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June 17, 2015
Ahmad Faruqui Quoted in Public Utilities Fortnightly on Supreme Court Decision to Hear Demand Response Case

Brattle principal Ahmad Faruqui was recently quoted in the Public Utilities Fortnightly article, “High Stakes at the High Court: U.S. Supreme Court to decide demand response case,” discussing how the U.S. Supreme Court will decide whether demand response services will be regulated by the federal government or by state utility commissions.

Demand response is an informative tool for both commercial and industrial customers that provides insight into the nature and patterns of their energy consumption, allowing them to run specific applications at the most favorable time of day under a given utility rate structure. Demand response also eases transmission congestion and can help avoid expensive power purchases on spot markets.

However, power producers and utilities that still own generation argue that demand response tools are diverting a share of their revenue by allowing regional market operators to offer equal compensation to demand response suppliers as is earned by generators that are actually producing power.

When coupled with new growth in distributed generation and Smart Grid technologies, demand response is becoming increasingly seen as not only a tool to reduce congestion on the interstate electric grid (regulated by the Federal Energy Regulatory Commission) but also a way to manage load and transactions between resources on the smaller, local distribution grid (regulated by the states).

“Demand response has reached a point of inflection in its evolution and has begun shifting toward retail markets and residential customers,” said Dr. Faruqui, “That movement will not be hindered by whatever happens to demand response in wholesale markets.”

The U.S. Supreme court will combine two lower court rulings into one: the first issue being whether FERC has primary responsibility over these wholesale market transactions or whether the state utility commissions oversee them as retail transactions. The second issue is whether demand response providers should receive equal compensation as the generators. The court could rule on these issues as early as October.

The full article can be read here.