Regulators Push Demand-Response

By Published On: December 4, 2014

To make demand-response a full-fledged contributor to California’s energy needs, state regulators rejected a settlement delaying for five years the full integration of these resources into the wholesale market. The California Public Utilities Commission Dec. 4 cut the proposed integration deadline by two years. “I’m confounded as to why 2020 is acceptable” to the settling parties, said Mike Peevey, California Public Utilities Commission president. “How in hell should it take five years [to fully integrate demand response] when we fought World War II in three-and-a-half years?” “I share president Peevey’s sense of urgency,” said commissioner Carla Peterman. So did the other three regulators. Commissioner Mike Picker called for a new batch of intervenors because of suspected burnout of the established ones. He noted their apparent lack of enthusiasm to advance resources that curb demand. The settling parties include the three investor-owned utilities, the grid operator, the California Large Energy Customers Association, Office of Ratepayer Advocates, The Utility Reform Network, Environmental Defense Fund, Sierra Club, Alliance for Retail Energy Markets and demand response providers, including Comverge. Peevey’s ruling initiates the splitting of two types of demand response resources—load modifying and supply side resources—in 2016. It expects them to be fully integrated into the California Independent System Operator’s market by 2018. Adopted unanimously, the decision notes it is not a resolution of the outstanding issues to remove demand response barriers but is a “path to resolution.” Regulators in the modified settlement seek not only to ensure demand response reaches its full potential in Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison territories sooner than later, it also guides how to price it. Peevey’s decision also discourages the use of fossil back up generation to support demand response. “It is reasonable to adopt as a policy statement that fossil-fuel emergency back-up generation resources should not be allowed as part of a demand response program for [Resource Adequacy] purposes,” it states. Tied up in how to price demand response resources is whether they also meet resource adequacy needs, which are supply cushions. A demand response auction mechanism is to be in place for the next two years while other pricing methods are explored. “While the commission would prefer full implementation of a competitive procurement mechanism in 2015, we recognize that many questions surrounding CAISO market integration remain unanswered.” If the auction mechanism is successful it may be the sole or one of many other procurement mechanisms, according to the decision. It establishes three working groups to resolve outstanding matters and directs a study be conducted on an appropriate demand response target for the private utilities. As of April 2014, demand response made up 3.9 percent of the utilities’ system peak loads. The settlement would have set a five percent target. This week’s decision is the third phase of a three-part demand response docket.

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