FERC commissioner concerned about demand response requirements

FERC accepted a tariff change of PJM Interconnection to correct language on how PJM measures compliance of demand response resources during non-summer months, but FERC’s April 1 decision did not order PJM to impose more strenuous testing and measurements of DR providers.

That latter element, declining an offer from PJM’s independent market monitor to take responsibility for the enhanced measuring of DR events, prompted FERC Commissioner Tony Clark to partially concur with the order and issue a separate statement on his concerns.

The decision (Docket No. ER16-873) marks another order where FERC does not impose the same requirements on DR providers that it does on generators, Clark said.

“In the long run, such an asymmetrical structure is not in the best interest of competitive, functional wholesale markets nor the American consumer,” Clark said, noting that the IMM has consistently raised this issue for FERC or PJM to address.

In the order, FERC agreed with PJM that requiring DR providers, also called curtailment service providers, to submit calculations for each end-use customer – dubbed a relative root mean square hourly error calculation – would be an administrative burden that would outweigh the benefit of enhanced measurement of load reductions. FERC noted that PJM indicated the calculations would require about 60 days of recent hourly load data for each end-use customer, and the steps would not result in significantly more accurate measurements of load reductions on a PJM-wide basis.

The IMM protested PJM’s filing and said the calculations are needed to have accurate measurements of load reductions, since different customers will behave differently during individual DR events, and that the relative root mean square hourly error calculations give a better picture than PJM’s current customer baseline load measurements, FERC noted in the order.

The IMM argued that generation resources are subject to detailed measurement requirements that impose administrative burdens and costs, and that if PJM or the DR providers are not willing to take responsibility for the enhanced measurement calculations, it would do so “in the interest of efficient markets,” FERC related.

FERC found PJM’s proposal to be just and reasonable without the need for the relative root mean square hourly error calculations.

“That the burden of conducting the analysis would fall to the IMM, rather than PJM or the curtailment service providers, does not alter our conclusion that the benefits of conducting that analysis for 12,000 entities would not definitively outweigh the costs of the incremental improvement in accuracy,” FERC said.

In his statement, Clark concurred with the majority that the enhanced calculations for so many individual customers present significant feasibility and practicality issues. But he urged PJM and its stakeholders, along with other regional grid operators, to expand work on developing methodologies that provide better insight into DR attributes.

“It is my concern that we have a continuing trend whereby when it relates to compensation, demand response is treated as a like-for-like equivalent to generation resources, even though it plainly has different attributes,” Clark said. “Yet when it comes to responsibilities and obligations, the same reasoning does not apply.”

He said, “The commission, regional grid operators and stakeholders would do well to address these ongoing concerns lest they degrade the proper functioning of these markets.”

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