Laying out a list of what he says still needs to be done in order to bolster demand response (DR) in the U.S., FERC Chairman Patrick Wood said that in planning, DR "should be considered to be an equal resource" with generation and transmission.
Wood said the U.S. hasn't "begun to fully tap the potential that a vigorous DR regime would bring us to." He made his comments before a conference in Washington, DC on DR sponsored by the U.S. Demand Response Coordinating Committee (DRCC).
Other steps that need to be taken on the DR front, according to Wood, include:
As for challenges ahead for DR, Wood's presentation listed the following: (1) few price-responsive retail rates; (2) weak federal-state coordination; (3) a lack of enabling technology; (4) an unclear business case for providers; and (5) the existence of other significant barriers.
Meanwhile, Wood said, "We need to never forget what we are about in this line of work. It's not to be creating a new business opportunity for DR, although I should say that is a certainly good thing to do. And it's not about the whiz-bang technology, which we badly need -- and that actually is a good thing to do. It is about the customer and about getting the rules right and getting the barriers removed, so that the customers -- who are the reason we're all here -- can finally get the full benefits of competition that they're entitled to."
Earlier in his remarks, Wood said the successful adoption of DR across the country "would allow us to dramatically and successfully, I think, simplify and streamline a number of the other necessary market oversight functions that are a fixture on the wholesale market scene today -- primarily in the area of market power mitigation."
He also said the "core challenge" with DR, "as it is with distributed generation, for that matter, is that it sits between the retail and the wholesale market. This means that to be truly successful in promoting and developing demand response, retail and wholesale regulators will need to work together on these demand response issues."
FERC Commissioners Nora Brownell and Suedeen Kelly have both called for a technical conference to examine barriers to DR, Wood noted. "I support the need for this conference and expect that the Commission will be making an announcement on that in the near future," he said. Wood is departing as FERC chairman at the end of this month.
Speaking with reporters following his remarks, Wood was asked to comment on whether some of the DR-related successes seen in RTO markets could be considered an endorsement of RTO participation, albeit in a small way.
"I think so," he said. "Although I just got a nice earful that the state of Connecticut is stepping up now and saying, 'Well, we'll handle the demand response stuff.' Apparently, there's some legislation going on there that would allow them to do it instead of the RTOs."
Wood said he would "see the RTO being a backstop if it's not going on effectively, but it would be, I think, a lot more efficient and, I think, effective if the states handled it first."
Meanwhile, David O'Connor, a commissioner with the Massachusetts Department of Energy Resources, said that "regulatory measures really are still needed at the state level" when it comes to DR.
"I think the ISOs have stepped up and FERC has stepped up and saw that you cannot simply step back and let the market work and hope that a demand side is going to emerge," he said. "We haven't seen that recognition at the state level."
O'Connor called for "much more aggressive intervention" by state legislatures and public utility commissions "to design rates and to implement technology in ways that will facilitate demand response."
The DRCC is a nonprofit organization formed in 2004 to increase the knowledge base in the U.S. on DR and facilitate the exchange of information and expertise among DR practitioners.
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