My June essay, "D.C. Circuit Kills Demand Response Compensation: Now What?" offered ways to keep demand response traffic moving around the court's decision invalidating FERC Order 745. To recap: The court held that FERC has no power to order (or approve regional transmission organization tariffs requiring) buyers of energy in RTO-organized markets to compensate retail consumers for demand response. The Court's reasoning seemed to have two prongs: (1) FERC cannot order compensation to retail consumers for any product, because it has no jurisdiction over "retail markets"; and (2) FERC cannot order compensation for demand response, because demand response is not a FERC-jurisdictional product.
Thanks to many conversations since June, here are four more options for action. Credit for insights goes to my colleagues; blame for flaws lies with me. Following the four options are four mistakes to avoid.
Four Options for Action
Can FERC order compensation for demand response, if the demand response is sold by, and the compensation is received by, entities other than retail consumers? The court condemned the compensation because it went to retail consumers. But the universe of possible sellers includes load-serving entities, and non-utility aggregators (provided the latter are not merely agents for retail consumers, but instead take economic risk by buying demand response from retail consumers and reselling into the RTO market). The option escapes the court's Scylla because . . .