Regional Demand Response in New England's Power Systems

1. Dimensions of Demand Response Capturing Customer Based Resources in New England’s Power Systems and Markets Massachusetts Electric Restructuring Roundtable November, 2003

2. NEDRI Overview • Genesis: Power shortages, price spikes of 1999-2001 – something important is missing ! • “RTO Futures” Forum: FERC, PUC Commissioners, ISO and utility leaders endorse regional effort • Goal: balanced energy markets – regional scope • Breadth: Remove market and policy barriers to all customer-based resources: load response, energy efficiency, and distributed generation • Depth: Propose coordinated policies and programs for wholesale, retail and wires • New England can lead, provide a model

3. The Market Value of Price-Responsive Load

4. NEDRI Process: Key Points • Sponsorship: ISO-NE, NECPUC, NESCAUM, NYISO, DOE, EPA, FERC • State + Regional + Federal agencies • Utility + Environmental regulators • Direct support and participation by FERC • Broad, Regional Stakeholder Participation: • More than 30 stakeholder groups, including 3 ISOs, 6 state PUCs, utilities and DR providers, DOE , EPA, state air directors, market participants, state energy offices, and advocates • Personal commitment over an extended period • Working Groups developed recommendations for plenary review • Expert consulting team provided Framing Papers, technical support – great library of resources • Expert facilitation led to productive dialogue and consensus on almost all issues • Where consensus not possible, alternative approaches set out for the benefit of regional decision makers

5. Goals of the process • Identify short-term and long-term demand response opportunities in NE • Identify barriers at wholesale and retail • Develop consensus on policies and programs for the region • For the ISO, and to recommend to FERC • Recommendations to state PUCs • And to environmental regulators • Support viable business models for DR

6. Restructuring does not resolve barriers to DR resources • Breakup of the franchise: • Who is responsible for efficiency and load management? • DR provides several values at once – how can these fragmented values be assembled and recognized in the market, or by regulation? • Historic market barriers to efficiency did not evaporate • Supply-only bidding at wholesale • Default service plans blunt cost and value signals to end-use customers • Load profiling blunts incentives to retailers • Reliability rules not open to DR • Distribution companies – retain throughput incentive, barred from delivering efficiency and load mgt. • And so on…

7. Principles for DR Resource Policy • Efficiency and productivity: NEDRI’s overriding goal is to “maximize the value of electricity services in the region, while minimizing the total societal cost of electricity production, delivery, and use;” • Using market forces: enable DR resources to participate on a level basis in regional power markets; empower end-use customers to deliver DR, at prices reflecting their value to the grid; • Role of public policy: not all costs and values can be captured in markets; public policy should intervene to correct market failures; • Comprehensiveness: view the system as a whole, consider market rules, tariffs, and policies for DR at both wholesale and retail; • Environmental protection: DR policies should ensure no net environmental harm from DR activities, and should seek long-term environmental gains; • Administrative simplicity: minimize transaction costs and regulatory requirements for DR wherever possible. Source: NEDRI Report, pp 4-5.

8. NEDRI’s Broad View of Demand Response Resources • “DR resources include all … modifications to the electric consumption patterns of end-use customers that are intended to modify the timing or quantity of customer demand on the power system in total or at specific time periods.” –NEDRIReport, p. 6 • NB: includes responses to reduce capacity and/or energy required to serve load • Dimensions of DR: • Term of availability: a few hours, up to many years • How called? Dispatchable, Scheduled, Deployable • Nature of the customer’s response: Efficiency and conservation reductions, Short-term load reductions, Load shifts, Increase in onsite generation

9. The Market Value of Price-Responsive Load

10. Demand Response includes embedded efficiency

11. What if the NEDRI Recommendations were implemented actively? One post-NEDRI estimate: • Thus: Energy efficiency could offset 30-50% of incremental load growth • And: DR and Pricing could provide an additional ~300 – 1800 MW of resources – Source: Lawrence Berkeley National Lab estimates (C. Goldman and G. Barbose), based on 2003 NEDRI Report after adoption, thus not reviewed or endorsed by NEDRI participants. .

12. NEDRI Conclusions and Recommendations • NEDRI Stakeholders adopted 38 recommendations; • Almost all by consensus – • limited exceptions on options for transmission expansion and non-transmission alternatives • Organized into 5 substantive areas: • Regional Demand Response Programs • Energy Efficiency as a DR Resource • Pricing, Metering, and Default Service Reform • DR for Contingency Reserves • DR and Power Delivery (Transmission and Distribution)