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AMP-Ohio Weekly Update Article -11/21/08 Edition By: John W. Bentine, AMP-Ohio General Counsel and Matthew S. White Chester Willcox & Sax be, LLP FERC Order No. 719 On October 17, 2008, FERC issued Order No. 719 which finalized new regulations dealing with aggregation of the demand response of retail customers. These new regulations could directly and adversely affect the current or anticipated demand response programs of public power distribution systems located in and around RTOs. Order No. 719 requires RTOs to accept bids into their markets for demand response of retail customers that are aggregated by Aggregators of Retail Customers ("ARCs"). ARCs can be traditional load serving entities ("LSEs") like AMP-Ohio's Member electric systems or they could be entities whose entire business model is based on aggregating retail loads and taking the aggregated demand response of such loads directly to the wholesale market. Unless such activity is undertaken in conjunction with a LSE's own demand response program, these non-LSE ARCs ("non-traditional ARCs") could effectively bypass the LSEs programs and go directly to the R TOs markets. Order No. 719 Concerns There are several concerns AMP-Ohio Members may have regarding these non-traditional ARCs. First, the non-traditional ARCs are likely to go after the biggest retail customers with the most demand response or energy efficiency potential. AMP-Ohio and its Members' demand response investments and programs could be significantly undercut by the non-traditional ARCs "cherry-picking" the most desirable retail customers and diminishing the effectiveness of Member demand response and energy efficiency programs. Second, and perhaps more importantly, if the demand reductions of the aggregated retail customers are not carefully coordinated by these non-traditional ARCs with AMP-Ohio and its Members' systems, power supply plmming and schedules for affected AMP-Ohio Members could be substantially impacted. Finally, these non-traditional ARCs generally are for-profit entities, so they siphon off a portion of the dollars saved through such aggregation. This is in contrast with public power demand response programs, where all net savings are generally passed through to customers. What AMP-Ohio and its Members Can Do Order No. 719 requires R TOs to allow ARCs to make bids of aggregated retail loads for demand response unless the laws and regulations of the relevant electric retail regulatory authority expressly prohibit a retail customer from participation except through their municipal utility, This means that the rulemaking body that governs a municipal utility, such as the city council, can pass an ordinance or otherwise adopt a regulation that has the effect of precluding an RTO from accepting a "non-traditional" ARC aggregation bid that includes retail loads that are supplied by the municipal utility.