FERC Orders Technical Conference on PJM Price Responsive Demand, Citing Allocation of PRD Credit

FERC has subjected PJM's price responsive demand (PRD) filing to the outcome of a technical conference and further Commission order (ER11-4628).

In doing so, FERC accepted but suspended PJM's price responsive demand filing for a five month period to become effective May 15, 2012, subject to refund.

FERC said that, among the issues that have not been fully supported and require further exploration, is the allocation of the price responsive demand credit. As first reported by Matters, the price responsive demand credit would always accrue to the customer's load serving entity, even if the price responsive demand were facilitated by a non-LSE (see 9/26).

This is necessary because an LSE's capacity obligation is not reduced to reflect price responsive demand. Rather, the credit provided to LSEs for price responsive demand compensates the LSE for any "extra" capacity it is required to be assigned under the Reliability Pricing Model despite the customer's price responsive demand reducing the customer's actual capacity obligation.

In other words, not providing the price responsive demand credit to the LSE would force the LSE to procure capacity that the customer does not use, and allow non-LSEs to receive benefits from the LSE's procurement of such capacity without any contribution to the cost of such capacity.

FERC directed PJM to provide support, "justifying the proposal to restrict non-load serving entity PRD Providers from receiving PRD Credits directly when their customers commit to maintain load caps at prescribed prices (i.e., a Maximum Emergency Service Level), including an explanation of how any contractual arrangements regarding the distribution of the PRD Credits, as between the load serving entity and a non-load serving entity PRD Provider, might be structured and/or performed."

Other issues that FERC said require further study include the funding of the PRD credit, the limitation on PRD load providing economic load response, the details regarding automation and supervisory control, and the testing requirement for PRD providers.

FERC also directed PJM to identify the current and expected penetration of LMP-based dynamic retail rates, in the PJM region, as a percentage of residential, commercial and industrial customers, and the current and expected MW of load for each customer class.