Docket No. RM21-14-000
The Commission’s order today closes a Notice of Inquiry (NOI) on removing the so-called “Demand Response Opt-Out,” which allows state regulators to place limitations on the participation of third-party demand response aggregators in wholesale markets. The Demand Response Opt-Out was included in Order No. 719 to balance the competing interests of opening wholesale markets to demand response and respecting state and local regulatory concerns relating to the operation of existing retail demand response programs, regulatory burdens, and jurisdictional challenges.[1] While the Demand-Response Opt-Out may need to be re-examined in the future, maintaining the status quo strikes the right balance today.[2] Thus, I am persuaded that the Commission should close this NOI.
However, demand-side resources are underrepresented in the wholesale markets, and I write separately to emphasize constructive steps that the Commission, states, market operators, and demand response providers can take to improve demand-side participation in wholesale markets.
Additional demand response, including from grid-interactive buildings, flexible large loads, and industrial customers, has the potential to significantly help meet the country’s load growth and resource adequacy challenges.[3] But despite a clear reliability imperative and strong economic signals from high market prices, the amount of demand response participating in wholesale markets is limited today. In the PJM Interconnection, L.L.C. (PJM) market, the last capacity auction cleared half of the amount of demand response compared to the 2014/2015 delivery period.[4] Even with the issuance of Order No. 745,[5] Commission-jurisdictional markets reflect very little economic demand response participation in the energy and ancillary services markets.
To increase demand response participation, the Commission, state regulators, and market operators need to collaborate on market designs and participation models that balance: 1) practical limitations on customers’ ability and willingness to curtail demand, and 2) confidence that system operators can rely on demand response resources to respond quickly and predictably when called. This means that state and federal regulators as well as market operators need to engage more to understand and resolve friction that might arise when demand-side resources are integrated into market structures. Such frictions may involve end users’ metering requirements, parameters around billing periods, or frequency of calls on customers to curtail their load.
I am heartened by the development of new retail demand response proposals and programs across various states,[6] including in states that have placed limitations on the wholesale market participation of third-party aggregators.[7] I look forward to seeing them integrated into the wholesale markets to maximize their value for the whole system. Further, I will continue to look for opportunities – whether in proceedings before the Commission or other forums – to better realize the potential contributions from demand-side resources, while working collaboratively with our state colleagues to support their deployment.
For these reasons, I respectfully concur.
[1] Wholesale Competition in Regions with Organized Elec. Mkts., Order No. 719, 125 FERC ¶ 61,071, at PP 154-56 (2008), order on reh’g, Order No. 719-A, 128 FERC ¶ 61,059, order on reh’g, Order No. 719-B, 129 FERC ¶ 61,252 (2009).
[2] While referred to as an “opt out,” Order No. 719 does not create a binary choice for state regulators with regard to the participation of third-party demand response aggregators in wholesale markets. Instead, Order No. 719 allows states to place conditions on participation of third-party aggregators, which may extend to disallowing participation for some or all customer classes. Some states that have chosen to “opt out” in fact do allow third-party demand response aggregation, but subject those programs to state regulations; or they may specify the customer classes that may take part in third-party aggregation programs. See, e.g., In the Matter of the Establishment of a Working Case Re: FERC Order No. 2222 Re: Participation of Distributed Energy Resource Aggregators in Markets Operated by Regional Trans. Organizations and Indep. Sys. Operators, Docket No. EW-2021-0267 (Missouri Pub. Serv. Comm’n Oct. 12, 2023) (allowing third-party aggregators to bid demand response into wholesale markets for commercial and industrial customers with demand of at least 100 kW); Indiana Util, Reg. Comm’ Initial Comments at 9 (describing the ability of third party aggregators to participate in wholesale market through a retail tariff).
[3] See U.S. Dept. of Energy, A National Roadmap for Grid-Interactive Efficient Buildings (May 17, 2021), https://gebroadmap.lbl.gov/A%20National%20Roadmap%20for%20GEBs%20-%20Final.pdf; Nicholas Institute for Energy, Environment, & Sustainability, Rethinking Load Growth: Assessing the Potential for Integration of Large Flexible Loads in US Power Systems (Feb. 2025), https://nicholasinstitute.duke.edu/publications/rethinking-load-growth; U.S. Dept. of Energy, Demand Response in Industrial Facilities (2022), https://betterbuildingssolutioncenter.energy.gov/sites/default/files/attachments/Demand%20Response%20in%20Industrial%20Facilities_Final.pdf..
[4] Compare PJM, 2014/2015 RPM Base Residual Auction Results, https://www.pjm.com/-/media/DotCom/markets-ops/rpm/rpm-auction-info/20110513-2014-15-base-residual-auction-report.pdf with PJM, 2027/2028 Base Residual Auction Results, https://www.pjm.com/-/media/DotCom/markets-ops/rpm/rpm-auction-info/2027-2028/2027-2028-bra-report.pdf.
[5] Order No. 745 established rules governing demand response participation in organized wholesale energy markets, including that demand response resources will be compensated at prevailing locational marginal prices, subject to certain conditions. Demand Response Compensation in Organized Wholesale Energy Mkts., Order No. 745, 134 FERC ¶ 61,187, order on reh’g & clarification, Order No. 745-A, 137 FERC ¶ 61,215 (2011), reh’g denied, Order No. 745-B, 138 FERC ¶ 61,148 (2012), vacated sub nom. Elec. Power Supply Ass’n v. FERC, 753 F.3d 216 (D.C. Cir. 2014), rev’d & remanded sub nom. FERC v. Elec. Power Supply Ass’n, 136 S.Ct. 760 (2016).
[6] For example, several states have announced virtual power plants, including a program in Virginia targeting a capacity of 450 MW. See Utility Dive, Viginia utility-scale VPP pilot mandate is first amid national push (May 12, 2025), https://www.utilitydive.com/news/virginia-leads-with-utility-scale-vpp-pilot-amid-national-push/747770/.
[7] For example, Google has committed to utility-run demand response programs in Indiana, Arkansas and Minnesota, which place restrictions on the ability of third party aggregators to participate in wholesale markets. Google, A new milestone for smart, affordable electricity growth (Mar. 19, 2026), https://blog.google/innovation-and-ai/infrastructure-and-cloud/global-network/demand-response-data-center-milestone/.