On June 3, 2016, FERC accepted a compliance filing made by the New York Independent System Operator, Inc. (“NYISO”) providing for changes to the NYISO tariff in order to expand participation in NYISO’s Day-Ahead Demand Response Program (“DADRP”) to include demand response from behind-the-meter generation. The tariff changes will become effective 60 days after the issuance of the June 3, 2016 order.

In June of 2013, a group of demand response providers (“Complainants”) filed a complaint with FERC alleging that NYISO’s tariff provisions for its DADRP were unduly discriminatory because they excluded demand response facilitated by behind-the-meter generation from participation, while simultaneously allowing similarly-situated demand response accomplished without the use of behind-the-meter generation to participate. FERC ultimately agreed and on November 22, 2013, FERC directed NYISO to undertake a stakeholder process and to file revised tariff provisions that would allow resources providing demand response facilitated by behind-the-meter generation to participate in the DADRP on a comparable basis with all other demand response resources. In doing so, FERC stated that these revised tariff provisions “should address appropriate eligibility, measurement, verification, and control requirements to ensure that demand response facilitated by behind-the-meter generation is provided in a manner that maintains system reliability and ensures that the resources are compensated only for the demand response service that they actually provide.”

On May 21, 2014, NYISO submitted its compliance filing, which included revised definitions, metering, and data reporting requirements. Specifically, NYISO proposed, among other things, amending the existing definition of “Demand Side Resource” to include resources that are capable of operating a “Local Generator”—the definition under NYISO’s tariff that refers to behind-the-meter generation—to facilitate load reduction. NYISO also proposed substituting its current baseline load methodology—used to measure the impact of a demand-response resource on load reduction—with a newer methodology called the Economic Customer Baseline Load (“ECBL”) which NYISO had submitted in response to FERC’s rule on demand response in wholesale markets, Order No. 745, and was pending before FERC. NYISO stated that it would apply the ECBL methodology to all demand response resources participating in the DADRP, including demand response resources that operate Local Generators to reduce load, upon FERC approval in the Order No. 745 proceeding. The proposed revisions also required that all demand response resources that are enrolled to participate in the DADRP and have a Local Generator be outfitted with New York Commission-approved meters.

In its June 3, 2016 order, FERC accepted NYISO’s filing, finding it in compliance with the Commission’s directives in the November 22, 2013 order. FERC rejected protestations from the Complainants that NYISO’s proposal to impose metering requirements on all individual behind-the-meter generators sited at a demand response resource facility as beyond the scope of the compliance proceeding, reasoning that: (i) the requirement responds to the November 22, 2013 order by seeking to treat demand response resources that have behind-the-meter generation comparably with all demand response resources; and (ii) because individually metering behind-the-meter generation enables NYISO to monitor the accuracy of the demand response resource’s baseline, and to confirm that the actual demand reduction is occurring, the requirement responds to the directive in the November 22, 2013 order to develop requirements that ensure that “the resources are compensated only for the demand response service that they actually provide.” FERC also rejected objections from the Complainants relating to the costs of individually metering behind-the-meter generators, finding that NYISO’s proposal reasonably balances cost concerns expressed during the stakeholder process and provides NYISO with the data needed to perform its monitoring functions, verify participation in the DADRP, and address the potential for manipulation.

A copy of the order may be found here.