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Federal-State Partnership

Transforming DR and smart-grid policies into reality.

Fortnightly Magazine - January 2010

Congress, the FERC has begun providing technical information and policy guidance designed to inform the states of the status of DR today, to describe where it’s headed, and to provide a roadmap for getting there (see “Rethinking Rate Design,” p. 30). FERC’s 2008 Assessment of Demand Response and Advanced Metering benchmarks the progress that states are making towards that end. It reported that the DR resource contribution from all existing U.S. DR programs 18 is close to 41,000 MW, or about 5.8 percent of U.S. peak demand, with a high proportion coming from the Mid-Atlantic, Midwestern, and Southeastern regions. 19

The FERC’s National Assessment of Demand Response Potential describes the destination. This report, completed in June 2009, contains a systematic state-by-state estimate of the total potential for U.S. DR over the next decade, based on a computer model of state-specific inputs (that the states themselves may use to develop their own estimates). The study concluded that if, over the next 10 years, utilities universally deployed advanced metering and if all customers were exposed to, and required to pay, real-time wholesale rates, the result would be a 20-percent reduction in peak demand, totaling 188,000 MW. 20 This is equivalent to a savings of $150 billion if that amount of demand had to be met with new generation construction. 20 FERC Chairman Jon Wellinghoff expressly disclaimed that the 20-percent level of peak DR is a prediction of what’s likely to occur, or is a “target, goal or requirement.” 22 Nevertheless, the heart of the congressional strategy, which FERC is implementing, is to determine what’s possible, 23 and then to develop and provide the tools that can make that possibility achievable.

To provide the road map, Congress directed the FERC to develop, in consultation with interested stakeholders, and to submit by June 2010, a National Action Plan on Demand Response . Over the last year, FERC has circulated drafts of its evolving action plan and has met with a large number of potential stakeholders. The National Action Plan on Demand Response has three objectives: 1) to identify the technical assistance needed by states to maximize their DR potential; 2) to design a national communications program to provide broad-based consumer education; and 3) to develop analytical tools, information, model regulations, model contracts, and similar support materials for use by customers, states, utilities, and DR providers. 24 Six months after expected finalization of this plan in June 2010, the FERC is expected to submit to Congress a more detailed implementation plan, complete with assignments of responsibility, proposed budget amounts, and any agreements obtained for participation by states and others. 25

Finally, emblematic of the policy of actively reaching out to those who must make these policies real—the state regulators—the FERC has established two collaborative groups with the National Association of Regulatory Utility Commissioners (NARUC); one each for DR and the smart grid. These collaboratives provide an opportunity for federal and state regulators to meet on a regular basis to share information, and to develop joint positions on issues. One such example was a joint policy statement in