Review of Demand-Side Bidding Programs: Impacts, Costs, and Cost-Effectiveness

This study reviews the experiences of U.S. electric utilities with demand-side management (DSM) bidding programs. In these programs, a utility requests proposals from third party (e.g., energy service companies) and customer bidders offering kW demand reductions, kWh savings, or some combination of both at a specified price for a fixed time period. DSM bids can be solicited as part of a competitive bidding program that includes supply-side providers or as a stand-alone program. Since 1987, about 30 utilities in 14 states have solicited bids from ESCOs and customers to reduce demand in commercial and industrial facilities and residences. DSM bidding has spread from its original roots in New England to other states and regions, driven both by regulatory policy and the capacity needs of utilities. In this study, we examine 18 programs in which utilities have selected winning bidders and information is available on program costs.