Demand Response Compensation in Organized Wholesale Energy Markets, 47499-47503 [2010-19376]

Download as PDF Federal Register / Vol. 75, No. 151 / Friday, August 6, 2010 / Proposed Rules complaints of retaliation. Upon receiving a complaint, the Ombudsman shall investigate the basis of the alleged retaliation. Upon completion of the investigation, the Ombudsman shall report the findings to the Director with recommendations, including a recommendation to take disciplinary action against any FHFA employee found to have retaliated. § 1213.7 Confidentiality. The Ombudsman shall ensure that safeguards exist to preserve confidentiality. If a party requests that information and materials remain confidential, the Ombudsman shall not disclose the information and materials, without approval of the party, except to appropriate reviewing or investigating officials, or as required by law. However, the resolution of certain complaints (such as complaints of retaliation against a regulated entity or the Office of Finance) may not be possible if the identity of the party remains confidential. In such cases, the Ombudsman shall discuss with the party the circumstances limiting confidentiality. Dated: August 1, 2010. Edward J. DeMarco, Acting Director, Federal Housing Finance Agency. [FR Doc. 2010–19424 Filed 8–5–10; 8:45 am] BILLING CODE 8070–01–P DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Part 35 [Docket No. RM10–17–000] Demand Response Compensation in Organized Wholesale Energy Markets Federal Energy Regulatory Commission. ACTION: Supplemental Notice of Proposed Rulemaking and Notice of Technical Conference. AGENCY: The Federal Energy Regulatory Commission is issuing a Supplemental Notice of Proposed Rulemaking (NOPR) and Notice of Technical Conference to provide additional opportunity for comment on issues related to the March 18, 2010 NOPR, 75 FR 15362 (March 29, 2010), regarding the appropriate compensation to be paid to demand response resources in organized wholesale electric markets administered by Independent System Operators or Regional Transmission mstockstill on DSKH9S0YB1PROD with PROPOSALS SUMMARY: VerDate Mar<15>2010 16:12 Aug 05, 2010 Jkt 220001 Organizations. The Commission proposed an approach for compensating demand response resources in order to improve the competitiveness of organized wholesale energy markets and thus ensure just and reasonable wholesale rates. The Supplemental NOPR seeks comment on whether the Commission should adopt requirements related to two issues addressed in comments: If the Commission were to adopt a net benefits test for determining when to compensate demand response providers, what, if any, requirements should apply to the methods for determining net benefits; and what, if any, requirements should apply to how the costs of demand response are allocated. The Commission invites all interested persons to submit comments in response to the issues discussed herein. DATES: A technical conference will be held at the Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, no later than 45 days following the publication of this document in the Federal Register. The exact date of the conference will be provided in a subsequent Commission publication in the Federal Register. Comments on the NOPR will be due 30 days following the technical conference announced herein. The Commission will announce the comment close date in a subsequent publication in the Federal Register. ADDRESSES: You may submit comments, identified by docket number by any of the following methods: Agency Web Site: https://ferc.gov. Documents created electronically using word processing software should be filed in native applications or print-toPDF format and not in a scanned format. Mail/Hand Delivery: Commenters unable to file comments electronically must mail or hand deliver an original and 14 copies of their comments to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street, NE., Washington, DC 20426. Instructions: For detailed instructions on submitting comments and additional information on the rulemaking process, see the Comment Procedures Section of this document. FOR FURTHER INFORMATION CONTACT: David Hunger (Technical Information), Office of Energy Policy and Innovation, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502– 8148, david.hunger@ferc.gov. Helen Dyson (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 47499 20426, (202) 502–8856, helen.dyson@ferc.gov. SUPPLEMENTARY INFORMATION: Supplemental Notice of Proposed Rulemaking and Notice of Technical Conference Table of Contents Paragraph Nos. I. Background ............................. II. Net Benefits ........................... A. The March NOPR .......... B. Comments ....................... C. Discussion ...................... III. Cost Allocation .................... A. Comments ...................... B. Discussion ...................... IV. Technical Conference .......... V. Comment Procedures ............ VI. Document Availability ........ 2 4 4 5 8 9 9 12 13 19 23 Issued August 2, 2010. 1. In a Notice of Proposed Rulemaking (NOPR) issued in this proceeding on March 18, 2010 (March NOPR),1 the Commission proposed to require Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) 2 with tariff provisions allowing demand response 3 resources 4 to participate in wholesale energy markets by reducing consumption of electricity from expected levels in response to price signals, to pay those demand response resources, in all hours, the market price of energy (also referred to as the ‘‘locational marginal price’’ or ‘‘LMP’’) for such reductions. In light of matters elucidated in responsive comments to the March NOPR, the Commission seeks additional comments on whether the Commission should adopt requirements related to two issues: (1) If the Commission were to adopt a net benefits test for determining when to compensate demand response providers, what, if any, requirements should apply to the methods for 1 Demand Response Compensation in Organized Wholesale Energy Markets, Notice of Proposed Rulemaking, 75 FR 15362 (March 29, 2010), 130 FERC ¶ 61,213 (March 18, 2010). 2 The following RTOs and ISOs have organized wholesale electricity markets: PJM Interconnection, L.L.C. (PJM); New York Independent System Operator, Inc. (NYISO); Midwest Independent Transmission System Operator, Inc. (Midwest ISO); ISO New England, Inc. (ISO–NE); California Independent System Operator Corp. (CAISO); and Southwest Power Pool, Inc. (SPP). 3 Demand response means a reduction in the consumption of electric energy by customers from their expected consumption in response to an increase in the price of electric energy or to incentive payments designed to induce lower consumption of electric energy. 18 CFR 35.28(b)(4) (2010). 4 Demand response resource means a resource capable of providing demand response. 18 CFR 35.28(b)(5) (2010). E:\FR\FM\06AUP1.SGM 06AUP1 47500 Federal Register / Vol. 75, No. 151 / Friday, August 6, 2010 / Proposed Rules determining net benefits; and (2) what, if any, requirements should apply to how the costs of demand response are allocated. The Commission also directs staff to hold a technical conference on these issues no later than 45 days following publication of this notice in the Federal Register. The exact date of the technical conference will be provided in a subsequent notice. mstockstill on DSKH9S0YB1PROD with PROPOSALS I. Background 2. In the March NOPR, the Commission proposed to add section 35.18(g)(1)(v) to its regulations to establish a specific compensation approach for demand response resources participating in organized wholesale energy markets, i.e., the dayahead and real-time markets administered by ISOs and RTOs. Under the proposed section, each Commissionapproved ISO and RTO that has a tariff provision providing for participation of demand response resources in its organized wholesale energy market would pay demand response resources, in all hours, the market price for energy, i.e., the LMP,5 for demand reductions made in response to price signals.6 3. Numerous comments were filed in response to the NOPR, many of which support the proposed demand response compensation level.7 However, other comments support payment of LMP 5 LMP refers to the price calculated by the ISO or RTO at particular locations or electrical nodes within the ISO or RTO footprint and is used as the market price to compensate generators. There are variations in the way ISOs and RTOs calculate LMP; however, each method establishes the marginal value of resources in that market. Nothing here or in the March NOPR is intended to change ISO and RTO methods for calculating LMP. 6 The proposed provision applies only to demand response acting as a resource in organized wholesale energy markets. The provision will not apply to demand response under programs that ISOs and RTOs administer for reliability or emergency conditions, such as, for instance, Midwest ISO’s Emergency Demand Response; NYISO’s Emergency Demand Response Program; PJM’s Emergency Load Response; and ISO–NE’s Real-Time 30–Minute Demand Response Program, Real-Time and 2–Hour Demand Response Program, and Real-Time Profiled Response Program. The provision also will not apply to compensation in ancillary services markets, which the Commission has addressed elsewhere. See, e.g., Wholesale Competition in Regions with Organized Electric Markets, Order No. 719, 73 FR 64100 (Oct. 28, 2008), FERC Stats. & Regs. P 31,281 (2008) (Order No. 719). 