Price-Responsive Load (PRL) Program - Framing Paper #1

The FERC staff recently issued its "Working Paper on Standardized Transmission Service and Wholesale Electric Market Design." In this report, FERC staff articulates its vision of the role of demand resources in wholesale electricity markets. Translating FERC's broad principles on the role of demand resources in competitive wholesale markets into a set of programs, initiatives, and activities that facilitate development of demand response resources in the New England electricity market is a major challenge for participants in the NEDRI process. The ultimate goal/objective of such efforts is to create sufficient "price-responsive" load so as to improve the performance, efficiency and reliability of wholesale electricity markets. Several conceptual studies have demonstrated that a relatively small amount of price-responsive load can substantially reduce market-clearing prices during "tight" market conditions, producing significant benefits to consumers. In Framing Paper #1, we explore and examine various options for demand response resources to provide load curtailments or decrements in response to market (price) signals in the day-ahead energy market as well as key policy and program design issues. In order to provide appropriate context for consideration of these issues, in Section 2, we describe various wholesale electricity markets, identify various barriers that currently limit participation in these markets by demand response resources, and summarize recent experiences and lessons learned from ISOs and utilities that have offered similar and related demand-response programs. For discussion purposes, we assume that New England ISO will be developing a day ahead market as part of its Standard Market Design and that FERC will require ISO/RTOs to implement a set of demand response initiatives and programs that are consistent with Standard Market Design which will be included in a revised transmission tariff. We assume some form of integration or coordination will occur with NYISO in the area of demand response programs, based on the current NERTO negotiations or through some other process. We also assume that ISO-NE will consider various types of wholesale market programs designed to elicit demand response resources as part of its effort to implement the FERC Standard Market Design and a reformed open access transmission tariff.