Demand Response Compensation, Net Benefits and Cost Allocation: Comments

FERC''s Supplemental Notice of Public Rulemaking addresses the question of proper compensation for demand response in organized wholesale electricity markets. Assuming that the Commission would proceed with the proposal “to require tariff provisions allowing demand response resources to participate in wholesale energy markets by reducing consumption of electricity from expected levels in response to price signals, to pay those demand response resources, in all hours, the market price of energy for such reductions,” the Commission posed questions about applying a net benefits test and rules for cost allocation. This article summarizes critical points and poses implications for the issues of net benefit tests and cost allocation.