7 See Comments of Illinois Citizens Utility Board at 2; Comments of Industrial Energy Consumers of America at 3; Comments of National Energy Marketers Association at 3–4; Comments of National League of Cities; Comments of New Jersey Board of Public Utilities at 2; Comments of North America Power Partners at 4; Comments of Pennsylvania Department of Environmental Protection at 5; Comments of Price Responsive Load Coalition at 2; Comments of Schneider Electric USA at 2; Comments of Wal-Mart Stores, Inc. at 4; Comments of Virginia Committee for Fair Utility Rates at 7. VerDate Mar<15>2010 16:12 Aug 05, 2010 Jkt 220001 only when the benefits of demand response compensation outweigh the costs of paying demand response resources, as determined by some type of net benefits test.8 Still other comments argue that, in order to determine the justness and reasonableness of the proposed compensation level, the corresponding cost allocation must be considered.9 More specifically, these comments raise concerns regarding how the costs associated with direct payment of LMP for demand response will be allocated, or assigned, within an ISO or RTO. Several commenters assert that the issues of cost allocation and net benefits are inherently linked, so that the Commission must address both issues together.10 Comments regarding net benefits and cost allocation issues are discussed below. II. Net Benefits A. The March NOPR 4. In the March NOPR, the Commission proposed to require ISOs and RTOs to pay LMP to demand response providers in all hours, but the Commission also sought comment on, among other things, whether payment of LMP should indeed apply in all hours and, if not, the criteria that should be used for establishing the hours when LMP should apply.11 8 See generally, Comments of New York State Consumer Protection Board; New England Consumer Advocates; Capital Power; Electric Power Supply Association (EPSA); Exelon Corporation (Exelon); PJM Power Providers Group; New England Conference of Public Utility Commissioners (NECPUC); Maryland Public Service Commission (Maryland Commission); New York State Public Service Commission (New York Commission); NSTAR Electric Company; National Grid USA (National Grid); PPL Parties; New England Public Systems; Viridity Energy, Inc.; and Charles Cicchetti. 9 Comments of ISO–NE at 39–40. See also, Comments of American Electric Power Service Corp. at 6–10; Comments of CAISO at 6; Comments of Consolidated Edison Company at 2; Comments of Hess Corporation at 3; Comments of the Illinois Commerce Commission at 12; Comments of PJM at 8; Comments of Potomac Economics at 3; Comments of Massachusetts Attorney General and Maine Public Advocate at 11; Comments of Midwest ISO Transmission Owners at 5–6; Comments of Midwest TDUs at 13; Comments of Edison Electric Institute at 5; Comments of NECPUC at 12, 22; Comments of New England Consumer Advocates at 11; Comments of RRI Energy, Inc. at 6; Comments of San Diego Gas & Electric Co. at 3–4. 10 As further addressed below, several commenters assert that the costs of demand response compensation should be borne by only those market participants determined to have benefitted from the subject load reduction, as determined by some type of net benefits test. See, e.g., Comments of ISO–NE at 5–6; Comments of NECPUC at 22; Comments of PJM at 12–14; Comments of PJM Power Providers Group at 37–38. 11 March NOPR, 130 FERC ¶ 61,213 at P 20. PO 00000 Frm 00011 Fmt 4702 Sfmt 4702 B. Comments 5. As noted above, numerous commenters, primarily industrial consumers and some consumer advocates, agree with the Commission’s proposal to pay LMP to demand response providers in all hours.12 They argue that, regardless of the hour or season, all consumers share in the benefits demand response resources provide, including lowering the clearing price.13 They also argue that, regardless of the hour or season, both demand response providers and generators provide a comparable service in terms of balancing supply and demand and therefore should be paid on a comparable basis, i.e., LMP.14 6. At the same time, a diverse group of commenters maintain that paying LMP for demand response in all hours, including off-peak hours, might not result in net benefits to customers, because the payments might be substantially more than the savings created by reducing the clearing price at that time.15 According to these commenters, net benefits are most likely to be positive and greatest when the supply curve is steepest, which typically occurs in highest-cost, peak hours.16 Some commenters suggest that paying LMP in all hours might make more difficult, and less accurate, the establishment of baselines for measuring whether a demand response provider has, in fact, responded.17 7. Many commenters who oppose paying LMP in all hours for demand response suggest approaches, or net benefits tests, for determining when LMP should apply. These commenters state that the purpose of these tests would be to determine the point at which the incremental payment for demand response equals the incremental benefit of the reduction in load; payment of LMP would apply only 12 See Comments of Steel Manufacturers Association at 12; Comments of Consumer Demand Response Initiative at 12; Comments of Joint Consumer Advocates at 11–12. 13 Comments of Alliance for Clean Energy New York at 2–3; Comments of American Chemistry Council at 3; Comments of American Forest & Paper Association at 3; Comments of Crane & Co. at 2–3; Comments of Industrial Energy Consumers of America at 2; Comments of Industrial Energy Consumers of Pennsylvania at 3; Comments of Madison Paper Industries at 2–3. 14 Comments of Steel Manufacturers Association at 12. 15 Comments of Capital Power Corporation at 5; Comments of PJM Power Providers Group at 5. 16 Comments of NECPUC at 13. 17 Comments of ISO–NE at 32–33; Comments of California Department of Water Resources at 11; Comments of National Grid USA at 8. E:\FR\FM\06AUP1.SGM 06AUP1 Federal Register / Vol. 75, No. 151 / Friday, August 6, 2010 / Proposed Rules up to that point.18 To achieve that end, some comments advocate a net benefits trigger based on a particular price or period of hours.19 While some proposals would utilize a static bid threshold, such as $75/MWh,20 other proposals would utilize a dynamic bid threshold, which could be based upon fuel prices and heat rates of marginal generation.21 Still other commenters urge compensating demand response during an ISO- or RTO-defined period of critical high-cost hours in which it is cost-effective to pay the full LMP.22 In addition to advancing net benefits tests, some commenters suggest implementation of an ISO- or RTOdeveloped mechanism to determine whether a net customer benefit would occur in advance of dispatch.23 Some commenters, however, state that it would be difficult to prescribe by regulation the hours in which demand response provides net benefits because system conditions and load patterns change across seasons and over time.24 mstockstill on DSKH9S0YB1PROD with PROPOSALS C. Discussion 8. Due to matters raised in responsive comments to the March NOPR, the Commission seeks further information regarding the net benefits issue. Accordingly, the Commission seeks additional comments and directs staff to hold a technical conference regarding various net benefits tests.25 Specifically, the Commission seeks comment on the following issues, as well as any other issues: (1) Some commenters address the need for a net benefits test. Address why the Commission should adopt a net 18 Comments of New England Consumer Advocates at 11; Comments of NYSCPB at 5; Comments of National Grid at 4–5. 19 For example, National Grid states that the threshold could be triggered by a particular price on the supply offer curve at which the additional cost of paying LMP to demand response resources is most likely to be outweighed by LMP reductions in the wholesale energy market as a result of the demand reductions produced by these resources. Comments of National Grid at 6. 20 Comments of the New York Commission at 10. According to the New York Commission, a static bid threshold helps prevent demand response providers from gaming the system by seeking compensation for reducing electricity consumption for reasons other than market prices, but can also limit participation in a demand response program because prices might not exceed the threshold on a consistent basis. 21 Comments of National Grid at 6; Comments of the New York Commission at 10; Comments of Viridity at 24. 22 Comments of the Maryland Commission at 4–5. 23 Comments of NYSCPB at 5. 24 Midwest ISO Transmission Owners at 16. 