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House Environmental Committee Hears Benefits Of Demand Response, Negative Impacts Of Proposed Nuclear Bill On Ratepayer Demand Savings

On May 14, the House Environmental Resources and Energy Committee held an informational meeting on the demand response industry in Pennsylvania.

Demand response programs help end-use energy customers change or reduce their normal energy consumption patterns in response to changes in the price of electricity over time or in response to incentive payments designed to lower electricity use during times of peak demand.

Bruce Campbell, Director of Regulatory Affairs from CPower, provided an overview of demand response and what it does for both customers and the PJM regional electricity grid.

Campbell said the typical request to reduce electricity use last from 2 to 6 hours and, in the case of the PJM grid, have not happened for several years.

He said curtailment strategies vary by business type. Industrial customers typically shutdown some or all of their production processes. Education institutions may dim lighting, adjust HVAC systems or send students and staff home.

Commercial and medical facilities with eligible backup generation may operate the generator. Water treatment sites will slow down processes and use storage or backup generation.

Campbell said most utilities to offer some sort of program for residential and small commercial customers which typically involve the control of thermostats or hot water heaters.

Customers are typically paid for performance, meaning that if they perform in tests or events to their contractual commitment, they are fully paid for a portion of their costs in reducing demand.

He said revenue varies from year to year, but recent rates have been between $25,000 and $50,000 per megawatt.

A large school district, for example may have 1 MW of curtailment, a hospital 500kW to 1 MW, big box stores are a few hundred kW and industrial facilities, which vary widely, could have between one-half MW to 10s of MWs.

Katie Guerry, Vice President of Regulatory Affairs of Enel X North America, which provides services to customers ranging from energy storage, demand response, electric vehicles and distributed generation.

“Currently, Enel X works with over 500 large Pennsylvania electric customers, at over 1,200 locations. These customers earned $26,800 on average in 2018 for providing PJM DR services and represented almost 600 MW of capacity provided to PJM.

“Our customers represent a wide swath of electric users. Our two largest segments are manufacturing and educational institutions. We have mining, agricultural, municipal, and airports clients, as well. Everything from sewage treatment plants to the state's public schools and universities.

“While $26,800 was the average payment a customer received last year, some large customers, including large manufacturers and large municipalities and universities received in the hundreds of thousands of dollars.”

Enel X appreciates Pennsylvania's state government leadership both regionally and nationally in the conversation on demand response. I'll note briefly that our company recently filed testimony at the PUC on "Investigations into Default Service and PJM Interconnection,LLC Settlement Reforms," which raised many interesting ratemaking questions relevant to demand response.

“On the federal level, we appreciated Commissioner Andrew Place's testimony at the FERC Technical Conference on Distributed Energy Resources last April. We are eager for a Hind resolution from FERC on this issue, to give clarity to the DR/DER industry. The industry is going through a rapid evolution and it is pivotal for Pennsylvania to continue to lead.

“Pennsylvania is also a leader on the very specific, but important topic of demand response customer participation. PJM's emergency demand response programs, which is the focus of today's discussion, are integral to Pennsylvania.

“The state utilities also implement the Act 129 peaks having demand response program, which alleviates costs to customers. In Phase III now, the Act 129 program is only dispatched when system demand exceeds 96 percent of the annual forecast-- usually the hottest days, when real-time electricity costs are highest.

“Approximately 3,900 Pennsylvania businesses,local govemments,and institutional locations participate in the PJM emergency demand response programs, which touch every County in the Commonwealth.

“These sites provide approximately 1,700 MW of emergency reduction. To put this into context, this is the scale of one very large or several average sized power plants operating at full capacity.

“Based on PJM data, we estimate that Pennsylvania customers participating in demand response received over $75 million this year from their participation in PJM's emergency load response programs.

“This revenue has real impact; for instance, school districts can hire teachers, facility managers, and other staff with their revenues from demand response.

“Since it is much more capital efficient to compensate end-use customers to reduce their energy consumption during an emergency than it is to build or maintain a power plant for those rare events, demand response lowers bills for all customers.

“The PJM Independent Market Monitor reported that the demand response program saved PJM customers as much as $3.2 billion, just in the 2018/19 delivery year.

“We estimate that this annual savings attributed to PJM demand response amounts to roughly $634 million in Pennsylvania, or $123 per Pennsylvania household.

“Pennsylvania's Act 129 peak shaving demand response program Phase III is predicted to have a benefit-cost ratio of 1.78 for the current phase, meaning that for every $1 invested, the state's ratepayers yield $1.78.”

Guerry said House Bill 11 (Mehaffie-R-Dauphin), designed to provide support to nuclear power plants, would have a significant, negative impact on demand response programs.

“The PJM Internal Market Monitor estimates that this legislation could contribute to a huge slash in the value of PJM emergency demand response, totaling a 50 to 70 percent cut.

“Therefore, not only will end-use customers have to pay an increase on their energy bills to fund the continued operation of a specific set of generators, but they will also not have the same opportunity to offset their energy costs through demand response.

“This will drastically reduce the approximately $75 million flowing to demand response participants now, and jeopardize the $123 in estimated per household annual savings.”

Click Here to watch a video of the meeting online.

Rep. Daryl Metcalfe (R-Butler) serves as Majority Chair of the House Environmental Committee and can be contacted by calling 717-783-1707 or sending email to: dmetcalf@pahousegop.com. Rep. Greg Vitali (D-Delaware) serves as Minority Chair and can be contacted by calling 717-787-7647 or sending email to: gvitali@pahouse.net.

NewsClips:

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