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Federal regulators began a process to open the door for bidding negawatts into regional grid operations. Under the proposal, transmission operators could accept offers to drop electricity use through “demand-response” plans. The saved power could replace supply from power plants, avoiding the need for new peaking power units. “It’s a comparable treatment of resources, be they generation or load reduction,” said Federal Energy Regulatory Commission member Phil Moeller. With a move to allow bidding for less use rather than more power into wholesale markets, federal regulators say that contributes to curbing global warming. The commission, however, expects the demand response market to be market driven. Thus, it would allow the price of demand-response bids to float with the market. Moeller called it a transition to forward capital markets, but he added it would remove barriers to the demand-response market. However, he cautioned that it may not always be a cheaper method to keep electricity flowing through the grid when supplies are crimped. FERC appears to be catching up to California’s demand-response policy--although in the state it mostly remains regulated at the utility level. The state has been a leader in trying, not always successfully, to get customers to drop their electricity use in times of high demand instead of building expensive polluting power plants that only satisfy “peak” use. The California Independent System Operator-run wholesale market allows bids for demand response instead of supply, for instance. The state’s water agencies are the main source of those bids, according to CAISO spokesperson Gregg Fishman. They bid to reduce water pumping during times of system stress. However, the grid operator refused to comment on the national proposal. One regulator, however, cited California’s experience during the 2000-01 energy crisis of allowing demand-response bids to soar with momentary necessity. “Having lived in California during the energy crisis, allowing the price to skyrocket is not a good idea,” said commissioner Suedeen Kelly. In another move that apparently shows California is ahead of federal regulators, it agreed to impose affiliate transaction rules on utilities. That is, if a utility affiliate, or if a utility’s parent company subsidiary, has business in the same area, rules would prevent cross subsidization between the for-profit and the ratepayer-backed corporations. California has required its major investor-owned utilities to keep affiliates at arm’s length--although with varying approaches--in the last decade. The California Public Utilities Commission allowed Pacific Gas & Electric’s parent company to “ringfence” its utility prior to the energy crisis. Regulators thought the strategy was protecting ratepayers from any misspending that the parent could place on the utility. However, it ended up that about $5 billion allegedly was sent by PG&E to its parent just before PG&E filed for bankruptcy and the ringfencing has so far prevented a lawsuit by the state and San Francisco from returning any of those funds.

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