25 As noted above, the exact date of the technical conference will be provided in a subsequent notice and will be no later than 45 days following publication of this notice in the Federal Register. VerDate Mar<15>2010 16:12 Aug 05, 2010 Jkt 220001 benefits test for determining demand response compensation, and what the objectives of any such test would be. (2) How to define benefits, including whether the benefits associated with demand response should account only for lower market-clearing prices in the day-ahead and real-time markets or should also include consideration of operational benefits (e.g., lower reserve requirements), societal benefits or another measure. (3) In addition to the payments received from the wholesale market, what are the costs demand response providers and load serving entities incur and should these be included for purposes of a net benefits test. (4) How to identify the beneficiaries of demand response, and how the allocation of costs related to demand response compensation affect the beneficiaries, if at all. (5) Whether any net benefits methodology adopted should be the same for all ISOs and RTOs or whether the individual circumstances or configuration of each ISO and RTO would support a different net benefits methodology. (6) Proposed methodologies for implementing a net benefits test. Comments also should consider whether a net benefits threshold should be established up front based on static measures, such as a specific price or number of peak hours, or established on a dynamic basis, such as a price threshold based on a pre-set heat rate and daily updated fuel price; and similarly, whether the net benefits should be an explicit test run by the ISO or RTO either after bids have been received or each hour prior to accepting demand response bids. Comments should also describe the advantages and limitations of any proposed net benefits methodologies. III. Cost Allocation A. Comments 9. Comments concerning cost allocation essentially ask how the proposed demand response compensation level will be funded.26 These commenters argue that, if not structured correctly, demand response compensation methodologies can increase, rather than decrease costs to end-users.27 Some commenters further contend that requiring payment of LMP for demand response will require ISOs and RTOs to reopen cost allocation issues that have previously been settled based on varying ISO- and RTO-specific demand response compensation levels.28 Additional commenters assert that demand response compensation and a method for allocating the associated costs are so inextricably entwined that the two issues must be simultaneously addressed as part of an integrated demand response regime.29 10. Another group of commenters endorse the position that demand response compensation and cost allocation are necessarily related, but they contend that resolution of cost allocation issues can await the final rule on demand response compensation. These commenters maintain that any cost allocation approach will depend on the outcome of the final demand response compensation rule 30 and, in any case, should first be addressed through stakeholder discussions at the regional level. 11. Several commenters advocate a specific approach or discuss the pros and cons of alternative approaches for allocating the costs associated with demand response compensation. Potential approaches raised in comments include: (1) Allocating the costs across the entire relevant ISO or RTO market, based upon the rationale that there are system-wide benefits to demand response, including reducing the market price for energy.31 Conversely, some commenters argue that, while this approach might increase the amount of demand response provided to the market, it might also result in some market participants paying costs associated with demand response for which they do not receive equivalent benefit.32 (2) Allocating the costs to only the load-serving entity of record, i.e., the load-serving entity that would have served the load providing the demand response. According to commenters, this option assumes that the deemed full benefit of demand response is only received by the load-serving entity of record and that demand response does 28 Comments 26 ISO–NE Comments at 5, 40; Comments of PJM at 8; Comments of Potomac Economics at 3. 27 Comments of Massachusetts Attorney General and Maine Public Advocate at 11 (arguing that spreading the costs of demand response over a smaller amount of load is cost-effective only so long as the remaining load pays a lower price than it would have paid if the demand response had not participated). PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 47501 of Midwest TDUs at 13. Comments of ISO–NE at 4–5; Comments of Edison Electric Institute (EEI) at 5; Comments of Charles Cicchetti at 26–27; Comments of CAISO at 6. 30 Comments of New England Consumer Advocates at 11. 31 See Comments of NECPUC at 22. 32 Comments of Midwest ISO Transmission Owners at 5. 29 Id.; E:\FR\FM\06AUP1.SGM 06AUP1 47502 Federal Register / Vol. 75, No. 151 / Friday, August 6, 2010 / Proposed Rules not impact other load-serving entities across the ISO or RTO.33 (3) Uplifting the costs locally to all load-serving entities within the zone impacted by the demand response reduction, based on a load ratio share. Commenters assert that this approach theoretically allocates the cost of demand response compensation to only those load-serving entities that benefitted from the demand response provided.34 (4) Recovering the costs through a surcharge added to the LMP for customers purchasing from the relevant energy market in the hour when the demand response resource is committed or dispatched. The rationale for this approach is that it allocates the costs of demand response resource procurement on the basis of cost-causation, i.e., demand response resource costs are allocated directly to those energy market consumers who benefitted from the demand response resource provided. To implement this proposal, an adjustment to the market price paid by customers would be calculated.35 (5) Utilizing a hybrid approach, in a manner intended to minimize cost impacts on final customers.36 Hybrid approaches include splitting the costs between load-serving entities and transmission owners,37 and allocating part of the costs to the demand response provider’s load-serving entity and part to all of the load-serving entities in the zone where the load reduction occurred, based on a load ratio share.38 B. Discussion 12. From the comments received, issues concerning cost allocation may be integrally related to the proposal relating to demand response compensation, and we believe such issues should be explored further. In addition, the diversity of comments relating to cost allocation leave open the 33 Comments of PJM at 15. of PJM at 14; Comments of NECPUC at 22; Comments of Midwest ISO Transmission Owners at 6. 35 Comments of NECPUC at 22, 23. 36 Comments of ISO–NE at 40. 37 ISO–NE suggests charging the difference between LMP and the generation (or ‘‘G’’) portion of the retail rate (i.e., LMP–G) to the load-serving entity that is providing the energy, and charging the remainder (i.e., ‘‘G’’) to network load, which would be billed to transmission owners. Comments of ISO–NE at 5. 38 As described by PJM, the ‘‘[load-serving entity] of record will receive a direct allocation of direct payments made for the demand response MWh reduction multiplied by the difference between the appropriate wholesale market price and the retail rate, and the cost associated with the MWh reduction multiplied by the retail rate allocated to all [load-serving entities] in the zone where the load reduction occurred based on a load ratio share.’’ Comments of PJM at 10. mstockstill on DSKH9S0YB1PROD with PROPOSALS 34 Comments VerDate Mar<15>2010 16:12 Aug 05, 2010 Jkt 220001 question of whether a singular cost allocation approach should be determined by the Commission for all ISOs and RTOs or whether differing cost allocation approaches should be developed regionally and reviewed by the Commission on an ISO- and RTOspecific basis. Accordingly, the Commission seeks additional comments on whether the Commission should consider a generic approach to allocating the costs of demand response compensation required by the final rule in this proceeding, and if so, what approach the Commission should adopt. Such issues also will be explored at the staff technical conference. Specifically, the Commission seeks comment on the following issues, as well as any other issues: (1) Whether standardizing demand response compensation among ISOs and RTOs requires simultaneous standardization of a method for allocating the costs associated with such compensation. In addition, whether standardizing demand response compensation among ISOs and RTOs requires consideration of corresponding settlements and other impacts associated with the compensation mechanism. (2) If the Commission standardizes an approach for allocating the costs associated with requiring payment for demand response, what type of approach is appropriate. Comments should address the specific approaches delineated above, and may address other broad principles the Commission could use to determine the cost allocation method. (3) How the use of a net benefits test would affect the need for and methodologies for determining cost allocation. IV. Technical Conference 13. The exact date of the Commission staff technical conference directed herein will be provided in a subsequent notice and will be no later than 45 days following publication of this notice in the Federal Register. The conference will be held in the Commission Meeting Room at the Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. All interested persons are invited to participate in the conference. 