For Immediate Release
Contact: Mike Gehrig Doug Lewin
SPEER Releases Report Detailing Benefits of Demand Response
Within Wholesale Electricity Markets Following Supreme Court Hearing
Texas, not subject to FERC jurisdiction, is charting its own course
Austin, Texas (October 29) – the South-central Partnership for Energy Efficiency as a Resource (SPEER) today released a report entitled “The Debate About Demand Response and Wholesale Electricity Markets.” Although its focus is on Texas, it addresses the same challenging issues recently heard before the Supreme Court. A Circuit Court overturned the decision of federal regulators to allow customers or representatives of customers to participate in wholesale electric markets, and to pay them the same as electric generators. The SPEER report finds it appropriate that customers willing to reduce demand bid directly against generation in the wholesale market, but concludes the debate about pay levels is a tempest in a teapot.
The ERCOT market serving most of Texas is wholly within the state, so not within the ‘interstate commerce’ jurisdiction of the Federal Energy Regulatory Commission (FERC). It thus does not have to follow FERC Order 745, the subject of the Supreme Court case for which oral arguments were heard earlier this month, and needn’t be affected by the outcome of the case. While the rest of the country waits on the Supreme Court decision, however, this report shows Texas is also struggling with the issue of how to treat demand response (often called DR) within its own borders. That this Texas market is the only one independent of FERC may make this a potentially interesting read, even for outsiders.
Texas currently allows customer loads to compete with generation at wholesale, through their retail suppliers, and The influential Technical Advisory Committee (TAC) to the ERCOT Board of Directors will hear a preliminary presentation on how to further open customer participation today (Thursday, October 29).
On the issue of pricing, TAC members have historically taken a more conservative position than FERC on how to compensate customers willing to reduce their demand for power at a stated price, agreeing on this point with interveners challenging FERC in the courts. Most Texas stakeholders would reduce the payment to participating customers by the amount they save by avoiding consumption.
The study doesn’t dispute the validity of this position, but points out that the administrative cost of implementing the complex, although theoretically more precise pricing could be higher than the actual cost of simply paying demand response providers like generators. And, it may risk foregoing significant benefits. SPEER’s companion analysis found savings to the market from the inclusion of an incremental amount of additional DR in ERCOT could have approached $200 million on only five days in 2012 and 2013, while the energy savings to customers for curtailing was less than $2 million, a modest degree of inaccuracy.
TAC will hear a stakeholder proposal for implementation of a compromise solution, an approximation of the more conservative payment approach that could be administratively practical, and yet allow even broader participation. Whether the proposed pricing solution is adopted, the SPEER report is a reminder that inclusion of consumer participation directly in the wholesale market can increase competition in competitive markets, contribute to price formation, and can lower costs to consumers, while erecting barriers to demand response would have the opposite effect.
For more information about SPEER, please visit www.eepartnership.org
SPEER is an educational non-profit regional energy efficiency organization, working to accelerate adoption of advanced building systems and energy efficient products, services, and technologies in Texas and Oklahoma. For more information, please visit www.eepartnership.org