Remand Order 745, fix the compensation scheme, but retain federal jurisdiction.
Robert L. Borlick is an independent energy consultant with more than 30 years of industry experience, both domestic and international. Since 2005 he has advised the Midwest Independent System Operator regarding the design of its demand response products. He has been a Senior Advisor with the Brattle Group and a Principle with Putnam, Hayes & Bartlett and Hagler Bailly. He holds BS and MS degrees in electrical engineering from the Illinois Institute of Technology and the Ohio State University, and a MBA from Stanford University.
Under the leadership of the now-former Chairman Jon Wellinghoff, the Federal Energy Regulatory Commission (FERC) issued Order 745 in March, 2011.1 Order 745 mandates that economic demand response offered into an ISO-administered wholesale energy market must be paid the locational marginal price (LMP) at the location on the transmission grid where that energy would have been withdrawn to serve the demand response provider's load. In addition, Order 745 imposes a complex "net benefits test" that must be satisfied for providers to be eligible for compensation.2
Order 745 has to be one of the worst orders the FERC has issued in its entire history.
In December, 2011, the Electric Power Supply Association (EPSA) and four other plaintiffs filed a petition asking the United States Court of Appeals for the District of Columbia Circuit to review the Order.3 The plaintiffs' primary complaints were that the FERC lacks jurisdiction over demand response and that the compensation mandated by Order 745 unduly discriminates against generators selling into the wholesale energy markets by overcompensating the demand response providers.