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The court steals demand response from FERCs bag of tricks.
As I sit down to write, the U.S. Court of Appeals for D.C. Circuit only hours ago dropped a bombshell, declaring in the case of EPSA v. FERC, No. 11-1486, decided May 23,2014 by a vote of 2-1, that Federal Energy Regulatory Commission Order 745 is completely null and void.
And for that clever bit of timing, waiting until Friday afternoon, so as not to roil markets, I applaud the court. But in forcing reporters back to their computer screens, to give up a portion of their Memorial Day holiday weekends in order to grind out a story to make their Tuesday deadlines, I can only curse.
You see, in treating demand response as the moral equivalent of electric generation, as it did in 2011 in Order 745 - that is, by rewarding forgone consumption with a payment equal to the going wholesale market price for day-ahead energy, known as the locational marginal price, or "full LMP," without any offset for "G" (that being the cost of buying energy that is thereby avoided) - FERC had sought to remove barriers and place DR on an equal ^m footing with power plants. Congress in fact just a few years earlier had told the commission to do exactly that, in sec. 1252 of the 2005 EPACT law.
But no. Choosing not to buy electricity, the court said, is a retail transaction, every bit as much as buying. So when the regulator promises a payment or credit for forgone consumption, the court explained, he is setting a retail rate - just the same, and no different in concept, than fixing the per-kilowatt-hour charge we all see on our monthly power bills. And so the court ruled: "Because FERCs rule entails direct regulation of the retail market - a matter exclusively within state control - it exceeds the commission's authority."
But as...