FERCs Role in Demand Response David Kathan Office of Energy Policy and Innovation Federal Energy Regulatory Commission Peak Load Management Alliance Practical.

FERC’s Role in FERC’s Role in Demand ResponseDemand Response

David KathanDavid Kathan

Office of Energy Policy and InnovationOffice of Energy Policy and InnovationFederal Energy Regulatory CommissionFederal Energy Regulatory Commission

Peak Load Management AlliancePeak Load Management AlliancePractical Demand Response for a Complex FuturePractical Demand Response for a Complex Future

October 20, 2009October 20, 2009

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OutlineOutline

FERC’s FY09-14 Strategic PlanFERC’s FY09-14 Strategic Plan Past Commission ActivityPast Commission Activity Recent Commission ActivityRecent Commission Activity

The author’s views do not necessarily represent the views of the Federal Energy Regulatory Commission

33

Released October 2009 Reflects the direction of

the Commission in supporting national goals

Speaks to future energy policy

FERC FY09-14 Strategic PlanFERC FY09-14 Strategic Plan

44

FERC’s MissionFERC’s MissionRELIABLE, EFFICIENT AND SUSTAINABLE ENERGY RELIABLE, EFFICIENT AND SUSTAINABLE ENERGY

FOR CONSUMERSFOR CONSUMERS

1. Ensure that rates, terms and conditions are just, reasonable and not unduly discriminatory or preferential.

2. Promote the development of safe, reliable and efficient energy infrastructure that serves the public interest.

Assist consumers in obtaining reliable, efficient and sustainable energy services at a reasonable cost through

appropriate regulatory and market means.

Fulfilling this mission involves pursuing two primary goals:

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FERC FY09-14 Strategic PlanFERC FY09-14 Strategic PlanStrategic Goals and ObjectivesStrategic Goals and Objectives

Goal 1: Just and Reasonable Rates, Terms and ConditionsEnsure that Rates, Terms and Conditions are Just, Reasonable and not Unduly Discriminatory or Preferential

1. Regulatory and Market Means

2. Oversight and Enforcement

Goal 2: InfrastructurePromote Development of Safe, Reliable, And Efficient Infrastructure that Serves the Public Interest.

1. Development and Siting

2. Safety3. Reliability

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FERC FY09-14 Strategic Plan FERC FY09-14 Strategic Plan Key Demand Response StrategiesKey Demand Response Strategies

1.1 Ensure implementation of appropriate regulatory 1.1 Ensure implementation of appropriate regulatory and market means for establishing ratesand market means for establishing rates• Strategy 1: Establish rules that enhance competition by Strategy 1: Establish rules that enhance competition by

allowing non-discriminatory market access to all supply-allowing non-discriminatory market access to all supply-side and demand-side energy resourcesside and demand-side energy resources

2.1 Increase efficient infrastructure consistent with 2.1 Increase efficient infrastructure consistent with demanddemand• Strategy 1: Encourage new electric transmission Strategy 1: Encourage new electric transmission

consistent with demandconsistent with demand• Strategy 2: Support electric transmission planning Strategy 2: Support electric transmission planning

through the use of open and transparent processes that through the use of open and transparent processes that include analysis and consideration on a comparable include analysis and consideration on a comparable basis of proposed solutions involving any of generation, basis of proposed solutions involving any of generation, transmission, and demand resourcestransmission, and demand resources

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Past FERC ActivityPast FERC Activity

Continued co-sponsorship of the ongoing Continued co-sponsorship of the ongoing NARUC-FERC Demand Response NARUC-FERC Demand Response Collaborative DialogueCollaborative Dialogue

Continued support for regional demand Continued support for regional demand response effortsresponse efforts

Issued two rulemakings that directly Issued two rulemakings that directly address demand responseaddress demand response

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Open Access Transmission Tariff Open Access Transmission Tariff Reform (Order No. 890)Reform (Order No. 890)

In February 2007 the Commission amended its regulations and In February 2007 the Commission amended its regulations and the the pro formapro forma open access transmission tariff open access transmission tariff to remedy to remedy opportunities for undue discriminationopportunities for undue discrimination and address and address deficiencies in the pro forma OATT. deficiencies in the pro forma OATT.

Key reform related to demand response was the requirement for Key reform related to demand response was the requirement for open, coordinated and transparent planning on both a local and open, coordinated and transparent planning on both a local and regional level. regional level.

Preventing Undue Discrimination and Preference in Transmission Service, Order No. 890, FERC Stats. & Regs. ¶ 31,241 at P 418-602

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Transmission Planning Processes Transmission Planning Processes Under Order No. 890Under Order No. 890

Comments are due by November 9, 2009 in AD09-8 on:Comments are due by November 9, 2009 in AD09-8 on:• Should there be consistency in the way transmission providers treat demand Should there be consistency in the way transmission providers treat demand

resources, such as demand response, energy efficiency and distributed storage, resources, such as demand response, energy efficiency and distributed storage, in the transmission planning process? in the transmission planning process?