14. Those interested in speaking at the conference should notify the Commission by August 10, 2010 by completing an online form describing the topics that they will address: https://www.ferc.gov/whats-new/ registration/demand-RM10-17-000speaker-form.asp. Due to time constraints, we may not be able to PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 accommodate all individuals interested in speaking, so multiple persons sharing the same position are encouraged to have one representative speak on their behalf. A detailed agenda, including panel speakers, will be published at a later date. 15. The technical conference will be transcribed. Transcripts of the conference will be immediately available for a fee from Ace-Federal Reporters, Inc. ((202) 347–3700 or 1–800–336–6646). The transcript will be available for free on the Commission’s eLibrary system and on the Calendar of Events approximately one week after the conference. 16. A free webcast of the technical conference directed herein will be available. Anyone with Internet access interested in viewing this conference can do so by navigating to https:// www.ferc.gov’s Calendar of Events and locating the appropriate event in the Calendar. The events will contain a link to the applicable webcast option. The Capitol Connection provides technical support for the webcasts and offers the option of listening to the conferences via phone-bridge for a fee. If you have any questions, visit https:// www.CapitolConnection.org or call (703) 993–3100. 17. There is an ‘‘eSubscription’’ link on the Web site that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please e-mail FERCOnlineSupport@ferc.gov, or call (866) 208–3676 (toll free). For TTY, call 202 502–8659. 18. Commission conferences are accessible under section 508 of the Rehabilitation Act of 1973. For accessibility accommodations, please send an e-mail to accessibility@ferc.gov or call toll free (866) 208–3372 (voice) or (202) 208–1659 (TTY), or send a FAX to (202) 208–2106 with the required accommodations. V. Comment Procedures 19. The Commission invites interested persons to submit comments on the matters and issues proposed in this notice to be adopted, including any related matters or alternative proposals that commenters may wish to discuss. Comments are due 30 days following the technical conference announced above. Comments must refer to Docket No. RM10–17–000, and must include the commenter’s name, the organization the commenter represents, if applicable, and the commenter’s address. 20. The Commission encourages comments to be filed electronically via the eFiling link on the Commission’s E:\FR\FM\06AUP1.SGM 06AUP1 Federal Register / Vol. 75, No. 151 / Friday, August 6, 2010 / Proposed Rules and dissenting, in part with a separate statement attached. Nathaniel J. Davis, Sr., Deputy Secretary. VI. Document Availability mstockstill on DSKH9S0YB1PROD with PROPOSALS Web site at https://www.ferc.gov. The Commission accepts most standard word processing formats. Documents created electronically using word processing software should be filed in native applications or print-to-PDF format and not in a scanned format. Commenters filing electronically do not need to make a paper filing. 21. Commenters that are not able to file comments electronically must send an original and 14 copies of their comments to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street, NE., Washington, DC 20426. 22. All comments will be placed in the Commission’s public files and may be viewed, printed, or downloaded remotely as described in the Document Availability section below. Commenters on this proposal are not required to serve copies of their comments on other commenters. [Docket No. DEA–247C] 23. In addition to publishing the full text of this document in the Federal Register, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through FERC’s Home Page (https://www.ferc.gov) and in FERC’s Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426. 24. From FERC’s Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field. 25. User assistance is available for eLibrary and the FERC’s website during normal business hours from FERC Online Support at (202) 502–6652 (toll free at 1–866–208–3676) or e-mail at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502– 8371, TTY (202) 502–8659. E-mail the Public Reference Room at public.referenceroom@ferc.gov. Schedules of Controlled Substances; Placement of 2,5-Dimethoxy-4-(n)propylthiophenethylamine and NBenzylpiperazine Into Schedule I of the Controlled Substances Act; Correction List of Subjects in 18 CFR Part 35 Electric power rates, Electric utilities, Reporting and recordkeeping requirements. By direction of the Commission. Commissioner Moeller is concurring, in part VerDate Mar<15>2010 16:12 Aug 05, 2010 Jkt 220001 MOELLER, Commissioner, concurring, in part and dissenting, in part: While I support the decision to supplement the record and convene a technical conference, for the reasons set forth in my concurring and dissenting statement on the NOPR that initiated this proceeding on March 18, I continue to concur and dissent, in part. Philip D. Moeller, Commissioner. [FR Doc. 2010–19376 Filed 8–5–10; 8:45 am] BILLING CODE 6717–01–P DEPARTMENT OF JUSTICE Drug Enforcement Administration 21 CFR Part 1308 Drug Enforcement Administration (DEA), Department of Justice. ACTION: Notice of proposed rulemaking: correction. AGENCY: The Drug Enforcement Administration (DEA) is correcting a notice of proposed rulemaking that appeared in the Federal Register of September 8, 2003. The proposed rule pertained to the scheduling of NBenzylpiperazine (BZP), and contained an error regarding the potency of BZP relative to amphetamine. Although DEA used the correct figures in arriving at its scheduling determination, the agency is publishing this correction to provide an official statement of the actual figures. This correction does not address the scheduling of 2,5-dimethoxy-4-(n)propylthiophenethylamine (2C–T–7) which was also placed into schedule I as a result of the above cited rulemaking. SUMMARY: This correction is effective August 6, 2010 without further action. FOR FURTHER INFORMATION CONTACT: Christine A. Sannerud, PhD, Chief, Drug and Chemical Evaluation Section, Office of Diversion Control, Drug Enforcement Administration, 8701 Morrissette Drive, Springfield, VA 22152, Telephone (202) 307–7183. SUPPLEMENTARY INFORMATION: DATES: PO 00000 Frm 00014 Fmt 4702 Sfmt 4702 47503 Background DEA is correcting an inadvertent error that occurred in a Notice of Proposed Rulemaking that scheduled the substance n-Benzylpiperazine (BZP) as a schedule I controlled substance. The Notice of Proposed Rulemaking, published on September 8, 2003 (68 FR 52872), proposed the control of BZP in schedule I of the Controlled Substances Act (CSA). The Final Rule, published on March 18, 2004 (69 FR 12794), finalized the placement of BZP in schedule I of the CSA. Each of these rules contained a misstatement in the ‘‘Supplementary Information’’ section, with regard to the potency differences between BZP and amphetamine. In each rule, it was erroneously stated that BZP is 10 to 20 times more potent than amphetamine. In actuality, the converse is true (i.e., BZP is 10 to 20 times less potent than amphetamine.) Therefore this Rulemaking corrects this misstatement in the Notice of Proposed Rulemaking. Under separate rulemaking, DEA is publishing a correction to the Final Rule, published March 18, 2004 (68 FR 12794). DEA emphasizes that these errors were made solely in the rules as published in the Federal Register. Both DEA and the U.S. Department of Health and Human Services (HHS) considered the correct BZP potencies during their scheduling deliberations. The correct potencies were included in both the HHS scientific and medical evaluation document, and in DEA’s scheduling document, which were used to make the determination for control. The public docket for BZP contains both of these review documents. In addition, DEA has already published on the agency’s Web site the correct figures regarding relative potency. The determination of control of BZP was made after consideration of all the available data and all eight factors and the criteria for schedule I as specified in 21 U.S.C. 811 and 812. The amphetamine-like property of BZP was determined following the collective review and consideration of all the available evidence including drug discrimination and self-administration and other information. These studies were briefly mentioned in the rules controlling BZP as a schedule I controlled substance and were discussed in detail in the scientific and medical evaluation and scheduling documents prepared by both HHS and DEA. Although the potency difference between BZP and amphetamine was discussed in the rules proposing and E:\FR\FM\06AUP1.SGM 06AUP1

