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Demand Response: Breaking Out of the Bubble

Using demand response to mitigate rate shocks.

Fortnightly Magazine - March 2007

of fuel sources. Typically, gas-fired combustion turbine plants are used as peaking plants, coal plants are used for base load, and combined-cycle plants are used for some amount of base load and some amount of peaking. The issue is, in part, a cost-effectiveness one—when and whether to price responsive demand to replace the expensive power generated by a peaking plant.

6. Every residential customer saw a price hike of a penny per kilowatt-hour in January 2001. In May, customers who used more than 130 percent of their baseline allowances saw increases that ranged from 5 to 10 pennies per kilowatt-hour.

7. FERC Staff Report, “Assessment of Demand Response & Advanced Metering,” Docket Number AD-06-2-000, August 2006. Page 29.

8. See http://www.iso-ne.com/pubs/pubcomm/pres_spchs/2006/dr_speech.pdf. Also, Gordon van Welie, The Providence Journal, May 13, 2006.

9. National Town Meeting and Symposium on Demand Response, Berkeley, Calif., June 2006.

10. Lisa Wood, “ The New Vanilla: Why Making Time of Use Rates the Default Rate for Residential Customers Makes Sense ,” Fortnightly’s Energy Customer Management , July/August 2002.

11. Daniel McFadden, “Free markets and fettered consumers,” Presidential address to the American Economic Association, Jan. 7, 2006.

12. James C. Bonbright, Albert L. Danielsen, and David R. Kammerschen, Principles of Public Utility Rates , 2nd ed. (Arlington, VA: Public Utilities Reports, 1988).

13. Southern California Edison, Advanced Metering Infrastructure: Conceptual Feasibility Report, August 2006.

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