NARUC-FERC Demand Response Collaborative Meeting

NARUC Fall MeetingAnaheim, CA

T. Graham EdwardsPresident & CEONovember 11, 2007

2

Value of the Midwest ISO

Coordinated Dispatch

Congestion Management

Transparency

ReliabilityReduced Reserve

Requirements

Regional Planning

Enhanced Infrastructure Development

Market Access

3

Demand Response in Midwest Market Today

Robust demand participation is important• Enhances long-term adequacy• Improves real-time reliability• Reduces peak prices and price volatility• Limits supplier market power

Existing demand response is limited• Most developed under state retail initiatives• Primarily consists of resources available under

emergency conditions• The amount is large but experience suggests less

may be available in practice

4

Available Demand ResponseISO/RTO’s

Total Coincident DR Resources by ISO/RTOUnited States: 20,864 MW

NYISO2,019 MW

10%

PJM2,629 MW

13%

SPP1,201 MW

6%

CAISO2,249 MW

11%ERCOT

1,963 MW10%

ISO-NE1,028 MW

5%

MISO8,645 MW

45%

5

Midwest ISO Load ReductionAugust 1, 2006

~ 3,000 MW Relief fromDemand Side Management

90,000

95,000

100,000

105,000

110,000

115,000

120,000

125,000

130,000

135,000

140,000

00

:00

:00

01

:00

:00

02

:00

:00

03

:00

:00

04

:00

:00

05

:00

:00

06

:00

:00

07

:00

:00

08

:00

:00

09

:00

:00

10

:00

:00

11

:00

:00

12

:00

:00

13

:00

:00

14

:00

:00

15

:00

:00

16

:00

:00

17

:00

:00

18

:00

:00

19

:00

:00

20

:00

:00

21

:00

:00

22

:00

:00

23

:00

:00

TIME (EST)

Lo

ad (

MW

)

24

:00

:00

Forecast Footprint LoadActual Footprint Load

6

Recent Demand Response Efforts

Midwest ISO and Stakeholders worked to address identified barriers• Tariff changed to eliminate disincentive to

demand response due to potential imposition of RSG charges

• Tariff change underway to increase incentives by assuring compensation for demand reductions called during emergencies

• Effort underway to evaluate alternative pricing mechanisms to increase incentives for participation by assuring market clearing prices accurately reflect value of demand reductions

7

Near-Term Market Enhancements

Demand Response in Ancillary Services Market (ASM)

• Demand response resources can sell ancillary products

– Operating Reserves if capable of responding within 10 minutes via physical load interruption (Type I)

– Regulation if capable of supplying instantaneous energy to the market through behind-the-meter generation or controllable load (Type II)

Demand Response in Resource Adequacy Requirements

• Planning Process – Demand response counts toward capacity requirements

• Efforts underway to finalize revised resource adequacy construct that enhances opportunities for participation of demand resources by tailoring resource requirements to demand characteristics

8

Demand Response ChallengesWholesale Market

Market design issues limit flexibility or realization of the value of demand response, particularly in Real-Time

Price signals do not provide incentives for participation when prices fail to reflect the value of demand response

Technical limits restrict ability to dispatch demand consistent with physical characteristics

9

Demand Response ChallengesRetail Market

Regulatory barriers or contract terms of existing demand response limit participation in the regional wholesale market

Misaligned incentives limit demand response where those making consumption decisions do not recognize (or pay) value of energy consumed

10

Demand Response Challenges

Customer Frustration

+

Time of Use Pricing

Opportunities to Reduce Retail Consumption

Existing Barriers:• Wholesale

• Retail

• Technology

11

Next Steps

Multiple efforts are underway in the Midwest aimed at increasing opportunities for demand participation

Midwest ISO Demand Response Working Group (DRWG)• Addressing linkage between demand response and resource adequacy• Developing additional market mechanisms based on unique

characteristics of demand response resources• Developing enhanced Midwest ISO emergency protocols• Evaluating opportunities to lower barriers to participation due to

misalignment between wholesale and retail markets

Midwest Demand Response Initiative (MWDRI) • OMS established task force focused on increasing opportunities for

demand response in Midwest ISO markets• Building a knowledge base among Midwestern regulators utilizing the

work already done via New England and Mid-Atlantic demand response initiatives