Casten Introduces REDUCE Act to Eliminate Demand Response Opt Out
Washington, D.C. — This week, U.S. Congressman Sean Casten (D-IL), chair of the Sustainable Energy and Environment Coalition (SEEC) Power Sector Task Force, introduced the Responsive Energy Demand Unlocks Clean Energy (REDUCE) Act, legislation that would allow consumers to sell their energy reduction into federal wholesale markets by eliminating the “Opt Out” currently employed by 13 states that ban aggregated demand response from these markets.
The legislation is co-sponsored by members from the SEEC Power Sector Task Force including co-chair Raja Krishnamoorthi (D-IL), Suzanne Bonamici (D-OR), Mike Levin (D-CA), Darren Soto (D-FL) and Paul Tonko (D-FL), and follows a March letter from the Task Force urging the Federal Energy Regulatory Committee to take up a rulemaking to eliminate the demand response Opt Out.
“Requiring FERC to take steps to eliminate the Opt Out rule would not only reduce emissions, it would create substantial economic benefits for local businesses,” said Rep. Sean Casten. “I’m proud to have led the SEEC Power Sector Task Force to create this win-win for our community and our environment.”
“Allowing residential and business consumers to sell their energy reduction into federal wholesale markets will allow consumers to get paid for reducing their energy consumption and bringing down emissions while simultaneously improving the reliability and efficiency of our electrical grids,” said Rep. Raja Krishnamoorthi. “I’m proud to co-lead this legislation to save consumers money while also cutting emissions, reducing the risk of blackouts and brownouts, and eliminating the need for dirty, gas-powered peaker plants.”
Federal Regulation currently permits states to prohibit electricity consumers from participating in wholesale electric markets by selling load flexibility. This is known as "opting out" of allowing competitive load management (demand response). In Opt-Out states, when the grid is stressed, peaker plants are turned on to meet high demand, rather than in other markets where energy consumption can be reduced. Turning on peaking power plants causes unnecessary consumption of fossil fuels, and hinders other benefits such as:
- Consumers earning revenues for their load flexibility and grid support
- Overall lower energy costs (the cheapest megawatt is the one never used)
- Integration of renewable resources into the grid (load flexibility can balance renewables intermittency)
The REDUCE Act would instruct FERC to initiate a rulemaking to eliminate the Opt Out, allowing consumers in every state to sell their energy reduction into the wholesale market, while unifying the regulatory treatment of all distributed energy resources including energy storage, energy efficiency, and distributed generation, resources that are not subject to the state Opt Out rule.
Allowing demand response reduces emissions and creates economic benefits for local businesses, an environmental and economic win-win. For example, when a business with a 5% profit margin earns $1,000 for reducing its energy consumption, this is pure profit, akin to earning $20,000 in top-line revenue.
States that Opt Out cause money to be paid to traditional fossil fuel emitting generators rather than local businesses or residential consumers. Eliminating the Opt Out would therefore help decarbonize the power sector.
Thirteen states have “opted out”: Arkansas, Iowa, Indiana, Kentucky, Louisiana, Michigan, Minnesota, Missouri, Mississippi, North Carolina, North Dakota, South Dakota, and Wisconsin.
You can find full text of the REDUCE Act here.
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