U.S. Supreme Court to decide demand response case.
Ken Silverstein is editor-in-chief of Public Utilities Fortnightly. Contact him at email@example.com. Bruce Radford is executive editor of Public Utilities Fortnightly. Reach him at firstname.lastname@example.org.
Cost-conscious commercial and industrial customers may be oblivious to the legal issues surrounding their energy choices, but their demand response providers are not. The U.S. Supreme Court will now decide whether those services will be regulated by the federal government or state utility commissions.
Demand response provides insight for commercial and industrial customers into the nature and patterns of their energy consumption. That allows them to run specific applications at times of the day that are more favorable under the applicable utility rate structure - something that also eases transmission congestion while avoiding some electric generation or expensive power purchases on spot markets.
The flip side, though, is that demand response tools are diverting a share of revenue from power producers and utilities that still own generation, which together take in billions each year. Their beef: the current rule for demand response has allowed regional market operators to compensate suppliers of demand response in the same amount as is earned by the generators that actually produce power.
To be clear, the High Court has combined two lower court rulings and will consider both of them. The first issue is whether the U.S. Federal Energy Regulatory Commission (FERC) has primary responsibility over these transactions in wholesale markets or whether the state utility commissions oversee them as retail transactions.