(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit takes issue with Contributing Editor Steven Andersen’s characterization of utility customers as “crazy.”
Getting the most from demand response—despite a flawed FERC rule.
FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy decision that stretches federal authority. Nevertheless, economic benefits will result if DR programs are well implemented to avoid gaming the system and distorting the market.
Which path leads to the smart grid?
A fierce debate has erupted in the utility policy community, with battle lines drawn within FERC itself. In the effort to improve system efficiency, two competing alternatives stand out: to build the smart grid on large-scale demand response (DR) programs, or to build it around consumer behavior in retail markets.
Economists take sides in the battle for DR’s soul.
Back when the U.S. economy and power consumption still were bubbling, PJM reported in August 2006 that customer curtailments during a week-long August heat wave had generated more than $650 million in market-wide energy savings—all at a mere $5 million cost, as measured in direct payments made to the demand response (DR) providers, set according to wholesale power prices prevailing at the time. Where else but the lottery can you get an instant payoff of 130-1?
Recent electricity pricing argues for faster, more extensive deregulation.
Was restructuring a success? Prices provide a dispassionate analysis, showing that restructuring was poorly designed, badly executed, and focused on the wrong part of the grid. With those lessons learned, it’s time to explore ways to move forward.
Two authors beg to differ with Goldman Sachs’ Larry Kellerman on what needs mending in the Northeast.
Randall Speck Esq. and Dr. Miles Bidwell
Although much work remains before all its benefits will be realized, the Forward Capacity Market satisfies the criteria for a capacity system that works, while avoiding the need for the centralized planning and control that Larry Kellerman appears to advocate in “Mending Our Broken Capacity Markets.”
Regulators today must define earnings for energy retailers virtually bereft of fixed assets.
Charles J. Cicchetti and Colin M. Long
Applying the traditional rate-base concept to the new hybrid companies is where the gap between the old and the new regulatory paradigms resembles a deep schism. The current shifts in regulation should cause regulators to revisit and reconsider concepts that once reigned supreme in ratemaking.
Enron's fall finds FERC toying with cost-based rates. But let's temper the nostalgia.
AEP Power Marketing Inc., 97 FERC ¶61,219,
More ruminations on the "stranded ratepayer."
Calif. PUC Application 99-08-022, proposed decisions by Barnett (Aug. 2, 2000), Neeper (Sept. 19, 2000), and Bilas (Nov. 6, 2000)