California’s investor-owned utilities are to face a new standardized cost-effectiveness test this year for their upcoming 2012-14 demand-response programs under a pending California Public Utilities Commission decision. The new test is to replace confidential judgments utilities made on what constituted cost-effective demand response programs. Under demand-response programs, utility customers generally agree to curtail usage when power demand peaks in exchange for a price break. Joy Morgenstern, CPUC Energy Division demand response program manager, said the test will apply to the utility demand response plans due March 1. Morgenstern spoke Jan. 6 at what was expected to be the last in a very long series of workshops held to develop the cost-effectiveness evaluation method for demand response. Utilities had wanted to use confidential data and proprietary models to determine the cost-effectiveness of demand response programs in their territories, pointing out that the cost of new megawatts, as opposed to negawatts, varies based on differences in climate, transmission, sources of energy, and other factors, noted the CPUC draft decision. However, demand response companies said a standard method would increase transparency and boost both “confidence” and “credibility” for negawatts. The draft CPUC decision came down on the side of demand-response companies, ordering a standard model that is open to all to examine. Under the new cost-effectiveness test, which Energy & Environmental Economics developed for the CPUC in 2012--the first year of the upcoming utility demand response plans--the annualized capacity value of a new combustion turbine peaker would be $106.35/kW. While other costs would be considered, utilities generally would have to keep the cost of their demand response programs under that value to win regulatory approval.