FirstEnergy Demand Response Program Perspectives: 2001 and 2002

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FirstEnergyDemand Response Program
Perspectives 2001 and 2002

• Chris Siebens
• Manager - Demand Response Programs
• FirstEnergy Technologies
• csiebens_at_gpu.com
• PLMA Conference
• October 8, 2002

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R U R-E-L B-S-N-S?
R U O K? S, N-Q.I M A U-M B-N. U R N
N-M-L.
From CDB!, W. Steig, Windmill Paperbacks
EDC DSR Perspectives
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EDC DSR PerspectivesRationalUnderlyingRulesEve
ntuallyLead toBusinessSustainabilityNS?
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FirstEnergy
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Presentation Overview/Takeaway

• DR programs have a place, are used, are
  challenging
• Regulatory context dictate viable EDC/DR
  programs scale
• ISO/RTO Rules can help (or hurt)
• Voluntary Load Reduction Experience 2001/2002
• NJ BGS Auction Update (Hourly Energy Pricing is
  on the table as BGS rate)
• Case Study - Market prices (PJM LMPs) respond to
  substantive load reductions

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EDC Demand Response Programs (Linking Customers
to Prices)
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Voluntary Load Reduction (VLR) and Seasonal
Savings Program (SSP)

• Economic Energy
• Reliability Contingency

• Economic Energy
• Capacity Value
• Reliability Contingency

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Load CurtailmentNotification and Monitoring

• Upon notification, customer logs on to view
  curtailment offer from anywhere on the Internet.
• Curtailment time, duration, price are displayed
  as received.
• Software uses operator-defined criteria to
  display a customer-specific baseline for the
  curtailment.
• The near real-time monitor screen displays
  current reduction achieved, remaining time money
  saved for current event, trending of actual
  performance to baseline in real time
• Customers view only their own facilities.

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Voluntary Load Reduction (VLR) 2002 2001 PA
NJ

• Pay fixed energy price customers to curtail when
  market prices exceed energy revenues
• internet based notice/pledge/event management
• Pilot program 2000 launched to PLR customers in
  2001 opened to PA shoppers as PJM economic
  program enabled flow
• Not many (shoppers or PLR customers) enrolled in
  2002 - those that did, didn't play much given
  market rates.
• Committed to VLR in PA in 2003 if cost effective
  - but not many participated

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VLR/SSP Participation 2001 (73 participants,
67 contract MW)
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VLR/SSP Participation 2002(53 participants,
42 contract MW)
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NJ BGS AUCTION

• Restructuring Background
• 4 year transition period through July 2003
• EDCs sole provider of BGS in their territories
  through July 2002
• Fixed shopping credits set by NJBPU
• EDCs defer cost above shopping credits
• NJBPU directed EDCs to file proposal for BGS
  procurement for last transition year (year 4)

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STRATEGIC IMPLICATIONS

• JCPL - NJ
• Reduce BGS deferral risk in year 4
• Eliminate BGS risk in subsequent years
• Magnitude
• 4.5 billion annually (NJ - 17,000 MW)
• 1.5 billion annually (JCPL - 5,100 MW)

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AUCTION FORMAT (year 4)

• Simultaneous all products sold at once
• Multiple Round suppliers bid number of tranches
  committed to serve / information feedback / bid
  again
• Descending Clock prices decrease until supply
  just enough to meet load to be procured for each
  product
• Internet based bidding

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EDCs BGS PROPOSALYear 4 - AUCTION

• Open / Transparent Process
• Maximize competition
• Minimize cost
• Product Fixed of BGS load by EDC
• Full requirements service
• Winning bidders become PJM LSEs
• EDC acts as BGS customer agent
• Starting Prices Critical Element
• Statewide / Simultaneous

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AUCTION RESULTSYear 4 (1 of 2)

• Auction Process
• Bidder participation - strong
• Over 20 companies bid
• Capacity bid of 1.75 X MW required
• Competitive / Open process
• Internet bidding - minimal problems
• Regulatory approval - timely

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EDCs BGS PROPOSALYear 5 - Auctions (1 of 2)

• Build upon success of Year 4 Auction
• Adopt Year 4 Auction elements
• Product design (full requirements)
• Auction format (SDCA)
• Contingency plan
• Standard Supplier Agreement
• Qualification and Credit requirements

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EDCs BGS PROPOSALYear 5 - Auctions (2 of 2)

• Modify to move development of retail markets
  forward
• Customer rates reflect market-based prices
• Rate design by customer class
• Remove artificial constraints on market
• All customers free to shop
• Committed Supply not provided to bidders

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EDCs BGS PROPOSALYear 5 - Auctions

• Fixed-Price (FP)
• Small and Medium BGS customers
• Customers less likely to shop
• 85 of EDC load
• Price Stability
• Minimize customer confusion

• Hourly Electric Price (HEP)
• Large customers
• Customers more likely to shop
• 15 of EDC load
• Real Time Price
• Encourage retail competition

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New Jersey - DR BGS Auctions

• Basic Generation Service (BGS/PLR) Auction takes
  EDC out of the role as LSE, absent extraordinary
  circumstances.
• Removes much of the economic motivation for EDC
  DR programs.
• EDC VLR would require approval as competitive CSP
  service
• Suppliers relationship with customers?
• BGS auction winners assumed LSE load in August.
• PJM program enabled JCPL to be compensated for 2
  VLR events in August as "exit strategy" to finish
  the summer.
• Unclear what JCPL will do about VLR in 2003. DLC
  continues, but under discussion for long run.
• RTP is on the table as potential BGS rate for
  large customers in 2003.
• Changes the available market for VLR based DR.
• VLR is appropriate "next best solution", absent
  RTP

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DG/DR Operating Experience in PA shows "smoking
gun" pricing effects

• 100MW distributed generator pilot runs machines
  based on LMP. LMP for bus drops when it runs,
  Larger Zone drops with bus.

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7-1-02 Single Event
Started Generators
Shutdown Generators
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