• Are there preferred methods of modeling or otherwise accounting for demand Are there preferred methods of modeling or otherwise accounting for demand resources in the planning process? resources in the planning process?

• Does the planning process investigate transmission needs at fine enough Does the planning process investigate transmission needs at fine enough granularity to identify beneficial demand resource projects?granularity to identify beneficial demand resource projects?

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Wholesale Competition Final Rule Wholesale Competition Final Rule (Order No. 719)(Order No. 719)

Wholesale competition NOPR contains four demand response proposals:Wholesale competition NOPR contains four demand response proposals:• At All TimesAt All Times

Aggregated retail demand responses may bid into RTO and ISO marketsAggregated retail demand responses may bid into RTO and ISO markets• Unless the laws or regulations of the relevant electric retail regulatory authority do not permit a retail Unless the laws or regulations of the relevant electric retail regulatory authority do not permit a retail

customer to participate customer to participate Demand response may bid into ancillary services marketsDemand response may bid into ancillary services markets

• During a Power ShortageDuring a Power Shortage Reducing load is not penalizedReducing load is not penalized Price may help reduce demandPrice may help reduce demand

Wholesale Competition in Regions with Organized Electric Markets Docket RM07-19, 122 FERC ¶ 61,167, issued February 22, 2008

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Recent FERC ActivityRecent FERC Activity

National Demand Response AssessmentNational Demand Response Assessment Annual demand response and advanced Annual demand response and advanced

metering reportsmetering reports NOPR on measurement and verification of NOPR on measurement and verification of

demand response products and services in demand response products and services in wholesale electric energy marketswholesale electric energy markets

National Action Plan on Demand ResponseNational Action Plan on Demand Response

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EISA 2007 Statutory RequirementsEISA 2007 Statutory Requirements

Section 529 of Energy Independence & Security Act of 2007 Section 529 of Energy Independence & Security Act of 2007 creates a new Section 571 of the National Energy creates a new Section 571 of the National Energy Conservation Policy Act that requires FERC to:Conservation Policy Act that requires FERC to:

Conduct a Conduct a National Assessment of Demand ResponseNational Assessment of Demand Response• Due by June 19, 2009Due by June 19, 2009

Develop a Develop a National Action Plan on Demand ResponseNational Action Plan on Demand Response• Due by June 17, 2010Due by June 17, 2010

With DOE, submit National Action Plan With DOE, submit National Action Plan Implementation Implementation ProposalProposal to Congress to Congress• Due by December 17, 2010Due by December 17, 2010

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National Assessment of Demand National Assessment of Demand ResponseResponse

Bottom-up, state-by-Bottom-up, state-by-state analysisstate analysis

15 pilot programs 15 pilot programs synthesizedsynthesized

User-friendly User-friendly spreadsheet modelspreadsheet model

Review of barriersReview of barriers Recommendations to Recommendations to

achieve potentialachieve potential

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Approach: ScenariosApproach: Scenarios

Business-as-Usual (baseline)Business-as-Usual (baseline) Expanded Business-as-UsualExpanded Business-as-Usual Achievable ParticipationAchievable Participation Full ParticipationFull Participation

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U.S. Peak Demand & NADRPU.S. Peak Demand & NADRP

650

700

750

800

850

900

950

1,000

2009 2011 2013 2015 2017 2019

GW

38 GW,4%

82 GW,9%

138 GW,14%

188 GW,20%

BAU 1.7%

Expanded BAU1.3%

FullParticipation

0.0%

AchievableParticipation

0.6%

No DR (NERC)

1.7%

Change in peak demand from No DR scenario

Average Annual Growth Rate

(AAGR)

BAU: Business-as-UsualDR: Demand Response

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0

50

100

150

200

Business-as-Usual

ExpandedBAU

Achievable Participation

Full Participation

Pea

k R

edu

ctio

n (

GW

)

0%

5%

10%

15%

20%

25%

% o

f P

eak

Dem

and

Other DR

Interruptible Tariffs

DLC

Pricing w/o Tech

Pricing w/Tech

38 GW,4% of peak

82 GW,9% of peak

138 GW,14% of peak

188 GW,20% of peak

DR Potential by Program TypeDR Potential by Program Type(2019)(2019)

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0

20

40

60

80

100

120

140

160

180

200

Business-as-Usual

ExpandedBAU

Achievable Participation

Full Participation

Pea

k R

edu

ctio

n (

GW

)

0%

5%

10%

15%

20%

% o

f P

eak

Dem

and

Large

Medium

Small

Residential

DR Potential by Customer ClassDR Potential by Customer Class(2019)(2019)

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Range of State Results Range of State Results (Achievable Participation Scenario)(Achievable Participation Scenario)

Gigawatt BasisGigawatt Basis

Texas (13.2 GW)Texas (13.2 GW) Florida (11 GW)Florida (11 GW) California (8.8 GW)California (8.8 GW)

