Key Issues in Developing Demand-Side Bidding Programs

Several utilities in New England have conducted pilot bidding programs for demand-side resources, while integrated bidding processes, which include DSM resources, are currently being planned or implemented by utilities in New York, New Jersey, and Washington. In this study, we examine several resource planning and program implementation issues that are raised by competitive bidding programs for DSM resources: the choice of combined or separate bidding for demand and supply resources, the criteria used to rank and select projects proposed by bidders, the value of DSM resources, the role of non-price factors, and issues that arise in measuring the impact of DSM programs. We compare the bid evaluation systems used by four utilities that are conducting integrated bidding programs and examine the nominal eights assigned to various features (e.g., price, project status/viability, system optimization, environmental factors) by each utility. We conclude that bidding may have a limited role in a utility's overall DSM strategy because bidding mechanisms are inappropriate for various types of programs and because of the relative immaturity of energy services industry.