Customer Load Participation in Wholesale Markets: Summer 2001 Results, Lessons Learned and “Best Practices”

The restructuring of the U.S. electricity markets has created new opportunities for customers to partner with load serving entities such as utilities or retail energy suppliers in order to curtail or alter their demand in response to either electric system reliability needs or high prices. Although the benefits of allowing customers to manage their loads in response to system conditions or wholesale market prices are potentially large, there are numerous challenges to creating workable price-responsive load programs. Utilities have operated load management programs in a completely regulated environment for many years. With restructuring, demand response (DR) or price-responsive load (PRL) programs are increasingly designed and administered by different entities (e.g., ISOs), involve new market participants (e.g., retail suppliers, curtailment service providers), and are triggered by economic considerations as well as electric system reliability conditions. Lawrence Berkeley National Laboratory, with funding from the Department of Energy Office of Power Technologies, has been examining the potential role of customer load participation in wholesale and retail electricity markets. This study summarizes key findings from an ongoing research project that includes case studies of approximately thirty demand response programs offered by twenty one program administrators which include investor-owned utilities, ISOs, and a federal power marketing authority (see Table 1). The thirty programs surveyed encompass an array of program types: innovative demand bidding programs as well as several more traditional interruptible load management programs. We focus on the market potential of price-responsive load programs, summarize program experience and lessons learned, and identify examples of current "best practices." Case studies were developed based on phone interviews with program managers, review of program information materials, and evaluation studies. The survey covered key program elements such as target markets, market segmentation, and participation results; pricing schemes; dispatch and coordination; measurement, verification, and settlement; enabling technologies; and operational results, where available.