Agencies

[Federal Register Volume 75, Number 151 (Friday, August 6, 2010)]
[Proposed Rules]
[Pages 47499-47503]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-19376]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM10-17-000]


Demand Response Compensation in Organized Wholesale Energy 
Markets

AGENCY: Federal Energy Regulatory Commission.

ACTION: Supplemental Notice of Proposed Rulemaking and Notice of 
Technical Conference.

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SUMMARY: The Federal Energy Regulatory Commission is issuing a 
Supplemental Notice of Proposed Rulemaking (NOPR) and Notice of 
Technical Conference to provide additional opportunity for comment on 
issues related to the March 18, 2010 NOPR, 75 FR 15362 (March 29, 
2010), regarding the appropriate compensation to be paid to demand 
response resources in organized wholesale electric markets administered 
by Independent System Operators or Regional Transmission Organizations. 
The Commission proposed an approach for compensating demand response 
resources in order to improve the competitiveness of organized 
wholesale energy markets and thus ensure just and reasonable wholesale 
rates. The Supplemental NOPR seeks comment on whether the Commission 
should adopt requirements related to two issues addressed in comments: 
If the Commission were to adopt a net benefits test for determining 
when to compensate demand response providers, what, if any, 
requirements should apply to the methods for determining net benefits; 
and what, if any, requirements should apply to how the costs of demand 
response are allocated. The Commission invites all interested persons 
to submit comments in response to the issues discussed herein.

DATES: A technical conference will be held at the Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, no 
later than 45 days following the publication of this document in the 
Federal Register. The exact date of the conference will be provided in 
a subsequent Commission publication in the Federal Register.
    Comments on the NOPR will be due 30 days following the technical 
conference announced herein. The Commission will announce the comment 
close date in a subsequent publication in the Federal Register.

ADDRESSES: You may submit comments, identified by docket number by any 
of the following methods:
    Agency Web Site: https://ferc.gov. Documents created electronically 
using word processing software should be filed in native applications 
or print-to-PDF format and not in a scanned format.
    Mail/Hand Delivery: Commenters unable to file comments 
electronically must mail or hand deliver an original and 14 copies of 
their comments to: Federal Energy Regulatory Commission, Secretary of 
the Commission, 888 First Street, NE., Washington, DC 20426.
    Instructions: For detailed instructions on submitting comments and 
additional information on the rulemaking process, see the Comment 
Procedures Section of this document.

FOR FURTHER INFORMATION CONTACT:

David Hunger (Technical Information), Office of Energy Policy and 
Innovation, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8148, david.hunger@ferc.gov.
Helen Dyson (Legal Information), Office of the General Counsel, Federal 
Energy Regulatory Commission, 888 First Street, NE., Washington, DC 
20426, (202) 502-8856, helen.dyson@ferc.gov.

SUPPLEMENTARY INFORMATION:

Supplemental Notice of Proposed Rulemaking and Notice of Technical 
Conference

Table of Contents

 
                                                               Paragraph
                                                                 Nos.
 
I. Background...............................................           2
II. Net Benefits............................................           4
    A. The March NOPR.......................................           4
    B. Comments.............................................           5
    C. Discussion...........................................           8
III. Cost Allocation........................................           9
    A. Comments.............................................           9
    B. Discussion...........................................          12
IV. Technical Conference....................................          13
V. Comment Procedures.......................................          19
VI. Document Availability...................................          23
 

    Issued August 2, 2010.
    1. In a Notice of Proposed Rulemaking (NOPR) issued in this 
proceeding on March 18, 2010 (March NOPR),\1\ the Commission proposed 
to require Independent System Operators (ISOs) and Regional 
Transmission Organizations (RTOs) \2\ with tariff provisions allowing 
demand response \3\ resources \4\ to participate in wholesale energy 
markets by reducing consumption of electricity from expected levels in 
response to price signals, to pay those demand response resources, in 
all hours, the market price of energy (also referred to as the 
``locational marginal price'' or ``LMP'') for such reductions. In light 
of matters elucidated in responsive comments to the March NOPR, the 
Commission seeks additional comments on whether the Commission should 
adopt requirements related to two issues: (1) If the Commission were to 
adopt a net benefits test for determining when to compensate demand 
response providers, what, if any, requirements should apply to the 
methods for

[[Page 47500]]

determining net benefits; and (2) what, if any, requirements should 
apply to how the costs of demand response are allocated. The Commission 
also directs staff to hold a technical conference on these issues no 
later than 45 days following publication of this notice in the Federal 
Register. The exact date of the technical conference will be provided 
in a subsequent notice.
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    \1\ Demand Response Compensation in Organized Wholesale Energy 
Markets, Notice of Proposed Rulemaking, 75 FR 15362 (March 29, 
2010), 130 FERC ] 61,213 (March 18, 2010).
    \2\ The following RTOs and ISOs have organized wholesale 
electricity markets: PJM Interconnection, L.L.C. (PJM); New York 
Independent System Operator, Inc. (NYISO); Midwest Independent 
Transmission System Operator, Inc. (Midwest ISO); ISO New England, 
Inc. (ISO-NE); California Independent System Operator Corp. (CAISO); 
and Southwest Power Pool, Inc. (SPP).
    \3\ Demand response means a reduction in the consumption of 
electric energy by customers from their expected consumption in 
response to an increase in the price of electric energy or to 
incentive payments designed to induce lower consumption of electric 
energy. 18 CFR 35.28(b)(4) (2010).
    \4\ Demand response resource means a resource capable of 
providing demand response. 18 CFR 35.28(b)(5) (2010).
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I. Background

