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ARTICLE · 30 MARCH 2011

FERC Issues Order Requiring The Standardization Of Demand Response Resource Compensation

Blank Rome LLP
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On March 15, 2011, the Federal Energy Regulatory Commission (the "Commission" or "FERC") issued an order (the "Order") modifying its regulations to require each Regional Transmission Organization ("RTO") and Independent System Operator ("ISO") to standardize the method for compensating demand response resources participating in their respective wholesale energy markets.

United StatesEnergy and Natural Resources
Nicholas Giannasca
Nicholas Giannasca
James Burlew
James Burlew
Carlos Gutierrez
Carlos Gutierrez

On March 15, 2011, the Federal Energy Regulatory Commission (the "Commission" or "FERC") issued an order (the "Order") modifying its regulations to require each Regional Transmission Organization ("RTO") and Independent System Operator ("ISO") to standardize the method for compensating demand response resources participating in their respective wholesale energy markets. Demand response entails the reduction in the consumption of electricity by customers in response to price signals. Specifically, the Order requires RTOs/ISOs to pay a demand response resource that is dispatched the market price for energy (i.e., locational marginal price ("LMP")) if: (1) the demand response resource has the capability to balance supply and demand; and (2) it will be cost-effective to dispatch and pay the LMP to the demand response resources.

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