The Role of Demand Response in Default Service Pricing

Journal Article · Wed Nov 09 04:00:00 EST 2005 · Electricity Journal

OSTI ID:928761

Barbose, Galen; Goldman, Charles; Neenan, Bernie

Dynamic retail pricing, especially real-time pricing (RTP), has been widely heralded as a panacea for providing much-needed demand response in electricity markets. However, in designing default service for competitive retail markets, demand response has been an afterthought, and in some cases not given any weight at all. But that may be changing, as states that initiated customer choice in the past 5-7 years reach an important juncture in retail market design. Most states with retail choice established an initial transitional period during which utilities were required to offer a default or standard offer generation service, often at a capped or otherwise administratively-determined rate. Many retail choice states have reached the end of their transitional period, and several have adopted or are actively considering an RTP-type default service for large commercial and industrial (C&I) customers. In most cases, the primary reason for adopting RTP as the default service has been to advance policy objectives related to the development of competitive retail markets. However, if attention is paid in its design and implementation, default RTP service can also provide a solid foundation for developing price responsive demand, creating an important link between wholesale and retail market transactions. This article, which draws from a lengthier report, describes experience to date with RTP as a default service, focusing on its role as an instrument for cultivating price responsive demand.1 As of summer 2005, default service RTP was in place or approved for future implementation in five U.S. states: New Jersey, Maryland, Pennsylvania, New York, and Illinois. For each of these states, we conducted a detailed review of the regulatory proceedings leading to adoption of default RTP and interviewed regulatory staff and utilities in these states, as well as eight competitive retail suppliers active in these markets.

• Research Organization: Ernest Orlando Lawrence Berkeley NationalLaboratory, Berkeley, CA (US)
• Sponsoring Organization: USDOE. Office of Electric Transmission and Distribution.Office of Electric Transmission andDistribution
• DOE Contract Number: AC02-05CH11231
• OSTI ID: 928761
• Report Number(s): LBNL--59737-Jart; BnR: TD5211000
• Journal Information: Electricity Journal, Journal Name: Electricity Journal Journal Issue: 3 Vol. 19; ISSN ELEJE4; ISSN 1040-6190
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
DESIGN
ELECTRICITY
FOCUSING
IMPLEMENTATION
MARKET
PRICES