Dive Brief:

• Utilities and state regulators are protesting a decision from federal regulators to prevent states from blocking demand response aggregates' participation in the wholesale markets.

• In several requests for rehearing filed with the Federal Energy Regulatory Commission on Tuesday, utilities within the Midcontinent Independent System Operator (MISO), the investor-owned utility trade group Edison Electric Institute, the National Association of Regulatory Utility Commissioners (NARUC) and individual state commissions questioned the FERC's March decision — Order 2222-A — denying states an opt-out option when it comes to allowing aggregated demand response to bid into the wholesale markets.

• Demand response and clean energy advocates had praised the ruling as the commission's next step in lowering barriers to distributed energy resources under Order 2222. But utilities and state regulators say the order oversteps FERC's authority.

Dive Insight:

State regulators launched similar charges against FERC's order on energy storage, alleging that the commission was illegally encroaching on state authority over the distribution system. The U.S. Court of Appeals for the D.C. Circuit ruled in FERC's favor last summer, but NARUC in its request for rehearing on 2222-A argued the circumstances in this instance are different.

In that case, state programs prohibiting or limiting energy storage from participating in wholesale markets didn't exist; in this case, states do have programs in place addressing demand response. Therefore, FERC is actively removing state authority in this case, in violation of a 2009 order that allowed states to opt-out of demand response programs implemented by regional grid operators, NARUC and utilities argued. That opt-out provision was intended to ensure states were able to address costs at the distribution level, which might not be seen or fully understood by federal regulators, groups, including the North Carolina Utilities Commission, Louisiana Public Service Commission and the Mississippi Public Service Commission, argued.

Further, Order 2222 has proven to be complicated. Several grid operators have already requested a timeline extension, which NARUC argued is further evidence that implementation would not be easy, and therefore states should be given all the flexibility possible.

"As we have said before, some states are open if not eager to accommodate DER participation in the wholesale markets, but as we have also said repeatedly not all states are in the same place. … The opt out would have provided the flexibility states need to manage the energy transition at their own pace," NARUC said in its comments. "Now, however, with Order No. 2222-A, FERC has taken an already complicated, difficult situation and made it worse." 

Commissioners Mark Christie and James Danly both dissented on 2222-A, with Christie arguing that the order would create "substantial" costs for consumers through the local grid. He pointed out that utilities and regulators aren't opposed to demand response, but that local entities would better address the costs associated with it through their own programs.

FERC Chair Richard Glick and Commissioners Neil Chatterjee and Allison Clements, however, in voting for the order, argued that such wholesale market decisions were well within the commission's jurisdiction, and that preventing the opt-out provision was an essential next step to lowering barriers to all distributed energy resources, as the original order called for.

"This was necessary to realize the full promise of Order 2222," said Chatterjee during FERC's open meeting last month.

DER advocates have since praised the order as well, arguing that the opt-out rule acted as a barrier to good demand response programs, and that FERC's order 2222-A will prevent the waste of thousands of megawatts of power.