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FERC Adopts NAESB Demand Response and Energy Efficiency Standards

On February 21, 2013, FERC issued a final rule incorporating updated business practice standards of the North American Energy Standards Board (“NAESB”) regarding the measurement and verification of demand response and energy efficiency.  The final rule revises FERC’s regulations (18 C.F.R. § 38.2) by referencing NAESB’s Phase II Demand Response Measurement and Verification, and its Wholesale Energy Efficiency Measurement and Verification standards.  These standards only apply to wholesale markets administered by regional transmission organizations (“RTOs”) and independent system operators (“ISOs”).

The Phase II Demand Response Measurement and Verification standards are a more RTO/ISO-specific version of NAESB’s Phase I Demand Response Measurement and Verification standards, which were adopted by FERC on April 15, 2010.  The new standards: (1) provide common definitions and processes regarding demand response products; (2) address the applicability of performance evaluation, metering, and processes of organized wholesale markets; and (3) require RTOs and ISOs to file revised governing documents addressing performance evaluation methods to be used for demand response products.  FERC stated that the new standards will reduce transaction costs, increase participation in organized wholesale electric markets, reduce differences in regional performance evaluations, and improve the performance measurement of demand response resources.  FERC incorporated these standards without modification.

The Energy Efficiency Measure and Verification standards are new business practice standards that are designed to establish a standardized method of quantifying energy reductions from energy efficiency measures.  In an attempt to create this standardized method, FERC stated that the “standards define terms and definitions that can be used to facilitate communications and provide standards for measurement and verification methodologies for energy efficiency in organized wholesale electric markets.”  In its final rule incorporating the standards, FERC added a minor modification to incorporate a plus or minus two percent accuracy requirement for energy efficiency measuring equipment.

In addition to incorporating both sets of standards, FERC addressed the manner in which ISOs and RTOs can implement the standards.  FERC stated that ISOs and RTOs must revise their Open Access Transmission Tariffs to include the new standards, except for standards that do not require revised tariff provisions; ISOs and RTOs may incorporate those by reference.  Additionally, FERC stated that because some of the standards can be incorporated by reference and do not require their own stand-alone tariff filing, ISOs and RTOs may incorporate them through an unrelated tariff filing before December 31, 2013.

FERC’s final rule becomes effective sixty days after publication in the Federal Register, with compliance required the same day the rule takes effect.  A copy of the rule is available here.