In denying rehearing, FERC said, "We affirm our finding in the Declaratory Order that the Commission has exclusive jurisdiction over the participation of EERs in the organized wholesale electricity markets, including the terms of eligibility for the participation of such resources. We reject Joint Parties’ claim that the terms of eligibility for the participation of EERs in wholesale markets have only an incidental and indirect effect on wholesale rates. We find that the Commission’s authority to determine which resources are eligible to participate in the wholesale markets is a fundamental component of the regulation of the wholesale markets."
"As to Joint Parties’ assertions that the Commission’s claim of exclusive jurisdiction over the terms of eligibility to participate in the wholesale electric markets 'has no obvious limiting principle' or would overrule any state action the Commission deems as affecting EERs, we reiterate that the findings in the Declaratory Order were limited to a 'unilateral state action that directly prohibits or limits' the ability of EERs to participate in wholesale markets, thereby directly affecting wholesale rates. Therefore, we find Joint Parties’ contentions that the Commission’s assertion of jurisdiction in the Declaratory Order enables the Commission to direct states to allow retail access or 'nullif[ies]. . . state jurisdiction over retail sales in this context' to be speculative and unsupported," FERC said
"We do not agree with contentions that the Commission’s assertion of exclusive jurisdiction over the terms of eligibility of the participation of EERs would usurp the authority of RERRAs [relevant electric retail regulatory authority] to regulate the retail entities subject to their jurisdiction. Our determinations here do not prevent states from regulating retail sales of electricity, even when such regulation incidentally affects areas within the Commission’s domain. However, we also disagree with Joint Parties that state and local restrictions on EER participation in wholesale markets is a valid exercise of state and local authority over retail electric service. A provision directly restricting retail customers’ participation in organized wholesale electricity markets, even if contained in the terms of retail service, nonetheless intrudes on the Commission’s jurisdiction over the wholesale markets. Such a restriction prevents the Commission from carrying out its statutory authority to ensure that wholesale electricity markets produce just and reasonable rates. Thus, we find that the effect on the wholesale rate from a RERRA restricting EERs’ participation in wholesale markets is direct and not merely incidental. The direct effect of such state or local laws is in stark contrast to the incidental effects at issue in Allco, cited by Joint Parties, which addressed Connecticut’s program to solicit proposals for renewable energy generation," FERC said
"In this instance, we find that state or local restrictions on EERs’ wholesale market participation, even if contained in the terms of retail service, dictate which resources can participate in wholesale electricity markets, thereby directly affecting wholesale rates, and that they interfere with the Commission’s statutory obligation to ensure that wholesale electricity markets produce just and reasonable rates," FERC said
"Having stated the foregoing, we grant Midwest TDUs’ requested clarifications to the extent that the Commission in the Declaratory Order: (1) did not assert the authority to preempt the terms and conditions established by RERRAs for retail customers to receive retail service; (2) did not purport to authorize retail customers to violate any state or local laws; and (3) made no findings as to whether contracts regarding EERs are subject to state or local law," FERC said
"We agree with Joint Parties that the Commission’s regulations in Order Nos. 719 and 719-A do not grant or delegate any authority to RERRAs. However, we note that the Commission’s exclusive jurisdiction over the participation of demand response resources and EERs in the wholesale market does not preclude the Commission from taking into consideration states’ preferences and implementing or deferring to those preferences when the circumstances merit. Indeed, the Commission has done so in other instances. Further, we disagree with arguments that the Declaratory Order reflects an unjustified departure from the opt-in/opt-out approach applied in Order No. 719. As the Commission noted in the Declaratory Order, Order No. 719 applies to demand response resources; the rule expressly provides that it does not apply to EERs," FERC said
"Midwest TDUs also request clarification that the Commission’s statements regarding the effects of EERs on retail electric service are not intended to prejudge any future RTO-specific proposal to limit EER participation in wholesale markets. We find such a clarification unnecessary as the Commission’s findings regarding the effects of EERs on retail service were appropriately based on the record in this proceeding. We note that the Commission did not find in the Declaratory Order that it would never implement such an opt-in/opt-out approach to EER participation in wholesale markets, but that the record in the instant proceeding does not support the implementation of such a rule. The Declaratory Order appropriately rejected several rationales for the need for a generic opt-in/opt-out approach for EERs, including the potential double counting of EERs in wholesale markets and retail energy efficiency programs, or third-party EERs siphoning financially valuable energy efficiency projects away from utilities’ programs. The Commission also found that other retail concerns could be addressed through means other than retail prohibitions on wholesale market participation. Joint Parties, FirstEnergy, and Midwest TDUs on rehearing have not supported their contention that the Commission should broadly defer to RERRAs’ direct restrictions on the wholesale market participation of EERs. As stated in the Declaratory Order, we will not predetermine any standards that the Commission would apply to any future requests for opt-out provisions and would instead assess any such proposals in the context of the facts presented in those particular cases," FERC said