D.C. Circuit Curbs FERC Authority Over Key Electricity Conservation Programs: Demand Response Deemed Beyond Federal Control

In a significant blow to the authority of the Federal Energy Regulatory Commission ("FERC" or "Commission") over incentive-based electricity conservation measures known as demand response, the United States Court of Appeals for the District of Columbia Circuit vacated a seminal FERC rulemaking order in its entirety as ultra vires. Order No. 745, issued in March 2011, required each FERC-approved Regional Transmission Organization ("RTO") and Independent System Operator ("ISO") to modify its energy market tariff to require that a demand response resource be paid the full price established for generators that sell electric energy (known as the locational marginal price) when the demand response resource reduces or limits it electricity consumption.¹ In the D.C. Circuit's May 23, 2014 decision, Electric Power Supply Ass'n v. FERC ("EPSA"), the court concluded that Order No. 745 exceeded FERC's authority under the Federal Power Act ("FPA").² "Because the Federal Power Act