Deregulated Electricity Markets Offer Real-Time Price Signals to Promote Retail Load Management

Kirk P. Miller and Shiva Swaminathan, City of Palo Alto Utilities

Keywords

Abstract

Deregulation of the electricity market creates new opportunities to develop real-time, price-responsive, load management programs. The deregulated electricity markets represent for the first time the opportunity for a retail load to receive real-time market price signals, reflecting the true value of wholesale energy and ancillary energy services.

Wholesale energy prices in California have repeatedly risen above $150/MWh during high demand periods and have even reached the $750/MWh price cap imposed by the system operator. These price signals, combined with modern communication tools provide an opportunity for end-users to undertake significant amounts of load management by quickly responding to, and taking advantage of values created in the deregulated marketplace. The California Independent System Operator (ISO) has developed two programs which provide payments to retail customers when the customers implement load reduction during high demand periods. A similar load reduction program is being undertaken by the New England ISO.

This paper examines the load reduction programs of the California ISO and the New England ISO and offers recommendations for improving their effectiveness. The paper also attempts to answer a fundamental question: “Do these load reduction programs provide sufficient revenue to attract and maintain participating load?”