Walmart Says Iso Power Markets Offer Best Programs for Supporting Demand Response

Michael Giberson

From Walmart’s contribution to a complaint against PJM filed with the Federal Energy Regulatory Commission on Wednesday:

Demand response initiatives can originate with a utility program, an ISO or RTO program, or by the customer for different reasons. Walmart has been one of the pioneers of demand response in addition to being a leading participant in all types of curtailment, and has found that the most successful programs from our experience are the ones offered directly by regional ISOs, which allow and encourage us to make the right choices regarding demand curtailment opportunities. Our broad participation has enabled Walmart to take a leading role in advocating for customer energy policy across the nation, improving existing programs, and helping to form new programs.

The testimony explains a bit how their energy management systems work:

When a demand response event is initiated and our automatic energy management system responds to implement preprogrammed curtailment strategies, the associate can double-check our sub-metering system to verify that the magnitude of the load committed to respond is responding appropriately. The self-monitoring and verification process confirms that we delivered on our load commitment for demand response programs. At the beginning of a demand response event, an associate can quickly verify the potential load response of a particular curtailment strategy by examining the real-time participation through the sub-metering system and make appropriate adjustments to maximize the benefit of the load curtailment to the demand response event and at the same time maximize the revenues that could accrue to Walmart. Our advanced metering systems are used for a variety of other reasons such as measurement and verification, double-checking utility meter malfunction or misbilling, advanced detection of Walmart equipment not operating correctly or optimally, benchmarking, and troubleshooting facilities and electrical systems. Although these sub-meters add an additional investment of capital to our stores, they also add a greater value to our company, other ratepayers, and the ISO.

The testimony is part of a complaint filed with FERC by a coalition of large electric power consumers operating in the PJM market, “Demand Response Supporters,” who are seeking changes to the way PJM pays for demand response participation. The complaint is here and the Walmart testimony is the last six pages in the accompanying appendix (links will open a pdf document. Added bonus in the appendix: testimony by prominent regulatory economist Alfred Kahn.)

The Supporters’ filing takes a gratuitous swipe at dynamic pricing in the complaint, claiming the practice “has not appeared after nearly a century of electricity regulation […] precisely because dynamic pricing does not ‘work’ for so many customers.”  I’d say that technology has changed over the “nearly a century of electricity regulation” in ways in which make most of that history of very limited relevance as to whether we should move to dynamic pricing now.  In any case, I don’t think they really mean it.  All they want to do is dissuade FERC from accepting PJM’s story about the someday-soon bursting out of dynamic pricing as a reason not to adopt Supporters’ pricing ideas now.

The complaint docket number is EL09-68. Documents filed at FERC can be found by searching by docket number on FERC’s eLibrary general search page.

Separately, at yesterday’s FERC open meeting the Commissioners “laid the groundwork for expanding the use of demand response in organized wholesale markets [by proposing] standards for measuring and verifying the performance of demand response services.” (In the words of the FERC press release.  The FERC proposal is here: Standards for Business Practices and Communication Protocols for Public Utilities.)

One thought on “Walmart Says Iso Power Markets Offer Best Programs for Supporting Demand Response

  1. Assume the demand response is legitimately measurable and gets “paid” under this proposal “full LMP.” Isn’t there some double-counting going on in these arguments?

    Take the RT LMP customer. If the RT LMP is $1,000 and the customer curtails, it avoids $1,000. There is no need to pay anything else to the customer.

    Take the DA LMP customer. If the DA LMP is $100 and the RT LMP is $1,000, if the customer bought its baseline in the DA and it curtails in RT, it earns $900. Again, no need to pay anything other than the normal RTO settlement.

    Take the fixed price contract customer. If the customer has an $80 contract that is scheduled in the DA and it curtails in RT at a $1,000 price, the normal RTO settlement pays the scheduler $920. How this is divied up is between the scheduler and the customer (e.g., if the customer provides this optionality to the scheduler, presumably the customer is getting a lower contract rate in return and the scheduler keeps the savings. Or, the scheduler can pass through the savings if that is the contractual arrangement). Again, why the proposal for extra (subsidy) money?

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