Lisa Wood, Ph.D., (lisa_wood@brattle.com) has recently joined the Brattle Group in the Washington, D.C., office. She specializes in economic and regulatory issues in the electric industry. She wishes to acknowledge Joe Wharton, Frank Graves, and William Moss of the Brattle Group, for their insightful comments for this article.
There is a timely and renewed national interest in price-responsive demand among utilities, independent system operators, policy makers, and regulators. The Federal Energy Regulatory Commission and Department of Energy co-sponsored a conference on demand response in February. Independent system operators in California, New York, and New England initiated widely publicized price-responsive retail load programs last summer. And individual utilities have recently introduced a variety of price-responsive demand programs. Puget Sound Energy developed what has been perhaps the best-known program, which placed 300,0000 residential customers on a time-of-use price as the default rate. It was fully voluntary, but customers had to opt off, not on.
On the energy policy side, officials like FERC Chairman Pat Wood are touting price-responsive demand as a way to potentially increase the effectiveness of wholesale markets. In the FERC’s “standard market design” white paper issued in March, demand response is included as an element of market design. The Senate energy bill approved and sent to the House in April would require utilities to offer real-time pricing to customers that request it. Both this bill and the energy bill passed by the House in August include tax credits and accelerated depreciation for advanced metering systems.