Item E-2: Commissioner James Danly Concurrence Regarding Participation of Aggregators of Retail Demand Response Customers in Markets Operated by RTOs and ISOs

Commissioner James Danly Statement
March 18, 2021
Docket No. RM21-14-000
Order:  E-2

I disagree that we should eliminate the Commission’s rule establishing states’ rights to opt out of wholesale demand response aggregation programs.[1]  The Commission, however, always has the discretion to issue a Notice of Inquiry (NOI) on any topic within its purview.  I therefore concur in the issuance of the NOI but oppose the measures it anticipates. 

It is my understanding that eighteen states have opted out[2] of the Commission’s demand response aggregation mandate in Order No. 719.[3]  Any Commission action to now revoke the states’ authority to opt-out would thus do significant violence to the statutory and regulatory regimes these eighteen states have enacted, in addition to the harm it would cause to the long-established division between federal and state regulation of electricity.[4]

I invite these states and any other parties interested in preserving the traditional and current role of the states in exercising jurisdiction over retail electricity and distribution systems, including oversight over demand response programs, to respond to the NOI and provide appropriate record evidence.

Some of the most important evidence I would like to see submitted concerns whether wholesale demand response aggregation programs are providing reliability benefits commensurate with their costs.  Before we force everyone to join them, we ought to see if they work.  We often see statistics of the quantity of resources that participate or join wholesale demand response programs.  We rarely see statistics that quantify the actual performance of these demand response resources during critical events. 

Anecdotal evidence suggests their performance during times of strain may be poor, and perhaps terrible.  Commission staff reviewed preliminary analyses in response to the 2020 California reliability crisis and observed that dispatched “Proxy Demand Response” in CAISO had 50% availability over the six days of the 2020 California reliability crisis, while dispatched “Reliability Demand Response Resources” had 71% availability.[5]  The Commission staff further observed that “while [Proxy Demand Response] has been regularly dispatched, its performance varies dramatically,” and that for Reliability Demand Response Resources, “[t]here are neither established performance metrics nor comparable historical data to evaluate” its performance.[6]  It would be an unacceptable failure of regulatory oversight if we do not have basic performance metrics for demand response given that these wholesale programs have been authorized for over a decade—and that customers have been paying for them all the while.

I welcome, indeed, encourage a searching inquiry into how much demand response actually contributes to reliability during critical reliability events.  Ideally, comments would rest upon detailed analyses of whether demand response is worth both the costs a resource saves when it does not purchase energy (when demand responds to requests to reduce consumption) and the marginal price it receives in payment.  Again, these seem like threshold questions before we upend eighteen separate states’ regulatory regimes enacted to accommodate the opt-out we currently require but now may eliminate.

For these reasons, I respectfully concur.