Blogs, Energy Efficiency, Solar, Storage, Wind Power

DC Circuit Issues A Stay On Vacating of Order 745 & The Market Reacts

On October 20, the Court of Appeals for the DC Circuit issued a stay on its ruling to vacate Order 745. The stay will be in effect until December 16, which will give the Solicitor General and FERC time to issue a writ of certiorari (an order to deliver its record of case) to the Supreme Court. If the case goes to the Supreme Court, then Order 745 will remain in effect until a final ruling is issued on the matter. For a refresher on Order 745, which lays out FERC’s demand response program to compensate end-users for reducing their consumption in wholesale organized markets, see our previous blog post here.

In FERC’s request to the DC Circuit for a stay of its decision on Order 745, FERC indicated that it may petition the Supreme Court for review. There is currently a great deal of uncertainty on the scope of FERC’s jurisdiction between wholesale and retail markets. While policy professionals are working to resolve this jurisdictional conundrum, stakeholders are wading in a bath of market uncertainty. FERC has jurisdiction over transmission lines, wholesale sales of electric energy, and matters that affect rates in connection with the wholesale sale of electric energy. Since most anything could be argued to have some indirect affect on wholesale rates, how do we know when it has enough of an affect on wholesale markets that it falls under FERC’s jurisdiction? Below are three examples where this question was answered differently.

First, in its ruling on Order 745, the DC Circuit ruled that FERC’s jurisdiction was very narrow, that any regulation of the retail market was out of bounds even if there were retail market issues that have an affect on wholesale rates. Second, in FERC’s request for a stay of the DC Circuit’s vacating of Order 745, FERC noted that MD and NJ’s initiatives to have their utilities enter into contracts for differences with state commissioned natural gas plants were vacated because they affected wholesale rates and thus infringed FERC’s jurisdiction. In this instance, FERC’s jurisdiction over matters that affect wholesale rates was viewed more broadly and thus the states’ method for incentivizing new generation was struck down. Third, the DC Circuit recently found that transmission planning under Order 1000 fell under FERC’s jurisdiction and upheld the Order. In this instance, transmission planning was found to affect wholesale rates and thus falls under FERC’s jurisdiction even though transmission line siting and planning had traditionally been left to the states. FERC may be seeking clarification from the Supreme Court on when exactly it has jurisdiction over matters that affect wholesale rates, and thus clarify what aspects of energy suppliers’ business fall under FERC.

Although Order 745 may eventually stand, stakeholders are planning for it to be struck down in order to enhance market certainty in the interim. For example, PJM has proposed a plan in a recent report to keep DR in its capacity markets by essentially allowing wholesale entities, utilities and competitive retail service providers rather than retail end users, to bid into the market with load curtailment. The curtailment commitments would function as a commitment by the load serving entity to reduce its wholesale demand at PJM’s request during the established compliance period. This avoids having retail end users being “lured” into the wholesale market, and has them compensated by utility and state demand response programs.

This article was co-written with Natara Feller.