    2. In the March NOPR, the Commission proposed to add section 
35.18(g)(1)(v) to its regulations to establish a specific compensation 
approach for demand response resources participating in organized 
wholesale energy markets, i.e., the day-ahead and real-time markets 
administered by ISOs and RTOs. Under the proposed section, each 
Commission-approved ISO and RTO that has a tariff provision providing 
for participation of demand response resources in its organized 
wholesale energy market would pay demand response resources, in all 
hours, the market price for energy, i.e., the LMP,\5\ for demand 
reductions made in response to price signals.\6\
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    \5\ LMP refers to the price calculated by the ISO or RTO at 
particular locations or electrical nodes within the ISO or RTO 
footprint and is used as the market price to compensate generators. 
There are variations in the way ISOs and RTOs calculate LMP; 
however, each method establishes the marginal value of resources in 
that market. Nothing here or in the March NOPR is intended to change 
ISO and RTO methods for calculating LMP.
    \6\ The proposed provision applies only to demand response 
acting as a resource in organized wholesale energy markets. The 
provision will not apply to demand response under programs that ISOs 
and RTOs administer for reliability or emergency conditions, such 
as, for instance, Midwest ISO's Emergency Demand Response; NYISO's 
Emergency Demand Response Program; PJM's Emergency Load Response; 
and ISO-NE's Real-Time 30-Minute Demand Response Program, Real-Time 
and 2-Hour Demand Response Program, and Real-Time Profiled Response 
Program. The provision also will not apply to compensation in 
ancillary services markets, which the Commission has addressed 
elsewhere. See, e.g., Wholesale Competition in Regions with 
Organized Electric Markets, Order No. 719, 73 FR 64100 (Oct. 28, 
2008), FERC Stats. & Regs. P 31,281 (2008) (Order No. 719).
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    3. Numerous comments were filed in response to the NOPR, many of 
which support the proposed demand response compensation level.\7\ 
However, other comments support payment of LMP only when the benefits 
of demand response compensation outweigh the costs of paying demand 
response resources, as determined by some type of net benefits test.\8\ 
Still other comments argue that, in order to determine the justness and 
reasonableness of the proposed compensation level, the corresponding 
cost allocation must be considered.\9\ More specifically, these 
comments raise concerns regarding how the costs associated with direct 
payment of LMP for demand response will be allocated, or assigned, 
within an ISO or RTO. Several commenters assert that the issues of cost 
allocation and net benefits are inherently linked, so that the 
Commission must address both issues together.\10\ Comments regarding 
net benefits and cost allocation issues are discussed below.
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    \7\ See Comments of Illinois Citizens Utility Board at 2; 
Comments of Industrial Energy Consumers of America at 3; Comments of 
National Energy Marketers Association at 3-4; Comments of National 
League of Cities; Comments of New Jersey Board of Public Utilities 
at 2; Comments of North America Power Partners at 4; Comments of 
Pennsylvania Department of Environmental Protection at 5; Comments 
of Price Responsive Load Coalition at 2; Comments of Schneider 
Electric USA at 2; Comments of Wal-Mart Stores, Inc. at 4; Comments 
of Virginia Committee for Fair Utility Rates at 7.
    \8\ See generally, Comments of New York State Consumer 
Protection Board; New England Consumer Advocates; Capital Power; 
Electric Power Supply Association (EPSA); Exelon Corporation 
(Exelon); PJM Power Providers Group; New England Conference of 
Public Utility Commissioners (NECPUC); Maryland Public Service 
Commission (Maryland Commission); New York State Public Service 
Commission (New York Commission); NSTAR Electric Company; National 
Grid USA (National Grid); PPL Parties; New England Public Systems; 
Viridity Energy, Inc.; and Charles Cicchetti.
    \9\ Comments of ISO-NE at 39-40. See also, Comments of American 
Electric Power Service Corp. at 6-10; Comments of CAISO at 6; 
Comments of Consolidated Edison Company at 2; Comments of Hess 
Corporation at 3; Comments of the Illinois Commerce Commission at 
12; Comments of PJM at 8; Comments of Potomac Economics at 3; 
Comments of Massachusetts Attorney General and Maine Public Advocate 
at 11; Comments of Midwest ISO Transmission Owners at 5-6; Comments 
of Midwest TDUs at 13; Comments of Edison Electric Institute at 5; 
Comments of NECPUC at 12, 22; Comments of New England Consumer 
Advocates at 11; Comments of RRI Energy, Inc. at 6; Comments of San 
Diego Gas & Electric Co. at 3-4.
    \10\ As further addressed below, several commenters assert that 
the costs of demand response compensation should be borne by only 
those market participants determined to have benefitted from the 
subject load reduction, as determined by some type of net benefits 
test. See, e.g., Comments of ISO-NE at 5-6; Comments of NECPUC at 
22; Comments of PJM at 12-14; Comments of PJM Power Providers Group 
at 37-38.
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II. Net Benefits

A. The March NOPR

    4. In the March NOPR, the Commission proposed to require ISOs and 
RTOs to pay LMP to demand response providers in all hours, but the 
Commission also sought comment on, among other things, whether payment 
of LMP should indeed apply in all hours and, if not, the criteria that 
should be used for establishing the hours when LMP should apply.\11\
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    \11\ March NOPR, 130 FERC ] 61,213 at P 20.
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B. Comments

    5. As noted above, numerous commenters, primarily industrial 
consumers and some consumer advocates, agree with the Commission's 
proposal to pay LMP to demand response providers in all hours.\12\ They 
argue that, regardless of the hour or season, all consumers share in 
the benefits demand response resources provide, including lowering the 
clearing price.\13\ They also argue that, regardless of the hour or 
season, both demand response providers and generators provide a 
comparable service in terms of balancing supply and demand and 
therefore should be paid on a comparable basis, i.e., LMP.\14\
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    \12\ See Comments of Steel Manufacturers Association at 12; 
Comments of Consumer Demand Response Initiative at 12; Comments of 
Joint Consumer Advocates at 11-12.
    \13\ Comments of Alliance for Clean Energy New York at 2-3; 
Comments of American Chemistry Council at 3; Comments of American 
Forest & Paper Association at 3; Comments of Crane & Co. at 2-3; 
Comments of Industrial Energy Consumers of America at 2; Comments of 
Industrial Energy Consumers of Pennsylvania at 3; Comments of 
Madison Paper Industries at 2-3.
    \14\ Comments of Steel Manufacturers Association at 12.
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    6. At the same time, a diverse group of commenters maintain that 
paying LMP for demand response in all hours, including off-peak hours, 
might not result in net benefits to customers, because the payments 
might be substantially more than the savings created by reducing the 
clearing price at that time.\15\ According to these commenters, net 
benefits are most likely to be positive and greatest when the supply 
curve is steepest, which typically occurs in highest-cost, peak 
hours.\16\ Some commenters suggest that paying LMP in all hours might 
make more difficult, and less accurate, the establishment of baselines 
for measuring whether a demand response provider has, in fact, 
responded.\17\
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    \15\ Comments of Capital Power Corporation at 5; Comments of PJM 
Power Providers Group at 5.
    \16\ Comments of NECPUC at 13.
    \17\ Comments of ISO-NE at 32-33; Comments of California 
Department of Water Resources at 11; Comments of National Grid USA 
at 8.
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    7. Many commenters who oppose paying LMP in all hours for demand 
response suggest approaches, or net benefits tests, for determining 
when LMP should apply. These commenters state that the purpose of these 
tests would be to determine the point at which the incremental payment 
for demand response equals the incremental benefit of the reduction in 
load; payment of LMP would apply only

