Supreme Court upholds demand-response payments
Stock of Boston-based EnerNOC soars on ruling
THE US SUPREME COURT ruled 6-2 on Monday that the Federal Energy Regulatory Commission has the authority to pay major consumers of electricity for commitments to use less power during peak demand periods.
The so-called demand response payments, which have been used by federal regulators for more than a decade to help curb peak demand, were challenged by power generators who stood to rake in a lot more profit if they were successful. The power generators prevailed at the appellate level, with the court holding that that the demand-response payments were too big and represented improper intrusion into retail power markets. The Supreme Court disagreed, clearing the way for the practice to continue and even expand.
In New England, the demand-response payments are administered by the regional power grid operator, ISO-New England. A spokeswoman for ISO-New England said the grid operator currently has 700 megawatts of demand-response resources under contract, or about 3 percent of this winter’s forecasted peak of 21,077 megawatts.As the Supreme Court explained in its decision, demand-response payments “arose because wholesale market operators can sometimes – say, on a muggy August day – offer electricity both more cheaply and more reliably by paying users to dial down their consumption than by paying power plants to ramp up their production. In the regulation challenged here, FERC required those market operators, in specified circumstances, to compensate the two services equivalently – that is, to pay the same price to demand-response providers for conserving energy as to generators for marking more of it.”
Attorney General Maura Healey applauded the Supreme Court’s decision, saying the ruling “will ensure that this common-sense and proven approach to lowering energy costs and prompting electric reliability will continue to grow and thrive.”