On June 11, 2014, Acting FERC Chair Cheryl LaFleur announced that FERC will seek rehearing en banc of the May 23rd, 2014, decision of the D.C. Circuit that vacated FERC’s controversial rulemaking on demand response compensation in wholesale energy markets. The compensation rule, known as Order No. 745, requires Regional Transmission Operators and Independent System Operators to pay demand response resources the full locational marginal price paid to generators.1 The D.C. Circuit found that FERC lacked jurisdiction over demand response because it is part of the retail market and, thus, exclusively within state jurisdiction. In addition, the court held that the compensation provisions of the rule are arbitrary and capricious.2
The court is not required to grant FERC’s request to rehear the case. Under the Federal Rules of Appellate Procedure, en banc rehearings are generally disfavored and will not be ordered unless the proceeding “involves a question of exceptional importance” or en banc consideration is needed to ensure uniformity of the court’s decisions.3 A majority of the D.C. Circuit’s justices who are in regular active service and who are not otherwise disqualified must agree to rehear the case en banc.4
Commissioner Tony Clark also released a statement on Wednesday. Commissioner Clark does not support a review of the court’s holding that FERC erred by requiring demand response to be compensated at the same rate as generation. He characterized the jurisdictional issue as “fuzzy,” however, and asserted that there is “at least some fodder for discussion” on that issue. Commissioner Clark nevertheless noted that he finds the court’s jurisdictional argument persuasive.
1 See Demand Response Compensation in Organized Wholesale Energy Markets, Order No. 745, 76 Fed. Reg. 16,658 (Mar. 24, 2011), FERC Stats. & Regs. ¶ 31,322 (2011).
3 Fed. R. App. P. 35(a).
4 Id. Senior Circuit Judges Silberman, who joined the majority opinion, and Edwards, who dissented, are not in “regular active service” and therefore will not vote to determine whether to rehear the case.