Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Are We Smart Yet?

Rising expectations in the Dog Days of summer.

Fortnightly Magazine - August 2012

management. Smith envisioned an energy exchange that would accommodate demand-side transactions just as it did those on the supply side—and he predicted that such a market would transform the industry. “The ability to alter intentionally the balance of supply and demand will become a tremendous competitive advantage,” he wrote. “The market will exact terrible penalties on those who don’t heed its signals.”

In some respects, that vision of dispatchable demand-side resources has become a reality. But in other respects, it’s still a long way off. In this issue of Public Utilities Fortnightly, several authors tackle this topic. Taken together, it’s mostly a story of progress, with demand response (DR) and distributed generation (DG) rising in importance across the country. Authors from Con Edison explain how that company has made strides integrating DG into the system to serve both efficiency and reliability (“Capturing Distributed Benefits ”). And a consultant involved with Puget Sound Energy’s dynamic pricing pilot describes its successes and lessons (“Directly Controlling the Winter Peak ”).

Those case studies occur against a backdrop of fundamental market change—most notably via last year’s Order 745, in which FERC ruled that DR and conservation should be paid the same price as energy supplies in organized wholesale markets. Operators like PJM are integrating demand-side resources into congestion pricing and resource planning, and energy service companies are building a business around aggregating and bidding negawatts into markets. One such company is Viridity Energy, whose CEO—and formerly PJM’s COO—co-authored “Load as a Resource.”

That article makes an unvarnished pitch for integrating demand resources into the dispatch queue. But as Publisher Bruce Radford writes in “ Making Demand More Dynamic ,” doing that equitably and efficiently is anything but simple. Treating load as a resource introduces a slew of new factors, and so it’s not surprising that we’re still trying to hash out even the most basic details. He writes, a “wide gulf will still persist between market[s] and the vision of demand response service providers for integrating dynamic, price-responsive load into real-time system dispatch.”

Feeling the Heat

In some sense, as America swelters in yet another record-hot summer, it seems like we’ve come full circle, back to the time of “It’s Reliability, Stupid!” Utilities seem to be getting tired of the hype about customer engagement, dynamic pricing, and demand resources. And at the same time, they’re feeling the heat from customers and regulators, who want to know whether reliability is getting neglected.

This time, instead of New York, it’s Maryland, where an extended outage in July left more than 1.2 million Pepco and BGE customers without power—and potentially contributed to 20 heat-related fatalities. Already the outages are having financial consequences; two Maryland state senators are calling for fines exceeding $100 million each for Pepco and BGE. And in mid-July—under pressure from Gov. Martin O’Malley to “adjust for the shorting of proper maintenance”—the state PSC rejected $50 million of Pepco’s requested $68 million rate increase.

It might seem like the typical backlash against a utility that’s doing the best it can under difficult circumstances—and to