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2009 State of the Market Report

Demand Response

has been successfully implemented in neighboring RTOs (see Table 5). The Midwest ISO filed Tariff revisions on October 2, 2009 to allow ARCs to participate in all Midwest ISO markets. ARCs were scheduled to be eligible to participate beginning June 1, 2010, although as of this writing FERC has not yet approved the Tariff revisions.

ARC-sponsored resources will be treated comparable to LSE-owned resources, with one notable difference. For settlement purposes, an ARC-operated resource cleared for energy will be paid the LMP minus the predetermined Marginal Foregone Retail Rate, which is a proxy for the cost the retail customer providing the DRR would have incurred to consume. This is an economically efficient payment because reducing load provides the retail customer savings for foregoing consumption. This payment to the ARC for foregoing consumption is assessed to the LSE at the retail rate, resulting in a net payment to the retail customer equal to the LMP. ARCs providing other products such as capacity or ancillary services are still paid just the MCP for that particular product because there is no retail rate associated with it.


Inter-ISO Comparison of DR Programs

In this section, we provide a comparison of the DR programs run by the Midwest ISO, NYISO, ISO-NE and PJM in Table 5 below. The Midwest ISO has an initiative for emergency DR and allows for direct participation of DR resources in all markets. The Midwest ISO’s total DR resources exceed 12,500 MW, far more than neighboring RTOs. These resources comprise 6.8 percent of the Midwest ISO’s resource mix, which is comparable to other RTOs. Only a quarter of this is in the form of ISO-controlled resources, however, with the balance being load that is interruptible by LSEs. Other RTOs are ahead of the Midwest ISO in implementing economic DR, which is discussed in the subsequent section.

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