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Brief History of FERC Filings for EER Provisions

September 27, 2022
Energy Efficiency Energy Law Resource Library
  • On March 26, 2009, FERC approved tariff language that PJM had filed to comply with a 2008 FERC order requesting that PJM include Energy Efficiency Resource (“EER”) provisions.  In the 2009 order, FERC approved PJM’s EER tariff language and discussed the value of EERs.  For example, FERC stated, in part, that: “energy efficiency is a critical part of efficient energy markets, and should be treated comparably to other types of resources, by being allowed to participate in base residual auctions and be paid the auction clearing price when they are accepted in the auction.”  See, PJM Interconnection, L.L.C., 126 FERC ¶ 61,275, P. 130 (2009). Paragraph 131 of the order also emphasized that the capacity benefits of EERs would be lost absent a 3rd party EER aggregation program: “The Commission finds PJM’s proposal regarding EE resources reasonable and will accept it. Under PJM’s current wholesale market structure, many retail customers who install energy efficiency measures do not capture the capacity benefit of the resources they install. PJM’s proposal would allow an EE resource to bid into the auction, and if it is accepted, to bid for an additional three consecutive years.”
  • In 2017, Advanced Energy Economy (“AEE”) requested that FERC issue a declaratory order regarding the jurisdiction of an RTO, PJM Interconnection, L.L.C. (“PJM”), under the Federal Power Act over Energy Efficiency Resources (“EERs”) located in Kentucky.  FERC determined in a responsive order, in part, that third-party EER aggregation programs were comparable to EER programs operated by electric utilities and approved by retail regulators.  Advanced Energy Economy, 161 FERC ¶ 61,245, P. 59  (2017). In Paragraph 60, FERC held that FERC has jurisdiction over EERs because “participation of EERs in organized wholesale markets as a practice directly affecting wholesale markets, rates, and prices. Specifically, this direct effect occurs when energy efficiency is offered directly into the wholesale capacity market, causing a reduction in demand and an increase in supply of capacity, thereby resulting in a lower wholesale capacity price.”  In addition, the Commission emphasized its continued support for EERs in Paragraph 60 by stating, in part: “As the Commission recognized in requiring and approving the participation of EERs in the RPM, to the extent possible, energy efficiency solutions should be able to compete on an equal footing with demand response, generation, and transmission solutions.” (Emphasis added).
  • In 2019, ISO-New England (“ISO-NE “) attempted to reject participation of EERs in its capacity market if the EER providers could not satisfy a newly imposed “causation” test (i.e., demonstrating to ISO-NE that the “net” EER reductions were based upon the efforts of the market participant rather than the “gross” EER reductions from the EE products). AEE and the Sustainable FERC Project filed a joint Petition for a Declaratory Order requesting that FERC clarify that ISO-NE could not implement revised EER qualification criteria without amending its tariff.  See, Advanced Energy Economy, et. al.,  167 FERC ¶ 61,032  (2019). FERC concluded that the Petition for a Declaratory Order by AEE was premature, in part, because “ISO-NE committed that it would only implement a gross-to-net savings methodology for determining the capacity value of energy efficiency resources through a section 205 filing.”  Id. at 19. This order demonstrates that EER qualification criteria must be found in the terms and conditions of an RTO’s tariff, and that such criteria cannot be altered absent FERC’s approval.