The Federal Energy Regulatory Commission has formally abandoned a question it opened five years ago: whether to rethink the rule that lets state regulators keep certain customers' demand response out of the nation's organized wholesale electricity markets. In a notice published in the Federal Register on April 21, 2026, under Docket No. RM21-14-000, the Commission withdrew its 2021 notice of inquiry and terminated the rulemaking proceeding, with the withdrawal effective May 21, 2026.

The mechanism at issue is known as the Demand Response Opt-Out. Under the Commission's regulations, a Regional Transmission Organization or Independent System Operator must not accept bids from an aggregator of retail customers when that aggregator is pooling the demand response of customers served by a utility that distributed more than four million megawatt-hours in the previous fiscal year — if the relevant state retail regulatory authority prohibits it. In effect, large-utility states can fence their retail demand response off from the wholesale market. The Commission codified that opt-out in Order Nos. 719 and 719-A back in 2008 and 2009.

"The Commission withdraws a notice of inquiry, which sought comment on whether to revise the Commission's regulations that require a Regional Transmission Organization or Independent System Operator not to accept bids from an aggregator of retail customers that aggregates the demand response of the customers of utilities that distributed more than 4 million megawatt-hours in the previous fiscal year, where the relevant electric retail regulatory authority prohibits such customers' demand response to be bid into organized markets by an aggregator of retail customers."— FERC Notice of Withdrawal, Docket No. RM21-14-000, source

When the Commission opened the inquiry in March 2021, it framed the move as overdue. It noted that more than a decade had passed since it established the opt-out, and that significant legal, policy, and technological developments in the intervening years might justify reconsidering the rule. Demand response — the practice of paying customers to curtail or shift load when the grid is stressed — had matured considerably, and the Commission asked whether the carve-out still made sense.

Why a demand-response procedure belongs on a grid-tech desk

Demand response is, increasingly, a grid asset that competes with steel and silicon. A dispatchable reduction in load can substitute for peaking generation or for a transmission upgrade, and the technology that enables it — metering, communications, automated load control, and the aggregation software that bundles thousands of small loads into a market-biddable resource — is squarely within the grid-management domain this site tracks. Whether that aggregated load can actually reach the wholesale market is a question of market rules, and the opt-out is one of the most consequential of those rules. Keeping it in place preserves a structural limit on how far retail-side flexibility can penetrate organized markets.

By withdrawing the inquiry rather than proceeding to a rule, the Commission leaves the existing opt-out intact at 18 CFR 35.28(g)(1)(iii). It does not strike the carve-out, but it also does not endorse expanding it. The status quo holds: states with large utilities retain the authority to prohibit retail aggregators from bidding their customers' demand response into RTO and ISO markets. For aggregators and the technology vendors behind them, the practical effect is continued fragmentation — a patchwork in which the addressable market for aggregated demand response depends heavily on the posture of each state's retail regulator.

The signal in a non-decision

A withdrawal is not nothing. Terminating a five-year-old inquiry tells the market the Commission does not intend to relitigate the federal-state boundary on retail demand response in the near term. That removes a source of regulatory uncertainty that had hung over the demand-response aggregation business since 2021. Some participants will read the stability as helpful; others, particularly aggregators who hoped the inquiry would loosen the opt-out, will see a door quietly closing. Either way, planning assumptions can now treat the opt-out as a fixed feature of the landscape rather than a rule in flux.

The federal-state dimension is what makes this more than a market-design footnote. The opt-out is, at bottom, a deference mechanism: it hands a state's retail regulatory authority a veto over whether its customers' load flexibility participates in federally regulated wholesale markets. That sits at one of the oldest fault lines in U.S. energy law — the boundary between FERC's jurisdiction over wholesale markets and the states' authority over retail service. The Supreme Court has visited that boundary repeatedly in the demand-response context, and any rulemaking that touched the opt-out would have had to navigate it carefully. Withdrawing the inquiry sidesteps that thicket entirely, which is itself a telling choice about the Commission's appetite for reopening settled jurisdictional questions right now.

For the technology side, the practical effect is that the addressable-market math for demand-response aggregation stays unchanged and state-dependent. Vendors building the metering, communications, and aggregation-software stack that turns distributed loads into a biddable grid resource must continue to plan around a map in which whole states are off-limits depending on their retail regulators' posture. That fragmentation shapes where the technology gets deployed and, indirectly, where the supporting IP is most valuable. A national rule loosening the opt-out would have expanded that map; the withdrawal keeps it as is.

The verifiable facts: the inquiry originated March 18, 2021; the underlying opt-out traces to Order Nos. 719 and 719-A; the Commission withdrew the inquiry and terminated the proceeding in Docket No. RM21-14-000; and the withdrawal became effective May 21, 2026. The full notice, including the Commission's reasoning and the comment history it considered before deciding to step back, is available in the Federal Register and on eLibrary. For anyone mapping where load flexibility can and cannot compete as a grid resource, this non-decision is itself a decision — and it leaves the demand-response map exactly where it was.