Prioritizing Demand Response: How Federal Legislation and Technological Innovation Changed the Electricity Supply Market and the Need to Revitalize FERC Order 745

Abstract

Traditional barriers to entry in the electricity supply marketplace are crumbling due to recent federal legislation and new technology. The Federal Energy Regulatory Commission (FERC)'s Order 745 prioritizes the use of demand response via a uniform pricing mechanism. Through it, demand response is able to provide the same benefit as traditional electricity generation - at a reduced cost - and improve service, reliability, and market development. Consequently, the increased use of demand response reduces prices for regional grid operators, as well as commercial, institutional, and residential consumers. This Note discusses the legal, economic, and policy reasons for upholding Order 745 in the face of transformative change in the electricity supply market and evaluates the history of smart grid legislation leading up to the issuance of Order 745 in 2011. Next, it analyzes how energy intelligence hardware and software allow new entrants into the wholesale electricity supply market in hopes of capitalizing on inefficiencies in regional power distribution and the revolutionary opportunities for residential consumers through new technologies. Most importantly, this Note argues for a reversal of the D.C. Circuit’s decision to vacate Order 745 in the case EPSA v. FERC, decided in May 2014. Such a reversal is necessary because Order 745 falls within FERC’s authority under the Federal Power Act and the loss of a uniform pricing mechanism for demand response resources sold at capacity auctions will harm electricity markets.