[BETA] Fortnightly

Regulatory policies are evolving to make demand response and smart-grid planning a reality across the country. Cooperation between federal and state lawmakers will allow local flexibility within a uniform national framework.

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?

In the world of utility bill payments, few issues have generated more controversy than the use of credit, debit and pre-paid cards. Generally, regulated utilities have been unable to build a compelling business case to offer no-fee card payments to customers, preferring instead to partner with third-party processors (TPPs) who happily charge convenience fees to card users.

Advanced metering and other smart technologies will allow more granular monitoring of conservation efforts, making them highly predictable for resource planning and system dispatch. Eventually, the smart grid will erase distinctions between wholesale and retail markets.

State and federal incentives provide the carrot for utilities to invest in grid intelligence. But regulatory and technological incentives are not enough without customer participation. Smart-grid policies will succeed only by focusing on customer needs and benefits.

When the California Energy Commission (CEC) proposed to include programmable communicating thermostats in the state’s new building codes, it expected some push-back from home builders. It didn’t expect what it got: a major public outcry.

Demand response reduces overall energy usage, but the magnitude of the reduction depends on whether the technologies are developed and deployed with efficiency in mind.

Does the volatility of the customer’s energy cost create much concern regarding the impact on the customer’s core business? One customer may be very comfortable taking on significant electricity cost risk to obtain electricity price and subsequent bill concessions. Another may be willing and anxious to pay a premium to accept less electricity cost risk than normal. Both of these customers, and all the customers in between, should be offered products that fit their needs, and these products should be priced upon sound risk fundamentals.

The opposing challenges of higher gas prices and rising environmental concerns have put utility regulators in a difficult position: How can they bring rate stability while minimizing environmental impacts? At the same time, they are grappling with trends in consolidation, competition, transmission planning, and distribution service quality. Each state brings a different view of the changing utility landscape. For insight, Fortnightly brought together regulators from several states to discuss their plans and priorities for today and the future.

Does demand response increase or decrease overall electricity usage?