FERC Perspective on Demand Response

1
FERC Perspective on Demand Response

• David Kathan
• FERC

Midwest Demand Response Initiative Chicago,
IL February 9, 2007 The authors views do not
necessarily represent the views of the Federal
Energy Regulatory Commission
2
FERC Demand Response Report

• FERC staff completed a report in August 2006
  required by the Energy Policy Act of 2005
• Report assesses demand response and advanced
  metering

http//www.ferc.gov/legal/staff-reports/deman
d-response.pdf
3
Demand Response Results

• Demand response is important in both wholesale
  and retail markets
• 37,500 MW of demand response potential in
  existing programs
• Vast majority from incentive-based demand
  response many legacy utility programs
• ISO and other wholesale demand response
  represents about 8,900 MW (24)
• Demand response capability represents between 3
  to 7 of peak demand in most regions

4
Existing DR Resource Contribution By Region and
Customer Class
Sources FERC Survey, EIA, and ISO/RTO Reports
5
Existing DR Resource ContributionBy Type of
Program
Source FERC Survey
6
Advanced Metering ResultsMarket Penetration by
Region
Nationwide 6
7
Benefits of Demand Response

• Key tool for handling
• Supplier market power
• Inefficient reserve procurement
• Power price volatility
• Reliability issues
• Additional Benefits
• Creates opportunities for risk management
• Potential environmental improvements
• Increased customer service and choice

8
Regulatory Barriers
Barriers identified by staff include

• Disconnect between retail pricing and wholesale
  markets
• Utilities disincentives to offering demand
  response
• Enabling technologies deployment need
  cost-recovery certainty may need incentives
• Research is needed on cost-effectiveness and how
  to measure demand reductions
• Specific state-level rules may inhibit more
  demand response
• Specific retail and wholesale market rules may
  limit use of demand response
• Fluctuating rules may limit third-party
  participation
• Insufficient market transparency and access to
  data
• Better coordination of federal and state
  jurisdictional programs could enable more demand
  response

9
Demand Response and MarketsNYISO 2002
Source David Patton, Potomac Economics
10
FERCs Role in Demand Response

• The Commission recognizes
• Demand response is missing from wholesale markets
• One thing that is missing in wholesale markets
  is effective demand response. Chairman Kelliher
  (Inside FERC, 1/15/07)
• Need to coordinate with states on demand response
• Federal and state regulation has to work
  together and encourage greater demand response
  Chairman Kelliher (1/25/06)
• The Commission has
• Approved demand response programs proposed by
  ISO/RTOs
• Supported regional demand response initiatives
  (e.g., the Mid-Atlantic Distributed Resources
  Initiative)
• Co-sponsored the NARUC-FERC Demand Response
  Collaborative Dialogue

11
NARUC-FERC Collaborative Dialogue on Demand
Response

• Joint NARUC-FERC effort
• Co-Chaired by FERC Commissioner Wellinghoff,
  Commissioner Ervin (NC), and Commissioner Reha
  (MN)
• In addition to FERC, participation from 13 states
  from all regions of the United States
• Commissioners Lieberman (IL) and Norris (IA) are
  also members
• First meeting held on November 13 in Miami
• Next meeting will be on February 18 at the NARUC
  Winter Meetings