Main Menu6/27/2005
Last week in Washington, D.C., UtiliPoint® attended a truly unique and powerfully educating event called A National Town Meeting on Demand Response, organized by the U.S. Demand Response Coordinating Committee (DRCC). Co-sponsored by the U.S. Department of Energy, the Federal Energy Regulatory Commission, The National Association of State Energy Officials, the National Association of Regulatory Utility Commissioners, The Alliance to Save Energy, and the Clean Energy Program of the U.S. Environmental Protection Agency the event was attended in person by several hundred of nation's luminaries, top policy makers, legislators, leading utilities, and technology providers that are focused on demand response and energy conservation. In addition to those in the room in Washington, the event was streamed over the web to more than 60 locations around the country. All in all, policy makers from 25 states participated in the Town Meeting.
In his welcome address, Dan Delurey, Executive Director of the DRCC and Town Meeting Chair, set an early theme of conversation when he told the packed house of standing room of event attendees that "Demand response represents one of the biggest opportunities and challenges for the electric utility industry." In fact, UtiliPoint® notes, the importance of the demand response opportunity in lowering consumer energy costs, increasing electric system reliability, and reducing U.S. dependency on carbon based-fuels is underscored in pending Congressional legislation. (See UtiliPoint's® June 8, 2005 IssueAlert®, Federal Energy Bill May Alter Energy Bills).
The Town Meeting's first speaker Congressman Rick Boucher (D-VA), a driving force behind the House of Representatives' energy legislation, affirmed the benefits of demand response saying that "As more electricity usage is shifted to off peak periods energy usage will be better utilized;"and "If today's antiquated meters are replaced by modern meters that can deliver a price signal, then we will be able to effect energy consumption positively." Wishing only that, "Demand side programs in every state might have been made mandatory," under stronger legislation, Congressman Boucher, to applause, stated the real importance of the House passed version of the Energy Bill "Our provision requires a 12 month investigation state by state, for a comprehensive Demand Side Response. If states see a way to go forward with such a program then each utility would be required to provide consumers a time based meter and educate consumers about the benefits of demand response."
UtiliPoint® believes that this provision in the House Energy bill is more than a strong indication that investments in advanced metering infrastructure and time-based pricing have come of age. When legislators of both parties and the president endorse the concepts long championed by demand response advocates, it is time for electric utilities and regulators to get with the program.
UtiliPoint® strongly believes that electric utility customers do not need to be protected from time-varying prices—they need to be given the opportunity to partner with the utilities to lower regional energy costs and their own energy bills.
The forum's next speaker, Kevin Kolevar, Director U.S. Department of Energy Office of Electricity Delivery and Energy Reliability, asserted to the audience a second important theme in the discussion of demand response and a source of some challenge, "There is only so much that can be done on the wholesale level, the large untapped demand response that rests in the individual states and with electricity customers and energy efficiency are important aspects of creating effective long-term demand response." UtiliPoint® echoes Director Kolvar's thoughts as we have long asserted that effective demand response programs span generation, wholesale, and retail value chains and participation by parties in each is essential.
In his address, Richard E. Morgan, Commissioner of the Public Service Commission of the District of Columbia, continued on a theme opening his remarks with the comment that "DR is an essential component of a retail delivery program." Continuing, Commissioner Morgan said, "DR is an idea whose time has come," and asserted that "We must have a sloping electricity demand curve or we should give up on (electric) restructuring altogether."
Despite the obvious wide support and increasing knowledge about demand response there are many challenges faced by legislators, regulators, utilities, and electric consumers. Bob Lieberman, commissioner with the Illinois Commerce Commission noted that to get to effective DR, "There are four key challenges, to get past short term thinking and get to action, to invest in technology, to invest in conversation with the numerous parties involved in DR, and to identify whose job it is to develop, finance, and implement effective DR programs."
Speaking from a structural perspective, UtiliPoint® and many of the attendees at the National Town Meeting agree that for the creation of effective demand response programs their must be parity for among demand side resources, an optimization of metering, communications and pricing technology, public acceptance of dynamic pricing, integration of demand response with other energy policy objectives including energy efficiency and generation planning, and addressing utilities investment financial risk and revenue profile regarding demand response.
"Demand response fundamentally redefines the question of the obligation to serve. DR looks very different depending on whether you take the utility perspective or the end use customer perspective," said another of the day's speakers, Roger Levy of California's Demand Response Research Center. However, as both UtiliPoint® and Mr. Levy agree, demand response is a key tool for handling electricity supplier market power, inefficient electricity reserve procurement, power price volatility, electric power reliability, and both macro and microeconomics of the nation and of individual businesses and households. The benefits of demand response at the bottom line are significant but getting to the right demand response is the industry's next challenge.
Departing FERC Chairman Pat Wood concluded the Town Meeting speeches by telling the assemblage that in this, his last policy speech as chairman that he would challenge the industry to actively engage in the "Coordination of policy and actions of the federal government, states, RTOs and utilities, to ensure that demand response is considered as part of a portfolio of better management for utilities," and that he would keep the utility customer top of mind.
UtiliPoint's IssueAlerts are compiled based on the independent analysis of UtiliPoint consultants. The opinions expressed in UtiliPoint's IssueAlerts are not intended to predict financial performance of companies discussed, or to be the basis for investment decisions of any kind. UtiliPoint's sole purpose in publishing its IssueAlerts is to offer an independent perspective regarding the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy issues. Copyright 2005. UtiliPoint International, Inc. All rights reserved.