[[Page 47501]]

up to that point.\18\ To achieve that end, some comments advocate a net 
benefits trigger based on a particular price or period of hours.\19\ 
While some proposals would utilize a static bid threshold, such as $75/
MWh,\20\ other proposals would utilize a dynamic bid threshold, which 
could be based upon fuel prices and heat rates of marginal 
generation.\21\ Still other commenters urge compensating demand 
response during an ISO- or RTO-defined period of critical high-cost 
hours in which it is cost-effective to pay the full LMP.\22\ In 
addition to advancing net benefits tests, some commenters suggest 
implementation of an ISO- or RTO-developed mechanism to determine 
whether a net customer benefit would occur in advance of dispatch.\23\ 
Some commenters, however, state that it would be difficult to prescribe 
by regulation the hours in which demand response provides net benefits 
because system conditions and load patterns change across seasons and 
over time.\24\
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    \18\ Comments of New England Consumer Advocates at 11; Comments 
of NYSCPB at 5; Comments of National Grid at 4-5.
    \19\ For example, National Grid states that the threshold could 
be triggered by a particular price on the supply offer curve at 
which the additional cost of paying LMP to demand response resources 
is most likely to be outweighed by LMP reductions in the wholesale 
energy market as a result of the demand reductions produced by these 
resources. Comments of National Grid at 6.
    \20\ Comments of the New York Commission at 10. According to the 
New York Commission, a static bid threshold helps prevent demand 
response providers from gaming the system by seeking compensation 
for reducing electricity consumption for reasons other than market 
prices, but can also limit participation in a demand response 
program because prices might not exceed the threshold on a 
consistent basis.
    \21\ Comments of National Grid at 6; Comments of the New York 
Commission at 10; Comments of Viridity at 24.
    \22\ Comments of the Maryland Commission at 4-5.
    \23\ Comments of NYSCPB at 5.
    \24\ Midwest ISO Transmission Owners at 16.
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C. Discussion

    8. Due to matters raised in responsive comments to the March NOPR, 
the Commission seeks further information regarding the net benefits 
issue. Accordingly, the Commission seeks additional comments and 
directs staff to hold a technical conference regarding various net 
benefits tests.\25\ Specifically, the Commission seeks comment on the 
following issues, as well as any other issues:
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    \25\ As noted above, the exact date of the technical conference 
will be provided in a subsequent notice and will be no later than 45 
days following publication of this notice in the Federal Register.
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    (1) Some commenters address the need for a net benefits test. 
Address why the Commission should adopt a net benefits test for 
determining demand response compensation, and what the objectives of 
any such test would be.
    (2) How to define benefits, including whether the benefits 
associated with demand response should account only for lower market-
clearing prices in the day-ahead and real-time markets or should also 
include consideration of operational benefits (e.g., lower reserve 
requirements), societal benefits or another measure.
    (3) In addition to the payments received from the wholesale market, 
what are the costs demand response providers and load serving entities 
incur and should these be included for purposes of a net benefits test.
    (4) How to identify the beneficiaries of demand response, and how 
the allocation of costs related to demand response compensation affect 
the beneficiaries, if at all.
    (5) Whether any net benefits methodology adopted should be the same 
for all ISOs and RTOs or whether the individual circumstances or 
configuration of each ISO and RTO would support a different net 
benefits methodology.
    (6) Proposed methodologies for implementing a net benefits test. 
Comments also should consider whether a net benefits threshold should 
be established up front based on static measures, such as a specific 
price or number of peak hours, or established on a dynamic basis, such 
as a price threshold based on a pre-set heat rate and daily updated 
fuel price; and similarly, whether the net benefits should be an 
explicit test run by the ISO or RTO either after bids have been 
received or each hour prior to accepting demand response bids. Comments 
should also describe the advantages and limitations of any proposed net 
benefits methodologies.

III. Cost Allocation

A. Comments

    9. Comments concerning cost allocation essentially ask how the 
proposed demand response compensation level will be funded.\26\ These 
commenters argue that, if not structured correctly, demand response 
compensation methodologies can increase, rather than decrease costs to 
end-users.\27\ Some commenters further contend that requiring payment 
of LMP for demand response will require ISOs and RTOs to reopen cost 
allocation issues that have previously been settled based on varying 
ISO- and RTO-specific demand response compensation levels.\28\ 
Additional commenters assert that demand response compensation and a 
method for allocating the associated costs are so inextricably entwined 
that the two issues must be simultaneously addressed as part of an 
integrated demand response regime.\29\
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    \26\ ISO-NE Comments at 5, 40; Comments of PJM at 8; Comments of 
Potomac Economics at 3.
    \27\ Comments of Massachusetts Attorney General and Maine Public 
Advocate at 11 (arguing that spreading the costs of demand response 
over a smaller amount of load is cost-effective only so long as the 
remaining load pays a lower price than it would have paid if the 
demand response had not participated).
    \28\ Comments of Midwest TDUs at 13.
    \29\ Id.; Comments of ISO-NE at 4-5; Comments of Edison Electric 
Institute (EEI) at 5; Comments of Charles Cicchetti at 26-27; 
Comments of CAISO at 6.
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    10. Another group of commenters endorse the position that demand 
response compensation and cost allocation are necessarily related, but 
they contend that resolution of cost allocation issues can await the 
final rule on demand response compensation. These commenters maintain 
that any cost allocation approach will depend on the outcome of the 
final demand response compensation rule \30\ and, in any case, should 
first be addressed through stakeholder discussions at the regional 
level.
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    \30\ Comments of New England Consumer Advocates at 11.
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    11. Several commenters advocate a specific approach or discuss the 
pros and cons of alternative approaches for allocating the costs 
associated with demand response compensation. Potential approaches 
raised in comments include:
    (1) Allocating the costs across the entire relevant ISO or RTO 
market, based upon the rationale that there are system-wide benefits to 
demand response, including reducing the market price for energy.\31\ 
Conversely, some commenters argue that, while this approach might 
increase the amount of demand response provided to the market, it might 
also result in some market participants paying costs associated with 
demand response for which they do not receive equivalent benefit.\32\
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    \31\ See Comments of NECPUC at 22.
    \32\ Comments of Midwest ISO Transmission Owners at 5.
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    (2) Allocating the costs to only the load-serving entity of record, 
i.e., the load-serving entity that would have served the load providing 
the demand response. According to commenters, this option assumes that 
the deemed full benefit of demand response is only received by the 
load-serving entity of record and that demand response does

