Demand Response: Keep It Market- Based

 

 

ITP vs. LSE, subsidies, cost recovery, regional coordination-all must be addressed to achieve FERC's goals.

The Notice of Proposed Rulemaking by the Federal Energy Regulatory Commission (FERC) to create a seamless national energy market, a "Standardized Transmission Service and Wholesale Electric Market Design," sets out a bold vision for the country. Importantly, this Standard Market Design (SMD) recognizes the value of price-responsive demand in making markets more efficient and less susceptible to the potential for market power.

EEI supports FERC in its efforts to include demand response as part of the SMD. America's electric companies-with the support and encouragement of state regulators-have created a variety of demand-response options for its customers during the past 30 years. Dynamic pricing (i.e., real-time pricing, time-of-use rates, coincident peak pricing), direct load control (i.e., air conditioner cycling), load reduction and interruption programs, and demand bidding/demand buy-back programs have all helped power companies to use their generation and other resources efficiently. They have helped to defer the need for building additional generating capacity as well.

Beyond helping to mitigate market power, demand response is critical to accurate price discovery. Demand response can also help to lower wholesale power costs, improve system reliability, and even provide new business options for ancillary services markets.