EPSA Files Brief in Demand Response Pricing Case with Supreme Court

The Electric Power Supply Association (EPSA) and other respondents filed a brief with the U.S. Supreme Court on August 31– seeking to keep demand response (DR) within the purview of the states and not the Federal Energy Regulatory Commission (FERC)

The case, EPSA v. FERC, originated in 2011, when FERC created Order 745, in order to ensure that providers of DR would be paid on equal footing with traditional generators in the wholesale energy market. The federal agency claimed that Order 745 was within its purview, based on its authority under the Federal Power Act to regulate pricing.

However, in May 2014, the DC Circuit Court ruled that FERC could not regulate demand response in wholesale energy markets, striking down Order 745, and setting the stage for this Supreme Court face-off.

In their brief, the respondents label Order 745 as a “blatant jurisdictional overreach.” Conversely, FERC and its fellow petitioner, EnerNOC, argue that the order concerns only the wholesale energy market, which is directly within the of federal agency’s purview.

In addition to EPSA, the respondents to the case include the American Public Power Association (APPA), the National Rural Electric Cooperative Association (NRECA), Old Dominion Electric Cooperative (ODEC), the Edison Electric Institute (EEI), the PJM Power Providers Group (P3), PPL Electric Utilities, and Talen Energy Marketing.

“The case is not nearly as complicated as the Federal Energy Regulatory Commission (FERC) and its supporters would make it out to be,” the brief begins, going on to note that, “There is no dispute that the Federal Power Act divides jurisdiction over electricity sales between the states and FERC, expressly preserving the states’ traditional and exclusive authority to regulate retail transactions, while granting FERC exclusive authority to regulate interstate wholesale transactions found by this court to be outside the states’ authority to regulate. There is also no dispute that the transactions FERC seeks to regulate through its ‘demand response’ rule are retail transactions.”

The respondents acknowledge that, because the U.S. Congress divided jurisdiction between the states and FERC, retail prices in many states do not always reflect the real-time wholesale cost of electricity. However, they do not agree that the disconnect between wholesale and retail rates is the “problem” that FERC perceives it to be – and do not think that the solution lies in “offering a bounty to retail customers who reduce their retail purchases.”

“The only real dispute,” the respondents argue, “is whether the fact that those bounties are paid by wholesale-market operators allows FERC to regulate retail demand and the effective price of retail transactions.

“It does not, they say, contending that, “The FPA leaves such regulation with the states, where it has always resided. FERC cannot circumvent that clear congressional decision by inviting retail customers into a wholesale market and ordering wholesale market operators to compensate them for reducing retail sales.”

Further, the brief states, “One can debate the merits of the states’ policy choices concerning the retail market, but Congress clearly placed the authority to make those choices with state regulators, who are closer and more responsive to the people.”

In conclusion, the respondents state, “FERC has no more jurisdiction to regulate retail-level ‘demand response’ through payments to retail customers than it does to raise retail prices directly…. The demand FERC seeks to regulate is still retail demand, the sales it seeks to affect are still retail sales, and the prices it seeks to change are still retail prices.”

The Supreme Court is expected to review the case during the term starting in October.

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