With Order 745, FERC in 2011 determined the price that ISOs and RTOs, responsible for wholesale market operations, should pay for a form of demand-side management that is capable of dispatch. The pricing was new and controversial, but bidding economic demand response into wholesale markets wasn’t.
The rule concerns what FERC calls “demand response,” which is when, in an attempt to manage electricity demand, regional electrical grid operators agree to pay large electricity users like factories, businesses, schools and hospitals to cut usage at peak times.
The court also upheld the formula the government adopted for compensating electricity users that receive the payments.
“Demand response” is intended to improve grid reliability, lower costs and encourage clean energy. It can cut costs for consumers and reduce the possibility of system failures and power blackouts.
“This decision allows us to continue realizing billions in annual savings from innovative incentives and business models that ensure we use our electricity system efficiently as we integrate more energy efficiency and renewable energy onto the power grid,” White House spokesman Frank Benenati said.