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FERC gets US high court hearing on energy-conservation rule

[WASHINGTON] The Obama administration will get a US Supreme Court hearing as it tries to save a rule that rewards industrial consumers for cutting electricity use.

The rule, opposed by the power industry, benefits smart- grid companies such as EnerNOC Inc that help large electricity consumers reduce their power usage during peak-demand hours. It's also backed by large power consumers, including Alcoa Inc and Wal-Mart Stores Inc, that are eyeing millions of dollars in energy savings.

A federal appeals court said the Federal Energy Regulatory Commission lacked authority to issue the rule. It requires wholesale-market operators to pay electricity users that cut consumption during high-demand periods at the same rate as generators that produce power. The practice, known as "demand response," means stiffer competition for generators.

Unless blocked, the rule will have its biggest impact on American Electric Power Co, CMS Energy Corp and Duke Energy Corp., the companies with the most wholesale electricity sales, according to Bloomberg Intelligence analyst Brandon Barnes.

The 13-state mid-Atlantic grid, which has the highest amount of demand response of all the regional markets, paid US$17.7 million for consumers to cut their electricity use in 2014, according to Monitoring Analytics LLC, based in Eagleville, Pennsylvania, which oversees the market.

Advocates of demand response say it can cut air pollution and reduce the need to build additional power plants. Power plant owners that opposed the FERC plan say it is too generous to energy consumers.

Demand response helped the grid maintain reliable service when the system faced potential supply shortages during the Polar Vortex in January 2014, according to PJM Interconnection LLC, which manages the mid-Atlantic network.

The court fight centers on the reach of FERC's authority. Federal law lets the commission regulate rates only at the wholesale level, leaving retail regulation in the hands of the states.

FERC and the Obama administration contend that the rule applies only to wholesale rates and to demand-response providers that are participating in that market. A divided federal appeals court in Washington rejected that reasoning, saying that demand response by definition "involves retail customers, their decision whether to purchase at retail and the levels of retail electricity consumption." That appeals court decision was poised to take effect and void the rule had the Supreme Court not intervened.