Load-reduction efforts need action, not talk, policymakers say

Washington (Platts)--24Jan2006

If demand-response programs are to reach their full potential, utilities
need to change the way they operate and recover costs, speakers said Tuesday
at a Washington conference. 

     Much like comments submitted to the US Federal Energy Regulatory
Commission in a recent case, speakers said most utility rate structures
and state regulatory policies hinder the full use of demand-response and
advanced-metering technologies. Advance metering is an enabling technology but
without the ability to fully recover costs and use such meters to their full
potential, utilities have no incentive to change their metering operations or
adopt time-sensitive rate plans, said Ward Camp, vice president of regulatory
and legislative affairs for Distribution Control Systems Inc.

     Of the 250-mil meters for electric, gas and water utilities in place
today, about 12-mil are capable of enabling demand-response actions for the
benefit of anyone other than a utility, said Chris King, chief strategy
officer for eMeter.  

     "This is an industry that's very slow to change" using "antiquated
technologies all over the grid" FERC Commissioner Nora Brownell told the
conference. 

     There are some emerging-demand response efforts at the wholesale level in
New England, New York and at PJM Interconnection, "but there's a lot more that
we could be doing" to integrate wholesale and retail markets and give retail
customers opportunities to save money by shifting their use to off-peak
periods, Brownell said. 

     "If we don't, a couple years will go by and we'll be in the same place,"
she warned the audience.

     Because demand response can include real-time pricing, advanced metering,
payments for load reduction, energy efficiency and other elements, it's a
concept that means different things to different companies and has plenty of
"myths" surrounding it, said Dan Delurey, executive director of the Demand
Response Coordinating Committee, which sponsored the conference. 

     Among those myths are that advanced meters are too costly to install,
only large customers take part in demand-response programs and that
demand-response resources cannot be counted on to provide reliable supplies
quickly.

     That last element is the single biggest obstacle to more adoption of
demand respnse at the wholesale level, said Frank Magnotti of Comverge.
Comverge has proven that load reduction can be counted on as spinning
reserves, capable of providing 50 MW in less than a minute, but until such
capabilities are accepted as a given industry adoption will be slow, Magnotti
said.

     At the US Dept of Energy, the Energy Policy Act of 2005 calls upon DOE to
report to Congress on the benefits of demand response and that report will be
coming soon, said Larry Mansueti of DOE's Office of Electricity Delivery and
Energy Reliability. Mansueti said the report will not provide a national
estimate of benefits but will recommend states set goals and establish best
practices for demand response actions. 

     In California, "we've placed demand response among our highest
priorities" within the state's Energy Action Plan, said Public Utilities
Commissioner Dian Grueneich. California has a goal of meeting 5% of system
demand with demand-response efforts in 2007. With total demand in the state at
more than 40,000 MW, the utilities and Independent System Operator need to
surpass 2,000 MW in demand response commitments next year. "This is an
ambitious, but we believe an achievable goal," Grueneich said.

                  ---Tom Tiernan, tom_tiernan@platts.com

     For more information, take a trial to Platts Electricity Alert at
http://electricityalert.platts.com.

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.