On January 9, 2015, FERC accepted proposed modifications to the ISO New England Inc. (“ISO-NE”) Transmission, Markets and Services Tariff (“Tariff”) designed to fully integrate demand response into ISO-NE’s wholesale energy and reserve markets.  The Commission’s action comes several months after the D.C. Circuit’s ruling in Electric Power Supply Association v. FERC in which it vacated FERC Order No. 745—the foundational order in which the Commission required organized wholesale energy markets administered by a Regional Transmission Organization or Independent System Operator to compensate demand response resources at the market price for energy (see May 27, 2014 edition of the WER).

On October 31, 2014, ISO-NE and the New England Power Pool Participants Committee submitted revisions to the ISO-NE Tariff to fully integrate demand response resources into the ISO-NE wholesale energy and reserve markets.  More specifically, ISO-NE stated in its filing that the proposed revisions would:

  1. implement a “common dispatch model” for demand response resources that are capable of producing Net Supply (energy injected at the Retail Delivery Point by a Demand Response Asset with Distributed Generation), which will allow ISO-NE to properly account for reserves from these resources;
  2. integrate demand response resources into the existing operating reserves structure;
  3. permit demand response resources to participate in the forward reserve market;
  4. revise the auditing rules for demand response resources;
  5. change the demand response baseline adjustment factor (used to assess a demand response resource’s real-time capability and to quantify its responsiveness to dispatch instructions); and
  6. implement a number of ancillary market rule changes that will improve demand response measurement and verification.

In its January 9, 2015 order, the Commission accepted the proposed Tariff revisions, finding them consistent with ISO-NE’s Commission-approved plan to fully integrate demand response resources into ISO-NE’s wholesale electricity markets.  The Commission also found that: i) under a common market structure, all resources would have comparable obligations and be paid the comparable price for delivery; ii) dispatching resources for energy and operating reserves could be co-optimized to produce the most efficient market outcome; and iii) expanding the pool of resources available to supply energy and operating reserves in real-time and on a forward basis will enhance competition and reliability.

The Commission noted the continued uncertainty regarding the D.C. Circuit’s ruling in Electric Power Supply Association v. FERC (the United States Department of Justice has petitioned the U.S. Supreme Court for a writ of certiorari), but was undeterred in issuing its ruling.  “While we acknowledge that the EPSA decision creates uncertainty for demand response resources in FERC-jurisdictional wholesale markets, we find it appropriate at this time to proceed with these market enhancements until further action is taken.”

A copy of the Commission’s order may be found here.