FERC denies generator arguments on NYISO demand response market

The Federal Energy Regulatory Commission (FERC) on May 9 upheld a previous ruling on the day-ahead demand response program of the New York Independent System Operator (NYISO), finding that demand response aided by the use of a customer’s behind-the-meter generation need not be distinguished from demand response resulting from a customer’s reduced power consumption.

The order denied a joint rehearing request from the Electric Power Supply Association (EPSA) and the Independent Power Producers of New York (IPPNY).

The generator groups challenged a Nov. 22, 2013 decision that found NYISO’s day-ahead demand response program discriminatory because it excluded participation from demand response facilitated by behind-the-meter generation, while allowing participation from demand response without the use of behind-the-meter generation.

Behind-the-meter generation can directly serve a customer’s electricity demand in lieu of, or in addition to, any power the customer takes through the NYISO grid, FERC noted in the order.

While NYISO filed to comply with the 2013 order, which FERC said it will act on in a separate order, EPSA and IPPNY sought rehearing, asserting that FERC disregarded its own definition of demand response and erred by treating demand response aided by the use of behind-the-meter generation the same as demand response without behind-the-meter generation.

Because a customer does not reduce consumption of electricity when behind-the-meter generation is used to provide demand response that is not truly demand response, EPSA and IPPNY claimed. They asserted that FERC’s definition of demand response requires a reduction in consumption by customers, and that the 2013 order conflicted with the commission’s regulations on demand response.

In the May 9 order, FERC said that a reduction in consumption, as the term is used in its regulations, refers to reduced consumption from the wholesale power grid. FERC quoted from its Order 745-A, where it said the manner in which a customer is able to produce such a reduction in load on the grid – either through shifting production, using internal generation, consuming less electricity or other means – does not change the effect or value of the reduction to the grid.

“Thus, a reduction in metered load on the grid, even a reduction facilitated by behind-the-meter generation, is still a reduction and thus is appropriately considered demand response,” FERC said.

The order also noted that EPSA and IPPNY claimed that the 2013 decision resulted in undue discrimination against generators located in front of a customer’s meter because behind-the-meter generation is not subject to the same filing requirements and other regulations of generators in front of a meter.

FERC again rejected the generator groups’ arguments. The commission said that the use of behind-the-meter generation to facilitate demand response serves only the entity engaging in that demand response, and is distinguishable from sales from generation units in front of the meter into the wholesale market. “For this reason, we find that, in the circumstances presented here, behind-the-meter generation facilitating demand response is not similarly situated to generation making sales in the wholesale market, and thus there is no undue discrimination,” FERC said.

In their rehearing request, EPSA and IPPNY claimed that FERC’s 2013 order did not address the damaging market effects of allowing behind-the-meter generation participate in the market as demand response, including creating an incentive for generators to move behind customer meters, FERC related.

The order said the generator group claims amounted to a collateral attack on FERC Order 745, which addressed similar arguments.

“We find any claimed movement of generation from the NYISO marketplace to behind the meter to be speculative,” FERC said.

Commissioner Tony Clark concurred with the decision, as he has with a few other demand response rulings. He agreed with his colleagues that concerns raised about the compensation of the resources were in effect a collateral attack on Order 745 and are outside the scope of the NYISO case.

“Yet I note, the mere fact that the argument is raised out-of-place does not make the concerns expressed over the Order No. 745 compensation regime any less valid or worthy of commission attention in an appropriate venue,” Clark said in a short concurring statement.

Clark referred to previous statements on the U.S. Supreme Court case, where the high court upheld Order 745, and an April 1 FERC order on demand response in the PJM Interconnection. In those statements, he encouraged FERC to turn its attention to a thorough review of demand response attributes and compensation.