Creating Regulatory Structures for Robust Demand Response Participation in Organized Wholesale Electric Markets

Jon Wellinghoff, David L. Morenoff, James Pederson, and Mary Elizabeth Tighe, Federal Energy Regulatory Commission

Keywords

Abstract

Organized wholesale electric markets serve two-thirds of electricity consumers in the United States. Independent entities known as regional transmission organizations (RTOs) or independent system operators (ISOs), most of which are regulated by the Federal Energy Regulatory Commission (FERC), operate these markets. The RTOs and ISOs administer trading of electricity services in real time (current day) and, in some instances, day-ahead markets for sales of electricity at wholesale, including sales to load-serving entities (LSEs) that then provide service to retail consumers. Recent studies and experience indicate that important benefits, including dramatic reductions in wholesale prices, can stem from planned reductions in consumer usage, or demand response.

A challenge to achieving these savings and benefits, however, has been enabling a robust industry to aggregate consumer demand and consistently and reliably deliver demand response to the organized markets. FERC is addressing that challenge by seeking to establish a federal regulatory framework that ensures that demand response has appropriate opportunities to participate in the organized markets and provides a stable base for the nascent demand response industry. This paper examines recent initiatives that FERC has undertaken in this area, as well as signs of progress that have coincided with FERC's increased interest in demand response. This paper also discusses possible further steps toward regulatory structures that reflect these goals.