OATI Active in Demand Response Ahead of Supreme Court FERC Order No. 745 Ruling
Open Access Technology International, Inc. (OATI) expects increase in Demand Response (DR) participation as a result of the Supreme Court Ruling, which upholds Federal Energy Regulatory Commission (FERC) authority to regulate DR programs in wholesale markets.
Minneapolis, MN: January 26, 2016 – OATI continuously monitors industry activities and regulations, including FERC Order No. 745. On Monday, January 25, 2016, the Supreme Court issued its long-awaited ruling on FERC Order No. 745, upholding FERC’s authority to regulate DR programs in wholesale markets.
FERC had issued Order No. 745 back on March 15, 2011. This was one among several FERC Orders enhancing participation of DR in wholesale markets. Previously, FERC Order No. 719, issued in October 2008, had already paved the way for DR participation in wholesale Ancillary Service markets on an equal basis with conventional generators. There had been little or no opposition to FERC Order No. 719. However, one element of FERC Order No. 745 led to objections from some entities, namely paying DR the full Locational Marginal Price (LMP).
Some entities, including some Independent System Operator (ISO)/Regional Transmission Operator (RTO) economists, argued that DR should not be paid the full LMP but the difference between the value it brings to the system and the cost it saves due to reduced consumption. This idea was proposed under various names, including terms like DR compensation based on “LMP minus G,” etc. This controversy provided a context for others who saw DR participation in wholesale markets in direct competition to their conventional generation portfolio. Among these, the Electric Power Supply Association (EPSA) was most vocal, and filed a lawsuit with the U.S. Court of Appeals for the District of Columbia Circuit, alleging that FERC had overstepped its authority since DR was under state jurisdiction rather than Federal (FERC).
On May 23, 2014, the D.C. Circuit Court vacated FERC Order No. 745 based on the lawsuit filed by EPSA. This started an avalanche, and was interpreted by some (including EPSA) to even negate FERC Orders on participation of DR in wholesale Ancillary Service markets, and even the Capacity markets. The D.C. Circuit Court decision was immediately opposed by FERC and other entities, including some Public Utility Commissions (PUC), DR Aggregators, and some ISOs/RTOs.
On July 07, 2014, FERC petitioned for en banc review of the decision stating that DR is “critical to ensuring that suppliers cannot exercise market power” and that the D.C. Circuit Court’s decision negatively impacts system reliability and wholesale markets. Other entities supporting the review included ISOs, state PUCs, as well as Northeast Utilities, consumer advocates, industrial customers, environmental groups, and DR providers. The request for en banc review was followed by a September 17, 2014, FERC request for the D.C. Circuit Court to delay its final decision while FERC contemplated an appeal to the Supreme Court.
On October 20, 2014 the U.S. Court of Appeals for the District of Columbia Circuit granted FERC’s request for a stay on the decision that vacated FERC Order No. 745. The stay was to be in effect until December 16, 2014 unless the Solicitor General and the commission filed a petition for writ of certiorari for a Supreme Court review of the case. Despite several attempts, no decision was reached on the issue during 2015. Today’s ruling is a victory for FERC, DR providers, and others in support of DR participation in wholesale markets.
Around the time the D.C. Circuit Court ruled to vacate FERC Order No. 745 in 2014, OATI and New York Public Service Commission had each independently tackled the issues of participation of Demand-side assets in wholesale/bulk power and distribution/retail. OATI had developed its pioneering New Distribution System operator (DSO) construct in late 2013/early 2014 embodied in a paper entitled “From ISO to DSO” that was published in the June 2014 issue of Public Utilities Fortnightly. NY State DPS had started its “Reforming the Energy Vision” (REV) initiative in April 2014, subsequently formalized in the Distributed System Platform (DSP) specification in August 2014. These efforts were implicitly addressing a natural way Demand-side assets could be used to address power system operational and planning issues in the emerging industry landscape at both bulk power and distribution levels and the seams between the two.
Ten years ago, OATI started adding to its portfolio of wholesale market and transmission scheduling products a new suite of applications to facilitate DR participation in wholesale markets. More recently realizing the need for low cost grid-edge sensing and communication devices, OATI had developed low-cost hardware to supplement its software product offerings.
Emphasis on environmental issues, including the Federal measures (Clean Power Plan) and State initiatives (Renewable Portfolio Standards), lead to bulk power operational problems facing Balancing Authorities (BA) and ISO/RTO markets. This includes the need for larger than ever volumes of conventional Ancillary Services, and emergence of new grid services. Leveraging the capabilities of Demand-side assets is a meaningful and cost-effective way to help provide such services to reduce the need for investment in conventional generation sources for provision of such services. FERC Orders No. 719, 745, and 1000, among others, help pave the way in this direction. Implementation of FERC Order No. 745 in PJM started in the summer of 2012 resulted in an almost 10-fold increase in DR participation. The Supreme Court’s decision yesterday could set off another massive increase.
OATI provides innovative software solutions that simplify, streamline, and empower the operational tasks required in today’s energy commerce and Smart Grid. With more than 1,800 customers in North America, OATI successfully deploys large, complicated, and diverse mission-critical applications committed to industry standards and stringent NERC CIP guidelines.
OATI (www.oati.com) is a leading provider of Smart Grid, Energy Trading and Risk Management, Transmission Scheduling, Congestion Management, and Market Management products and services. OATI is headquartered in Minneapolis, Minnesota, with an office in Redwood City, California. For more information, please contact email@example.com.