory regime. Ignoring this reality is an exercise in fantasy confusing retail regulation with wholesale regulation. Of course, stating that “these restrictions are essential to avoid market distortions” is a recipe for doing nothing or simply—again possibly fantasizing—having states develop DR programs at retail that will somehow mysteriously solve all of the other inefficiencies that exist at retail to arrive at the economically efficient outcome.
Gonatas also claims that “full LMP compensation for industrial customers results in curtailing economic output worth more than the power saved.”