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FERC poised to remove State Opt-Out for Demand Response programs

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Independent Consultant Rakon Energy LLC

Rao Konidena found Rakon Energy LLC because Rao is passionate about connecting clients to cost-effective solutions in energy consulting, storage, distributed energy resources, and electricity...

  • Member since 2014
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  • Aug 9, 2021

Federal Energy Regulatory Commission (FERC) is poised to removed State Opt-out for Demand Response Programs based on scanning the comments filed in the Notice of Information (NOI) docket # RM21-14 here

A quick summary of main commenters, and a single line excerpt follows:

Advanced Energy Management Alliance (AEMA) says, "the Demand Response Opt-Out is no longer just and reasonable and should be removed to unleash the latent demand flexibility currently hidden in these markets".

Voltus said, "Eliminating the antiquated opt-out for demand response would allow providers to deliver billions of dollars of pent-up consumer benefits as well as reliability and sustainability benefits".

Illinois Commerce Commission said, "Illinois Commerce Commission (“ICC”) offers the following comments and observations in support of removing the DR opt-out provisions from the Commission’s regulations"

PJM said, "When locational marginal prices are high in PJM’s Energy Market, economic demand response, referred to as an Economic Load Response Participant, has the opportunity to reduce electricity consumption and receive compensation"

Midwest Energy Consumers Group (“MECG”) "supports termination of the Demand Response Opt-Out. Eliminating the Demand Response Opt-Out would provide for greater participation by demand response resources"

California Air Resources Board (CARB), the Maine Office of Public Advocate, and the Attorneys General of Maryland, Massachusetts, and Rhode Island said "support the repeal of the Demand Response Opt-Out, consistent with the Commission’s treatment of other aggregations of resources at the generation, retail, or distribution levels, but urge that, if the Commission finalizes that repeal, it do so while recognizing the States’ traditional, statutorily preserved jurisdiction"

Ted Thomas, Chairman of the Arkansas Public Service Commission said "the Supreme Court permitted FERC to set the amount of compensation paid to end-use customers for participation in a demand response program in spite of the fact that the end-use customer had previously been seen on the state side of the “bright line”1 dividing state and federal jurisdiction"

Google said, The Demand Response Opt-Out allows states within an RTO/ISO market to prevent distributed energy resources (DERs) already on the grid from participating i n the wholesale energy markets."

Advanced Energy Economy (AEE) said "the Commission should remove the “opt-out” provisions from its existing regulations, originally adopted over a decade ago in Order No. 719, that allow state and local regulators and load-serving entities to bar aggregations of retail demand response customers from participating in the RTO/ISO markets."

R Street said "Since 2009, the demand response opt-out has limited substantial opportunities for saving customer money and lowering system costs in those jurisdictions that implemented the opt-out."

Those in favor of retaining the State Opt-Out include - American Public Power Association (“APPA”) and the National Rural Electric Cooperative Association (“NRECA”), Entergy Operating Companies, Indiana Utility Regulatory Commission (IURC), Edison Electric Institute (EEI), and Midcontinent Independent System Operator (MISO).

Matt Chester's picture
Matt Chester on Aug 9, 2021

For those in favor of retaining the opt-out, what are the typical main arguments? 

Rao Konidena's picture
Rao Konidena on Aug 9, 2021

MISO says "The removal of the Demand Response Opt-Out could have significant impacts on RTO/ISOs that are comprised primarily of vertically integrated, state regulated utilities and ultimately place RTO’s like MISO in the untenable position of implementing the Commission’s directives in opposition to the exercise of RERRA authority"

EEI says "Removal of the Order No. 719 opt-out will add to these implementation issues as states and utilities make changes to state DR provisions and implement new processes, rules, and infrastructure to address the change in Commission policy"

Indiana Utility Regulatory Commission states "Responding to the opt-out for aggregation of DR afforded by the FERC in Orders 719 and 719-A, Indiana conducted an investigation and implemented a process allowing for the aggregation of DR with the LSE serving as the gatekeeper. This process has worked well in Indiana, and the Indiana Commission submits that FERC should maintain the status-quo and continue to allow for state oversight and regulation of DR aggregation in Indiana and in similarly situated states."

APPA and NRECA said, "APPA and NRECA have often reminded the Commission, the focus in all of these efforts must remain reasonable costs to end-use consumers. The Commission determined in Order No. 719 that RERRAs are in the best position to make determinations  whether retail versus wholesale demand response programs are effective, and the role aggregation should play. APPA and NRECA submit that the RERRAs remain in that position."

Matt Chester's picture
Matt Chester on Aug 9, 2021

Thanks for the follow up, Rao!

Rao Konidena's picture
Rao Konidena on Aug 11, 2021

You are welcome, Matt.

Bob Meinetz's picture
Bob Meinetz on Aug 9, 2021

Matt, DR is nothing more than an attempt to shift responsibility for resource adequacy from utilities to the customer. Proponents argue, without any evidence, that it will "lower prices." What happens in practice is utilities raise their prices, then allow customers to return to their prior price by using electricity when it's least convenient - in essence, imposing a burden in convenience equivalent to, or more costly, than the savings they're receiving.
Reminds me of when banks start charging service fees to use their ATMs, then try to tell you it "reduces service costs".

To get a proponent who is going on and on about the virtues of DR to shut his mouth, ask him to give you some examples where DR has lowered the average price of residential electricity - you'll be able to hear a pin drop.

Tony Sleva's picture
Tony Sleva on Aug 11, 2021

Bob, step back, check what happened in Texas last February, and reconsider your post.  With today's billing practices, consumers pay an average cost for electric energy.  Most consumers are willing to reduce usage when electric utilities are paying outlandish prices for energy.  

On 08/11/2021 at 08:32 ET, the marginal cost of power on the New York ISO was $48 per MWH.  This is what consumers expect.  In Texas, the market cap is $9,000 per MWH.  In February 2021, consumers in Texas that arranged for market based pricing received outrageous electric bills when the marginal cost of energy reached $2,000 per MWH.  With DR, the marginal cost of power can be maintained below $100 per MWH.

DR is a tool for cost management that will be an essential element of 4Ge (fourth generation electric power grid, today's electric power grid is a 3Ge).


Bob Meinetz's picture
Bob Meinetz on Aug 12, 2021

Tony, if anything DR helped to create the problem in Texas. By foisting the responsibility of resource adequacy on their customers, ERCOT didn't have enough electricity to go around when the state was hit by extreme weather in February. Because 10,700 wind turbines and natural gas wellheads weren't weatherproofed, many customers had no electricity at all.
They were forced to learn the hard way DR is not an "energy resource" (no matter how much energy they had saved, their light switches still didn't work!). Now, utilities will "demand" they pay their $11,000 electricity bills, and their "response" must be to pay them - or else.
Is that tool for cost management (i.e., extortion) an essential element of 4Ge, or 3Ge?

Chris Hickman's picture
Chris Hickman on Apr 22, 2022

There are obviously those who believe in DR and those who do not.  It's almost a religious debate at this point so I won't go there.  I simply want to point out that DER is VERY VERY different that DR.  Technology providing actual generation/storage at the edge of the grid, not load management.  People are going to have to step away from calling these two things the same and putting them into the same bucket and having them treated in the same way.  

Rao Konidena's picture
Thank Rao for the Post!
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