NAESB Measurement and Verification Model Business Practice Retail Electric Demand Response

1. NAESBMeasurement and Verification Model Business PracticeRetail Electric Demand Response NARUC update 9/14/09

2. Approach for Retail Standard • Determine that the RTO draft recommendation could apply to the retail draft recommendation with proper wording changes • Determine that the RTO draft recommendation provides a framework for the retail draft recommendation, but more detail is necessary • Determine that the retail draft recommendation needs to be more prescriptive than the wholesale draft recommendation.

3. Model Business Practice Measurement and Verification (M&V) standards are intended to facilitate Demand Response in retail electricity markets by providing a common framework for the following: • Transparency: accessible and understandable M&V requirements for Demand Response products • Accountability: criteria that will enable the Program Administrator to accurately measure performance of Demand Response resources • Consistency: standards applicable across retail electricity markets • Comprehensive: strives to cover all forms of Demand Response

4. APPLICABILITY

5. Coordination • Worked closely with: • Wholesale standards group to maintain consistency with current approved standard • NERC to insure consistency with reliability standards • AEIC as they develop load research standards with regards to M&V • Industry groups and Market Participants involved in providing or evaluating demand response programs such as EPRI, EnerNoc, Comverge, GoodCents

6. Scope • Limited to Demand Response programs only: • Does not include Measurement and Verification of energy efficiency programs or for permanent load reductions. • Confined to the retail markets. If a utility has programs that are bid into and operate in the wholesale markets then the wholesale standard will take precedence. • Standards are voluntary across state jurisdictions. They can be adopted by individual state regulators • Program Administrator has significant flexibility to adopt more stringent requirements in most areas to meet regional needs.

7. Product Categories • Wholesale group developed model business practice for each of 4 Product types: • Energy Services • Capacity Services • Reserve Services • Regulation Services • Retail group is developing one model business practice to cover all Demand Resource products in the retail space

8. Performance Evaluation A performance evaluation methodology is used to determine the Demand Reduction Value provided by a Demand Resource. The standards include descriptions of acceptable Baselines and alternative performance measurements. • Maximum Base Load • Meter Before / Meter After • Baseline • Metering Generator Output

9. Definition of Terms • Definition of Terms was developed to clarify specific meanings of terms while providing consistency and conformance where possible to: • Wholesale Standard • FERC • NERC • AEIC • Worked through the NAESB glossary committee to adopt definitions

10. Demand Response Event Timing

11. Key Definitions • Demand Resource: A Load or aggregation of Loads capable of measurably and verifiably providing Demand Response. • Demand Response: Changes in electric use by demand-side resources from their normal consumption patterns in response to changes in the price of electricity, or to incentives designed to induce lower electricity use at times of high cost periods or when system reliability is jeopardized. • Program Administrator: An investor-owned, governmental or cooperative utility with the responsibility for developing and operating Demand Response programs

12. Key Definitions • Baseline: A method of estimating the electricity that would have been consumed by a Customer or Demand Resource in the absence of a Demand Response Event. It may be calculated using interval metering and/or statistical sampling techniques. • The following figure illustrates the concept of Baseline relative to a Demand Response Event.

13. Baseline Conceptualization

14. Next Steps • Completed formal comment period – August 28th • Single topic review session planned for September 25th. • Allows Executive Committee members and interested industry participants to discuss recommendation. • Allows EC members to review and resolve issues from formal comment period members and to prepare to vote on recommendation • Executive Committee will vote on proposed standard on October 2nd • Work Group 3 – Tasked to look at more technical standards for both wholesale and retail going foreward