It’s a great day for the Federal Energy Regulatory Commission (FERC) and supporters of demand response. Today, the United States Supreme Court issued its decision in FEDERAL ENERGY REGULATORY COMMISSION v. ELECTRIC POWER SUPPLY ASSOCIATION ET AL., upholding the FERC’s authority to regulate wholesale demand response as well as FERCs method of compensating demand response participants. In the 6-2 decision, the Supreme Court ruled:
- The practices at issue directly affect wholesale rates.
- The Federal Power Act (FPA) provides FERC with the authority to regulate the wholesale electric market.
- FERC has not regulated retail sales.
- FERC’s method of compensating demand response participants at locational marginal pricing (LMP) is not arbitrary and capricious.
- A contrary view would conflict with the FPA’s core purposes by preventing the use of a tool (demand response) that will curb prices and enhance reliability in the wholesale electricity market.