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CT Plans Utility-Offered Demand Response Programs If FERC Lack of Jurisdiction Upheld
December 12,2014 The Connecticut Department of Energy and Environmental Protection has issued a draft integrated resource plan which states an intent to create state-run demand response programs if a court order stripping FERC jurisdiction over demand response is upheld, and which also calls for long-term supply-side procurements to mitigate rising wholesale prices. Regarding long-term supply procurements, DEEP plans to (1) utilize existing state authority under Public Act 13-303 to procure Class I and/or large-scale hydropower that can offset some increment of natural gas demand driving ISO-NE prices up, and (2) seek new authority from the legislature to solicit proposals from demand-side or supply-side resources that can cost-effectively resolve the gas infrastructure constraint, up to an amount that is proportional to Connecticut’s share of regional electric demand. The Department has existing statutory authority to issue a solicitation for long-term power purchase agreements (PPAs) for up to 5% of the state’s electricity demand under Section 7 of Public Act 13-303. This equates to approximately 175 MW of large-scale hydropower at a 90% capacity factor, or 550 MW of wind at a 35% capacity factor. In addition, the Department has authority remaining under Section 6 of Public Act 13-303 to solicit long-term PPAs for up to approximately 125 GWh/year of Class I renewables. The draft plan also says that DEEP will revive and improve state programs that support demand response in the event demand response is effectively shut out of the ISO-NE wholesale markets under a court ruling which says FERC cannot set compensation for demand response (in the energy market). DEEP said that such state action could include: • Extending the state’s authority to direct the electric distribution companies to implement cost-effective active DR programs within their service area and permitting the EDCs to recover the cost of such programs through retail rates. • Requiring each EDC to submit to PURA an application to implement time-of-use rates for customers that have a maximum demand of not less than 100 kilowatts. Additionally, the EDCs should offer optional interruptible or load response rates and time-of-use rates for all customers. The Department notes that some limited legislative clarifications may be needed to reinforce authority to implement such a program, including adequate enforcement authority to ensure that demand response resources can perform as needed to satisfy forward capacity obligations, and to ensure that the state’s EDCs are appropriately motivated to procure demand response resources. The draft IRP also forecasts higher generation rates for customers. DEEP projects that the average Generation Service Charge will increase from 9.8¢/kWh in 2014 to 10.9¢/kWh in 2017, 13.4¢/kWh in 2019, and 16.0¢/kWh in 2024 in nominal dollars Notably, an increase of 2.2¢/kWh is expected due to regional capacity prices rising to the level needed to attract new generation and maintain resource adequacy as retirements and load growth erode the capacity surplus that kept prices low in the past. Given the reliance on the centralized capacity market, this increase will be felt by retail suppliers as well, and does not represent any opportunity to undercut default service pricing (as suppliers are more apt to do with increases in energy pricing. Link to Draft IRP
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