|
COPYRIGHT 2001 Business News Publishing Co.
Regulators thought these programs would reduce peak demand, Did they?
Each of the first four functioning regional independent system operators (ISO) in the U.S. (California, New York, New England, and PJM) have established demand response (DR) programs. The programs are intended to create competition between demand and supply-side resources that would hold down prices and increase system reliability. The DR programs were first operational during the summer of 2000.
Program designers and other market participants and observers believe that large commercial, industrial, and institutional customers will be enthusiastic DR program participants, because the programs are economically attractive. Customers who read headlines about electricity prices skyrocketing can, in effect, get a piece of the action. However, during the summer of 2000 and through most of the summer of 2001 customer participation has been modest. Participation by energy service companies is almost negligible. Are customers and ESCOs missing a golden opportunity?
Who Wants to be an Electricity Trader?
DR programs are ISO versions of the load management programs that have been operated by numerous utilities for the last two decades. Ratepayers generally funded utility load management programs as part of the general portfolio of energy-efficiency programs. During the last half of the 1990s, as electricity deregulation gained momentum across the country, many utilities, with the approval of their regulatory commissions, dramatically scaled back their load management programs. They believed it was no longer necessary for the public to subsidize energy efficiency and load management through a regulatory process. Instead the robust marketplace of competitive energy suppliers would optimize the supply-demand balance in a way that would offer each electricity customer the opportunity to optimize purchases of electricity and electricity-using technologies.
Many customers participated in the utility-operated load management and energy-efficiency programs during the 1980s and 1990s. The utilities paid substantial incentives to customers because retrofit projects at customer sites produced permanent load reductions or load shifting, and thus lowered the utilities' peak power costs. The benefit-cost equation imposed by regulators said that the negawatts produced by the utility programs had to be cheaper than the avoided cost of megawatts produced by utility generation. In the regulated world of monopoly utilities, avoided costs were relatively easy to calculate and relatively predictable. Thus, the implementation of permanent load reductions, through permanent retrofits or replacements of lighting, heating, air conditioning, and industrial process systems, became a familiar undertaking for many large customers.
The new ISO demand response programs, even though they are in some sense successors to the utility programs of the 1980s and 1990s, did not, in fact, evolve from these programs. Though the ISOs recruited staff from utilities, the staff was typically taken from the transmission-related parts of the utilities, not the customer service or energy-efficiency program staffs. In a very real sense, each of the four ISOs in effect started from scratch to invent programs. Because ISOs are membership organizations (see sidebar on page 14), developing the DR programs fell to committees with extended semi-public processes, in which virtually anyone could observe and opine, but only members could ultimately vote. These committees of industry experts started out convinced that customers would love DR programs, and months of wrangling through complex program details at lengthy meetings only deepened that conviction. Many customers (see sidebar on page 12) do not seem so convinced.
The DR programs developed by the ISOs are designed to produce the same end result as the utility programs. Customers turn off loads in times of high system demand. But the mechanics of the ISO programs are much more complex.
In the old utility load-management programs, customers got either a regulated rate reduction to be in an interruptible program or a significant payment to be in a standby load shedding program. When the utility needed capacity, a utility...
Read the full article for free courtesy of your local library.
|
Bookmark this article
Print this article
Link to this article
Email this article
Digg It!
Add to del.icio.us
RSS
