Update Regarding D.C. Circuit’s Demand Response Ruling

by Cadwalader, Wickersham & Taft LLP
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Since our last post regarding the D.C. Circuit’s demand response ruling, several notable developments have occurred in both the Electric Power Supply Ass’n v. FERC proceeding itself, and in other, related proceedings. 

Electric Power Supply Ass'n v. FERC

On June 11, 2014, FERC announced that it will seek en banc review of the D.C. Circuit’s May 23, 2014 decision striking down Order No. 745, FERC’s demand response regulation.  In making this decision, Chairman LaFleur sought the input of other FERC Commissioners, including Commissioner Clark.  In conjunction with FERC’s announcement that it would seek en banc review, Commissioner Clark released a statement concurring with the D.C. Circuit’s decision with regards to both jurisdiction and the merits.  Commissioner Clark stated “I . . . believe the court was wholly correct in its assessment of the pricing mechanism adopted by the Commission,” criticized the Commission for failing to take a more modest approach to demand response compensation from the beginning, and encouraged the Commission to pursue price-responsive demand response initiatives in the future.  Moreover, he expressed that he found the majority opinion from the D.C. Circuit persuasive with regards to the jurisdictional issue; stating:  “[t]here simply has to be a jurisdictional ‘bridge too far’ for FERC under the FPA.  The line the court drew, distinguishing between wholesale supply sales and retail consumption/compensation, is not unreasonable, though it could have far-reaching impacts.”

Other Proceedings Related to the D.C. Circuit's Opinion

On June 11, 2014, FERC issued a notice in the FirstEnergy Service Co. v. PJM Interconnection, L.L.C. matter, extending the time for answers, interventions, and protests “to, on, or before 30 days after the submission of an amended complaint” from FirstEnergy.  FirstEnergy’s “fast track” complaint against PJM requested that: (1) “all portions of the PJM Tariff allowing or requiring PJM to include demand response as suppliers to PJM’s capacity markets” be removed from the PJM tariff; (2) a refund effective date be set; and (3) the results of PJM’s most recent capacity market auction results be stayed and considered void.  In its complaint, FirstEnergy “reserved its right to amend this complaint.”  Many in the industry have remarked that FirstEnergy may have “jumped the gun” with its expedited filing.  And, now, FERC has taken FirstEnergy up on this reservation of rights to amend.  Expect FirstEnergy to amend its complaint likely to include additional arguments and support. 

In addition, a federal district court judge in Massachusetts refused to stay two proceedings (FERC v. Lincoln Paper & Tissue, LLC and FERC v. Silkman) involving demand response providers.  There, FERC requested the stays in light of the D.C. Circuit’s decision.  However, according to the pleadings, it failed to offer substantive justifications for its request, citing only that Lincoln Paper and Tissue, LLC had supplemented its motion to dismiss on May 30, 2014, arguing that the D.C. Circuit’s decision served as grounds for dismissing the action.  Thus, the cases will continue during the pendency of any review of the D.C. Circuit’s decision.

The initial post regarding the D.C. Circuit’s demand response decision and FirstEnergy’s complaint can be found here.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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