[[Page 47502]]

not impact other load-serving entities across the ISO or RTO.\33\
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    \33\ Comments of PJM at 15.
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    (3) Uplifting the costs locally to all load-serving entities within 
the zone impacted by the demand response reduction, based on a load 
ratio share. Commenters assert that this approach theoretically 
allocates the cost of demand response compensation to only those load-
serving entities that benefitted from the demand response provided.\34\
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    \34\ Comments of PJM at 14; Comments of NECPUC at 22; Comments 
of Midwest ISO Transmission Owners at 6.
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    (4) Recovering the costs through a surcharge added to the LMP for 
customers purchasing from the relevant energy market in the hour when 
the demand response resource is committed or dispatched. The rationale 
for this approach is that it allocates the costs of demand response 
resource procurement on the basis of cost-causation, i.e., demand 
response resource costs are allocated directly to those energy market 
consumers who benefitted from the demand response resource provided. To 
implement this proposal, an adjustment to the market price paid by 
customers would be calculated.\35\
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    \35\ Comments of NECPUC at 22, 23.
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    (5) Utilizing a hybrid approach, in a manner intended to minimize 
cost impacts on final customers.\36\ Hybrid approaches include 
splitting the costs between load-serving entities and transmission 
owners,\37\ and allocating part of the costs to the demand response 
provider's load-serving entity and part to all of the load-serving 
entities in the zone where the load reduction occurred, based on a load 
ratio share.\38\
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    \36\ Comments of ISO-NE at 40.
    \37\ ISO-NE suggests charging the difference between LMP and the 
generation (or ``G'') portion of the retail rate (i.e., LMP-G) to 
the load-serving entity that is providing the energy, and charging 
the remainder (i.e., ``G'') to network load, which would be billed 
to transmission owners. Comments of ISO-NE at 5.
    \38\ As described by PJM, the ``[load-serving entity] of record 
will receive a direct allocation of direct payments made for the 
demand response MWh reduction multiplied by the difference between 
the appropriate wholesale market price and the retail rate, and the 
cost associated with the MWh reduction multiplied by the retail rate 
allocated to all [load-serving entities] in the zone where the load 
reduction occurred based on a load ratio share.'' Comments of PJM at 
10.
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B. Discussion

    12. From the comments received, issues concerning cost allocation 
may be integrally related to the proposal relating to demand response 
compensation, and we believe such issues should be explored further. In 
addition, the diversity of comments relating to cost allocation leave 
open the question of whether a singular cost allocation approach should 
be determined by the Commission for all ISOs and RTOs or whether 
differing cost allocation approaches should be developed regionally and 
reviewed by the Commission on an ISO- and RTO-specific basis. 
Accordingly, the Commission seeks additional comments on whether the 
Commission should consider a generic approach to allocating the costs 
of demand response compensation required by the final rule in this 
proceeding, and if so, what approach the Commission should adopt. Such 
issues also will be explored at the staff technical conference. 
Specifically, the Commission seeks comment on the following issues, as 
well as any other issues:
    (1) Whether standardizing demand response compensation among ISOs 
and RTOs requires simultaneous standardization of a method for 
allocating the costs associated with such compensation. In addition, 
whether standardizing demand response compensation among ISOs and RTOs 
requires consideration of corresponding settlements and other impacts 
associated with the compensation mechanism.
    (2) If the Commission standardizes an approach for allocating the 
costs associated with requiring payment for demand response, what type 
of approach is appropriate. Comments should address the specific 
approaches delineated above, and may address other broad principles the 
Commission could use to determine the cost allocation method.
    (3) How the use of a net benefits test would affect the need for 
and methodologies for determining cost allocation.

IV. Technical Conference

    13. The exact date of the Commission staff technical conference 
directed herein will be provided in a subsequent notice and will be no 
later than 45 days following publication of this notice in the Federal 
Register. The conference will be held in the Commission Meeting Room at 
the Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426. All interested persons are invited to participate 
in the conference.
    14. Those interested in speaking at the conference should notify 
the Commission by August 10, 2010 by completing an online form 
describing the topics that they will address: https://www.ferc.gov/whats-new/registration/demand-RM10-17-000-speaker-form.asp. Due to 
time constraints, we may not be able to accommodate all individuals 
interested in speaking, so multiple persons sharing the same position 
are encouraged to have one representative speak on their behalf. A 
detailed agenda, including panel speakers, will be published at a later 
date.
    15. The technical conference will be transcribed. Transcripts of 
the conference will be immediately available for a fee from Ace-Federal 
Reporters, Inc. ((202) 347-3700 or 1-800-336-6646). The transcript will 
be available for free on the Commission's eLibrary system and on the 
Calendar of Events approximately one week after the conference.
    16. A free webcast of the technical conference directed herein will 
be available. Anyone with Internet access interested in viewing this 
conference can do so by navigating to https://www.ferc.gov's Calendar of 
Events and locating the appropriate event in the Calendar. The events 
will contain a link to the applicable webcast option. The Capitol 
Connection provides technical support for the webcasts and offers the 
option of listening to the conferences via phone-bridge for a fee. If 
you have any questions, visit https://www.CapitolConnection.org or call 
(703) 993-3100.
    17. There is an ``eSubscription'' link on the Web site that enables 
subscribers to receive email notification when a document is added to a 
subscribed docket(s). For assistance with any FERC Online service, 
please e-mail FERCOnlineSupport@ferc.gov, or call (866) 208-3676 (toll 
free). For TTY, call 202 502-8659.
    18. Commission conferences are accessible under section 508 of the 
Rehabilitation Act of 1973. For accessibility accommodations, please 
send an e-mail to accessibility@ferc.gov or call toll free (866) 208-
3372 (voice) or (202) 208-1659 (TTY), or send a FAX to (202) 208-2106 
with the required accommodations.

V. Comment Procedures

    19. The Commission invites interested persons to submit comments on 
the matters and issues proposed in this notice to be adopted, including 
any related matters or alternative proposals that commenters may wish 
to discuss. Comments are due 30 days following the technical conference 
announced above. Comments must refer to Docket No. RM10-17-000, and 
must include the commenter's name, the organization the commenter 
represents, if applicable, and the commenter's address.
    20. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's

[[Page 47503]]

Web site at https://www.ferc.gov. The Commission accepts most standard 
word processing formats. Documents created electronically using word 
processing software should be filed in native applications or print-to-
PDF format and not in a scanned format. Commenters filing 
electronically do not need to make a paper filing.
    21. Commenters that are not able to file comments electronically 
must send an original and 14 copies of their comments to: Federal 
Energy Regulatory Commission, Secretary of the Commission, 888 First 
Street, NE., Washington, DC 20426.
    22. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

VI. Document Availability

    23. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through FERC's Home Page (https://www.ferc.gov) and in FERC's 
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
    24. From FERC's Home Page on the Internet, this information is 
available on eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number excluding the last three digits of this document in the docket 
number field.
    25. User assistance is available for eLibrary and the FERC's 
website during normal business hours from FERC Online Support at (202) 
502-6652 (toll free at 1-866-208-3676) or e-mail at 
ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. E-mail the Public Reference Room at 
public.referenceroom@ferc.gov.

List of Subjects in 18 CFR Part 35

    Electric power rates, Electric utilities, Reporting and 
recordkeeping requirements.

    By direction of the Commission. Commissioner Moeller is 
concurring, in part and dissenting, in part with a separate 
statement attached.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

MOELLER, Commissioner, concurring, in part and dissenting, in part:

    While I support the decision to supplement the record and convene a 
technical conference, for the reasons set forth in my concurring and 
dissenting statement on the NOPR that initiated this proceeding on 
March 18, I continue to concur and dissent, in part.

Philip D. Moeller,
Commissioner.
[FR Doc. 2010-19376 Filed 8-5-10; 8:45 am]
BILLING CODE 6717-01-P
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