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2009 State of the Market Report

Demand Response


Emergency DR

The Emergency DR Initiative began in May 2008 and allows the Midwest ISO to directly curtail load in specified emergency conditions if DRR dispatched under ASM and LSE-administered DR programs are unable to meet the demand. EDR is supplementary to existing DR initiatives and requires the declaration of a NERC Energy Emergency Alert (“EEA”) 2 or EEA 3 event. Resources that do not qualify as DRR or DRR units that are not offered into energy or operating reserve markets are still eligible to reduce their load and be compensated as EDRs. EDR- qualified resources totaled 242 MW in 2009. EDR was never deployed in 2009 due to low peak demand conditions.

As of July 2009, EDR offers are submitted on a day-ahead basis, rather than on a monthly basis, which allows for more accurate availability of such resources. During emergency conditions, the Midwest ISO will select offers on a merit basis based on the provided curtailment prices (subject to a $3,500 per MWh cap). EDR participants that reduce demand in response to a dispatch instruction will be compensated at the greater of the prevailing real-time LMP or the offer cost (including shutdown costs) for the amount of verifiable demand reduction provided. EDR resources are not yet eligible to set prices due to their inflexibility, but we have recommended that the Midwest ISO investigate changes that would allow them to set prices when they are needed.


Aggregators of Retail Customers

FERC in August 2008 directed RTOs to improve their DR participation in wholesale electricity markets. Orders 719 and 719-A specifically require comparable treatment of DR resources to existing generation. In response, the Midwest ISO has established a stakeholder process to identify and address specific barriers related to market rules, settlement provisions, and operating requirements. The largest such barrier is the limitation of direct market participation to resources greater than 1 MW. The pooling of small resources through ARCs, which serve as an intermediary between the Midwest ISO and retail customers that can reduce their consumption26,


An ARC is by definition a market participant sponsoring a DRR resource provided by customers that it does not serve at retail. An ARC can also be an LSE sponsoring a DRR that is the retail customer of another LSE.

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