Hawaii (0.2 GW)Hawaii (0.2 GW) Vermont (0.01 GW)Vermont (0.01 GW) Alaska (0.01 GW)Alaska (0.01 GW)

Peak Load FractionPeak Load Fraction

Conn. (26%)Conn. (26%) Maryland (24%)Maryland (24%) Maine (22%)Maine (22%)

Wisconsin (8.5%)Wisconsin (8.5%) Hawaii (8.5%)Hawaii (8.5%) Alaska (4.6%)Alaska (4.6%)

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State Details in Appendix DState Details in Appendix D

2020

FERC Assessments of Demand FERC Assessments of Demand Response and Advanced MeteringResponse and Advanced Metering

Required by EPAct 2005 Section 1252(e)(3)Required by EPAct 2005 Section 1252(e)(3) FERC staff issued reports in 2006, 2007 and FERC staff issued reports in 2006, 2007 and

20082008 2009 FERC staff report issued September 20092009 FERC staff report issued September 2009 Future staff reports:Future staff reports:

• Comprehensive reports every even year reports (e.g. 2008) Comprehensive reports every even year reports (e.g. 2008) that will include survey resultsthat will include survey results

• Informational reports every odd year based largely on Informational reports every odd year based largely on publicly available informationpublicly available information

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2009 FERC Demand Response Report2009 FERC Demand Response Report

Fourth annual report issued Fourth annual report issued in September 2009in September 2009

Report includesReport includes• Results from AssessmentResults from Assessment• Summary of recent Summary of recent

Commission actionsCommission actions• Summary of noteworthy Summary of noteworthy

retail demand response retail demand response activitiesactivities

http://www.ferc.gov/legal/staff-reports/sep-09-demand-response.pdf

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2010 Survey2010 Survey

2010 Demand Response and Advanced Metering 2010 Demand Response and Advanced Metering survey under developmentsurvey under development

Draft survey released for comment in Docket Draft survey released for comment in Docket IC09-731IC09-731

Small number of comments were receivedSmall number of comments were received Survey will be fielded in March/April 2010Survey will be fielded in March/April 2010

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Wholesale Demand Response Wholesale Demand Response Measurement and VerificationMeasurement and Verification

Issued NOPR on proposed business practices on Issued NOPR on proposed business practices on wholesale M&V developed by NAESB in RM05-5-wholesale M&V developed by NAESB in RM05-5-017017

Proposed standards categorize various demand Proposed standards categorize various demand response products and services and support M&V response products and services and support M&V in wholesale electric energy marketsin wholesale electric energy markets

Finds that more work is needed to develop Finds that more work is needed to develop substantive standardssubstantive standards

Comments due October 22, 2009Comments due October 22, 2009

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Subsection 571(b) of the National Energy Subsection 571(b) of the National Energy Conservation Policy Act require FERC to:Conservation Policy Act require FERC to:

Develop a Develop a National Action Plan on Demand National Action Plan on Demand ResponseResponse• Solicit input and participation from broad range of Solicit input and participation from broad range of

stakeholdersstakeholders Including industry, state utility commissioners, and non-Including industry, state utility commissioners, and non-

governmental groups governmental groups

• Identify requirements for technical assistance to statesIdentify requirements for technical assistance to states• Identify requirements for a national communications Identify requirements for a national communications

programprogram• Identify analytical tools and other support material Identify analytical tools and other support material

Demand Response National Action Plan Demand Response National Action Plan

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Demand Response National Action Plan Demand Response National Action Plan StatusStatus

Developed a FERC Staff Discussion Draft of Developed a FERC Staff Discussion Draft of Possible Elements of a Demand Response National Possible Elements of a Demand Response National Action Plan Action Plan

Conducted initial and broad outreach on Conducted initial and broad outreach on Discussion Draft with stakeholdersDiscussion Draft with stakeholders

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Demand Response National Action Plan Demand Response National Action Plan Next StepsNext Steps

Release Revised Discussion DraftRelease Revised Discussion Draft Conduct National Action Plan Technical Conduct National Action Plan Technical

ConferencesConferences Publish for Comment Draft National Action PlanPublish for Comment Draft National Action Plan Publish Final National Action Plan by June 2010Publish Final National Action Plan by June 2010

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Demand Response National Action Plan Demand Response National Action Plan Implementation ProposalImplementation Proposal

Post-June 2010 FERC will work with the Secretary Post-June 2010 FERC will work with the Secretary of Energy to develop a proposal to implement the of Energy to develop a proposal to implement the National Action PlanNational Action Plan

Contents of implementation proposal could Contents of implementation proposal could include:include:• Specific proposed assignments of responsibilitySpecific proposed assignments of responsibility

• Proposed budget amountsProposed budget amounts

• Agreements secured for participation from State and other participantsAgreements secured for participation from State and other participants

Implementation proposal due to Congress by Implementation proposal due to Congress by December 2010December 2010

Questions?Questions?David KathanDavid Kathan

[email protected]

202-502-6404202-502-6404