U.S. Court of Appeals Overturns FERC Order | FTI Consulting

U.S. Court of Appeals Overturns FERC Order

Economic Consulting

June 3, 2014

FTI Consulting’s William Hogan advised the lead petitioner, the Electric Power Supply Association, and examined alternative pricing models, such as dynamic pricing, and analyzed the Rule’s implications for consumers. FTI Consulting played a critical role in explaining how the FERC’s demand response compensation framework would overcompensate demand response providers at the expense of other electricity market participants.

Situation

  • The U.S. Court of Appeals overturned Federal Energy Regulatory Commission (FERC) Order No. 745, issuing an order vacating and remanding the Order on the basis that FERC does not have jurisdiction to regulate demand response.
  • The Court noted that even if FERC did possess jurisdiction to regulate demand response, the compensation ordered by FERC is arbitrary and capricious.
  • Due to the disconnect between wholesale and retail prices in the electricity market and the absence of retail price signals, retail consumers do not adjust their demand during peak-usage periods. To incentivize less consumption of electricity during peak hours, the FERC established the Final Rule (Order No. 745) to stimulate a “demand response”.
  • Our client, Electric Power Supply Association, filed a petition for review of the FERC Final Rule Order No. 745 in the U.S. Court of Appeals for the District of Columbia Circuit.

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