Demand Response: Getting the Prices Right

Deck: 

The rule works in the direction of more regulation to hamper innovation and counteracts incentives the rule creates.

Byline: 

William Hogan

Author Bio: 

William Hogan is the Raymond Plank Professor of Global Energy Policy at the John F. Kennedy School of Government.

Fortnightly Magazine - March 2016
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The legal issue over the Federal Energy Regulatory Commission's (FERC) jurisdictional authority to set demand response prices is settled. 1 In the so-called EPSA (Electric Power Supply Association) case, the Supreme Court found for FERC in support of its demand response Rule in Order 745.2

"1. The [Federal Power Act] provides FERC with the authority to regulate wholesale market operators' compensation of demand response bids. ..."3

The second part of the decision addressed the compensation for demand response.4 Here the Supreme Court held that FERC had followed procedures to ensure that its demand response pricing mechanism is not arbitrary and capricious.

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