Looking ahead to summer within the PJM Power Pool meansanticipating power shortages and price spikes. With virtually nonew generation coming on line for this summer, Pennsylvania publicinterest group PennFuture says it’s time to create a demand sidemarket for electricity and give consumers an incentive to conserve.

“Demand-side bidding would allow consumers to bid a maximumprice that they are willing to pay for electricity. Moreimportantly, it would allow consumers to be paid for reducing theirenergy usage during peak periods,” write PennFuture CEO John Hangerand colleagues in a memo from the organization. Hanger is a formermember of the Pennsylvania Public Utility Commission where he waswidely considered to be an advocate for consumer interests.

Although growth in electricity demand lags gross domesticproduct growth, electricity demand in PJM is five years ahead ofschedule. One tool for meeting the challenge is PJM’s demand-sidebidding platform, which is slated to begin June 1. The market willbe a two-settlements market in which deviations from the scheduledenergy demand will be used to credit the load-serving entity thatserves retail customers.

PennFuture gives the example of a consumer scheduling in theday-ahead market 40 MW at $20/MWh for one hour and paying $800. Thenext day, if the consumer’s real-time locational price was $45/MWhand he only used 15 MWh, he would be paid $225 ($45/MW for 5 MW).”By participating in the two settlements market, the consumerreduced his/her electricity use by 25% while reducing his/her billby 28%.”

The report notes demand-side approaches exist in New England andalso are planned for the New York ISO. “What if PJM residentialconsumers could participate in a demand-side market? When PJMlocational prices hit 99.9 cents/kWh this summer, the value ofresidential customer load for five peak summer afternoons will beclose to $100, enough to pay for 50% of that month’s electric billin Philadelphia. If 5% of Pennsylvania’s load were to participatein this market for five hours, consumers could save as much as $4.5million.”

Hanger and company speculate there may be “thousands ofresidential customers” who would be willing to turn off all theirappliances for five afternoons in exchange for $100. Some may bewilling to turn only certain items off and save $50.

Since no current electric suppliers are proposing to servecustomers in a two-settlement framework, making a demand-sidemarket available to all consumers requires entry of new suppliersand possibly the unbundling of customer account services. “However,with demand ahead of schedule and the opportunity for savings whatthey are, the time for that has come.”

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