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Subsidized Demand Response Exposed: Is it a Reliability Resource or Not?

EPSA comments on draft NERC report pull the curtain back on attempts by demand response providers to have it both ways

WASHINGTON, D.C. - The Electric Power Supply Association (EPSA) has filed comments with the North American Electric Reliability Corporation (NERC) on NERC's Functional Model Demand Response Advisory Teams ("FMDRAT") "Report on Assessing the Need for Introducing Demand Response ("DR") Functions and Entities to the NERC Reliability Functional Model." The text is online at www.epsa.org. With DR increasingly participating as a resource on the electric system, accurately assessing the true extent of its actual role in reliability and any necessary NERC registration is timely and necessary. EPSA stressed in its comments:

"While EPSA can support certain of the FMDRAT report's findings that generating resources and DR resources do not contribute equally to grid reliability for the Bulk Electric System ("BES"), it may be too far a reach to recommend that there be no reliability registration, standards or requirements for DR resources. What the FMDRAT report highlights is increasing concern with mixed messages as to the role that DR plays on the BES and therefore how it should be treated. For instance, the DR Function Reports conclusions are not supported and are in fact repudiated by recent actions and rule implementation by the Federal Energy Regulatory Commission ("FERC" or the "Commission"), in particular issuance of Order No. 745 last year. Additionally, DR resources' increased participation as a capacity resource in the organized markets indicates an important role for reliability and assurance of resource adequacy. Therefore, DR is currently being integrated in to the marketplace in a manner that reflects some reliability functions.

While EPSA does not believe that DR resources are equal or comparable to generation for reliability, they are increasingly being assumed to function as a network participant as a matter of public policy (whether EPSA agrees or not) and therefore should be accountable for standards, requirements and obligations commensurate with that participation. This view of DR is supported by the statements of DR providers before regulatory venues other than NERC, and at odds with the recommendations of the FMDRAT, as is discussed below."

EPSA President and CEO John E. Shelk said, "Demand response is ill-served by DR providers telling one story to one regulator and yet another elsewhere. If NERC's experts are correct, and DR is not comparable to generation as EPSA argues, then DR should not be paid the same as generation. If, however, FERC is going to press ahead to pay DR as if it were the same as generation, then DR should be subject to NERC rules to the full extent as generation. DR activists should not succeed in telling FERC and EPA they are part of the reliability equation yet escape registration and regulation by NERC as the nation's guardian of the bulk electric system's reliability.'

CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660

EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.