On Thursday, June 17th, FERC issued an order that was about one resource: demand response aggregated with anything else on the distribution system. For example, a resource like this:

FERC said that, for the time being, states can prohibit (“opt out” of) allowing these resources to participate in the wholesale market.

See, in September 2020, when FERC first issued Order No. 2222 – directing all the RTOs and ISOs to revise their tariffs to allow distributed energy resources aggregations (DER aggregations) to participate in the wholesale markets – any aggregation including demand response could be prohibited from participating by the state. This was because FERC did not touch a 2008 order, Order No. 719, that gave states the authority to prohibit demand response. But in 2222, states weren’t allowed to prohibit other distributed energy resources, like solar or energy efficiency. Put that together, it means that under 2222, a state could prohibit any aggregation that includes demand response and any other distributed energy resource from participating in the wholesale markets.

With 2222-A though, FERC changed its mind, allowing DER aggregations that include demand response to participate, regardless of whether the state otherwise prohibited “just demand response.” But this was short-lived, because with 2222-B, FERC said, “Never mind. Aggregations including demand response can still be prohibited by states, but we’ll address this prohibition in a separate proceeding.” That separate proceeding is a Notice of Inquiry regarding the state’s power to opt out. If FERC decides the opt-out should be removed, it will begin another proceeding, a rulemaking, to change its rules on this topic.  

Voltus, like many demand response providers, has been a vocal advocate that states should not be allowed to prohibit demand response, or any other technically qualified resource, from participating in the wholesale markets. So what, then, do we think of 2222-B?  

We think it’s the right call. Numerous stakeholders submitted filings, questioning why FERC changed aspects of demand response in the 2222 proceeding rather than in the Notice of Inquiry. Voltus would not want any stakeholder to feel disenfranchised, like a collateral proceeding revoked authority granted to states over a decade ago.  

The Notice of Inquiry (NOI) will afford all parties a full and fair discussion of the opt-out. This will show how the opt-out is anti-competitive and preferential, favoring utility generation and demand response over more cost-effective resources like third-party demand response. The NOI will illustrate how private parties have developed technologies to decrease the energy use of customers that utility programs don’t serve, and have done so at no cost to ratepayers. The NOI will show how the opt-out is an artifact, a blunt tool developed during the wholesale markets’ adolescence to address state interests. Now, we have better, more precise tools that address these interests while keeping the markets competitive. And, perhaps most importantly, the NOI will show that demand response complements a variety of technologies, including renewable generation, base load generation, and even utility demand response programs. Hopefully, at the end of the NOI, everyone will see what we at Voltus have known for years: demand response is a powerful tool, at a time when we need everything in our toolbox.  

As a matter of principle, Voltus believes that markets work best when all resources have a fair opportunity to compete. Similarly, all stakeholders deserve a fair opportunity to be heard. As a result, Voltus supports FERC’s decision to wait until the Notice of Inquiry to address the full participation of demand response.  

Questions? Reach out to us at info@voltus.co.