Demand Response: Breaking Out of the Bubble

Deck: 

Using demand response to mitigate rate shocks.

Fortnightly Magazine - March 2007
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By protecting customers from price spikes during a few hours in the year, existing rate-design regulations also are preventing them from lowering their average rates throughout the entire year. That is the paradox of utility regulation.

Responding to the directives of the Energy Policy Act of 2005 (EPACT), two recent reports by the U.S. Department of Energy and the Federal Energy Regulatory Commission (FERC) make a strong case for dynamic pricing of electricity.1 These reports pick up on a theme that was first articulated by the California Public Utilities Commission (CPUC) in 2002. As it began its deliberations on dynamic pricing, advanced metering, and demand response (DR), the CPUC instituted Rulemaking (R.) 02-06-001 “to provide the forum to formulate comprehensive policies that will develop demand flexibility as a resource to enhance electric system reliability, reduce power purchase and individual consumer costs, and protect the environment.”2

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