Wholesale Products and Prices - Price Responsive Demand - Example 2

A 2009 paper by PJM Senior Vice President for Markets, Andrew Ott, and I, described the need to incorporate PRD in RTO tariffs and operations and provided for an overall framework for doing so (Attachment D). While in many ways similar to the more recent proposal discussed in the PJM stakeholder process, the paper approaches a key issue in a different manner. Instead of relying primarily on an LSE's commitment that demand will not exceed its MESL in a generation emergency, the paper proposes the development and use of a forecast demand curve. The forecast demand curve is designed to forecast peak demand at different price points. The curve is continuously reviewed based on actual experience and improved over time. This type of review process already occurs for traditional single point forecasts of peak demand. To ensure system reliability, LSEs hold planning reserves for forecasted residual firm demand at a high price point on the forecasted demand curve. A proposal
based on this approach was further developed into a potential tariff change (Attachment E) for the Midwest ISO. A summary of how the approach would work was presented to the Midwest ISO Supply Adequacy Working Group (Attachment F). Midwest ISO has taken the position that LSEs can submit forecast curves under its existing tariff. This approach could be reflective of how PRD will be recognized in RTOs as utilities and RTOs acquire experience with forecasting the impacts of dynamic retail pricing.

For further information, see:
http://www.oasis-open.org/committees/download.php/40642/Centolella-%20Comments%20on%20EMIX%20Product%20Specification%20Standard%20complete%20FINAL.zip