| Independently Powered Energy News

Utilities, demand-response companies, and consumer advocates next week are set to argue over who should pay-&#045;if anyone--for power that utilities buy but is unneeded. That’s because the reverse new capacity, or negawatts, could be procured at the same time from third-party demand-response providers as utilities buy the same amount of energy. The big issue in the debate, explained grid operator attorney John Anders in a filing that sets the stage for next week’s discussion, revolves around the so-called “missing money,” or utility “undercollections.” On one side are demand-response aggregators who hope to sign up utility customers and share the profits from energy savings with them. Their interest is to avoid requirements that would add costs. On the other side are utilities, which not only could get stuck with a bill for unused power, but also stand to lose revenue. In the middle, are advocates for consumers who participate in demand response programs, or could potentially subsidize them, and want protection from getting short shrift. Arguments on how to address the missing money--or whether to worry about it at all--are slated Jan. 19-21 before a California Public Utilities Commission administrative law judge. The debate comes in response to a California Independent System Operator plan the Federal Energy Regulatory Commission tentatively approved last year to enhance the role of negawatts in the state’s power market. Negawatts--that is, dropping electricity use on demand--have been used to shape power use during peak periods since the days of the state’s utility crisis. Utilities, for instance, began signing up their customers in demand-response programs in which they would curtail their power use--particularly air conditioning-- to keep the grid flowing on hot days in exchange for lower rates. Regulators reason that doing so holds down the price of power--by cutting demand--to produce savings for all ratepayers. They also reason that if enough utility customers enroll in demand response programs, they reach a critical mass that can avoid the cost of building expensive new peaker power plants. Throughout the decade, utilities increased their demand response efforts, eventually turning to new companies--such as EnerNOC and Comverge--that effectively administer programs for them on a contract basis. Even then, utilities still were in the driver’s seat in controlling negawatts in the wholesale market. Now that is changing. In response to federal directives, CAISO last year approved a plan tentatively backed by the Federal Energy Regulatory Commission to extend demand-response by allowing the aggregation companies themselves--and even large utility customers--to bid negawatts into its wholesale power market. This, in effect, pits them as competitors against generators and utilities. When it made that decision, Anders acknowledged, utilities raised the potential for so-called undercollections that could occur due to a lag time in communication in the grid operator’s market. However, because the negawatts ultimately stem from utility ratepayers, CAISO handed the “missing money” problem over to the CPUC to solve, since it’s responsible for assuring equity and consumer protection for utility customers. As the CPUC grapples with a solution it faces a dynamic tension. To compete effectively, Anders notes that demand-response aggregators have an interest in maximizing their revenue streams and minimizing their costs. For instance, he points out that to be economically viable market players they need both payments for negawatts and energy capacity. So when it comes to the missing money, he argues that demand-response companies should only have to pay what it costs to generate power that winds up going unused due to negawatts, an amount that would match potential utility losses. Meanwhile, EnerNOC attorney Sara Steck Meyers questions whether missing money will be significant enough to worry about at all. If it is, she argues, the CPUC should collect it from all utility customers, rather than just demand response aggregators, which likely would pass the cost on to those who enroll in their energy savings programs. That’s justified, she wrote, because demand response lowers the overall cost of electricity sold in the market by blunting demand, which would help all ratepayers. Seeking to minimize their potential revenue losses, utilities suggest the CPUC may want to consider payments that amount to more than just what it costs to make the power. For instance, Southern California Edison attorney Fadia Rafeedie Khoury suggested demand response providers could pay the full retail rate for the power. Meanwhile, ratepayer advocates are skeptical of demand response companies and want the CPUC to apply rules to make sure energy consumers get their due from negawatt transactions in CAISO’s market. To this end, the commission should register demand response providers and require them to post performance bonds to assure financial viability and protect ratepayers that enroll in negawatt plans against fraud, according to Division of Ratepayer Advocates attorney Lisa Marie Salvacion. She wrote to the commission that there’s a danger demand response companies may not adequately compensate utility customers for energy savings or may curtail their load more than agreed to in service agreements. Seeking to avoid the cost of such consumer protections, Meyers maintained the CPUC does not have consumer protection jurisdiction over the demand response companies. A commission decision on the issues is not expected anytime soon.

No Result