Federal Report on Consumer Demand Response Underscores the Need to Stay the Course on Competitive Reforms in Electricity Sector
Federal Report on Consumer Demand Response Underscores the Need for Policymakers to Stay the Course on Competitive Reforms in the Electricity Sector
FERC-Sponsored Study Highlights Potential Economic, Environmental Gains From Consumers Responding to Market Price Signals
A Congressionally mandated report issued today sheds a glaring spotlight on the unrealized potential of competitive reforms in the U.S. electricity sector, and should give pause to policymakers advocating a retreat from market-based policies for electricity pricing, the COMPETE Coalition said.
The “National Assessment of Demand Response Potential” released today by the U.S. Federal Energy Regulatory Commission (FERC) shows that the tremendous economic and environmental gains from demand response will be best realized if consumers – particularly residential consumers – respond to real-time price signals. The report concludes that the greatest potential for demand response gains will come when consumers have advanced metering technology that allows them to respond to dynamic pricing, or real-time price signals.
“FERC’s report comes at an important time, as policymakers in some states are advocating a retreat from competitive reforms in the electricity sector,” observed Federico Peña, former U.S. Secretary of Energy and COMPETE’s co-chairman.
“Competitive markets will allow consumers to maximize the game-changing economic and environmental benefits of ‘smart grid’ technology that is only just now entering the marketplace,” Peña continued. “State lawmakers and regulators should carefully consider FERC’s report before closing the door to as-yet unrealized electricity market benefits for residential consumers.”
Today’s report shows how dramatic the growth in electricity demand response programs has been, particularly in the organized competitive wholesale power markets. COMPETE welcomed comments by FERC commissioners regarding the advantages competitive wholesale power markets pose for the development of innovative demand response programs that benefit consumers and the environment.
Meeting with reporters after today’s commission meeting, FERC Chairman Jon Wellinghoff noted how “extremely useful and helpful” the organized competitive markets are in promoting demand response.
“Market structure makes a big difference in how well demand response works,” FERC Commissioner Philip D. Moeller said during today’s staff briefing on the report. Moeller pointed to the “fabulous gains” to be realized when vibrant wholesale electricity markets are married with consumers responding to market prices.
Commissioner Marc Spitzer called for FERC to work with state policymakers to “align” wholesale and retail power markets. Chairman Wellinghoff said FERC would take the report’s findings before the joint FERC-state collaborative on demand response.
COMPETE has long advocated the innovation and economic and environmental benefits of competition in electricity markets. Today’s report illustrates just how much more there is to be gained from technological advances and consumers responding to market-derived price signals. The report also underscores the findings of a report COMPETE issued this week concluding that market-based climate programs will be more effective in organized competitive markets where consumers have an opportunity to see and respond to price signals.
