FERC lifts restrictions on demand response in organized power markets

Dive Brief:

  • The Federal Energy Regulatory Commission issued an order last week lifting restrictions on demand response resources participating in wholesale power markets, freeing up more resources to help manage the grid during times of high demand.
  • The commission's decision is the result of a complaint filed by the Natural Resources Defense Council and a coalition led by the New York Public Service Commission. The parties argued that New York ISO rules improperly prevented customers from participating in both wholesale-level and retail-level demand response programs.
  • Former commissioner Norman Bay added a lengthy concurrence to the order on his last day at FERC. The commission, down to just two members, now lacks manpower to bring a quorum together.

Dive Insight:

In their complaint, the NY PSC and its coalition members argued that NYISO's buyer-side power market mitigation rules present an unreasonable barrier for customers who wish to participate in DR programs in both the wholesale and retail markets. 

The rule at the heart of the matter is the minimum offer price rule (MOPR), which essentially restricts some supply bids to a floor price. 

In a blog post, NRDC explained that while the rules were written to prevent market manipulation, "they now sweep too broadly."

"NYISO’s minimum bid rules, for example, can now apply to bids that are lower than they otherwise would have been because the supplier receives revenue from state-administered programs outside of NYISO’s markets," the organization wrote. 

The commission's decision issues a blanket exemption for new special case resources from the New York ISO's minimum offer rule. But in Bay's concurrence, he went further to say the entire concept of a MOPR needs to be reconsidered.

"Despite the best intentions of the Commission, in my view, the MOPR has turned out to be unsound in principle and unworkable in practice," Bay wrote. "No other market in the United States is subject to the same construct in which a federal agency reviews state action and imposes an administrative price floor on supply offers from certain resources that have received state support."

The premise of minimum offer rules was "based on an idealized vision of markets free from the influence of public policies," Bay said. "But such a world does not exist."

Bay's departure, following a shakeup in commission leadership, leaves FERC severely shorthanded and will keep major decisions from being issued. Until the commission gains a third member, some duties have been handed over to FERC staff.

This post has been updated to add information from the FERC decision.

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Filed Under: Efficiency & Demand Response
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