1. Demand Response in New York State Northwest Power and Conservation Council DR workshop February 24, 2006

2. New York and Neighbors * = Peak Load in Megawatts IMO 25,414 MW* Hydro Quebec 35,137 MW* ISO - New England 25,348 MW* New York ISO 30,983 MW* PJM / PJM West 63,762 MW*

3. The NY Marketplace Deregulated since late 90’s Nearly all generators are owned by IPPs NYISO administers capacity and energy markets Energy is bought and sold on a day ahead basis at zonal hourly prices (LMP) The highest priced bids accepted in a zone for each hour set the price

4. Bilaterals 50% Real Time <5% NYISO Day-Ahead Market 45 – 50% Bilateral Contracts 50% Day-Ahead Market45 - 50% Real-Time Market <5% 100% New York’s Energy Market

5. New York’s Capacity Market Load Serving Entities must procure 118% of the load they serve – This covers the reserve margin of 18% Capacity beyond that is assigned a decreasing value as supply becomes more abundant This value is set by a demand curve and funded through uplift (socialized)

7. The value of DR DR provides the same benefit to the system as generators, so should be given the same value This holds true for both capacity and energy DR acts like a peaking plant, and should be valued as such for both capacity and energy (peaking plants typically only run when energy is expensive)

8. DR Program Options Capacity Based –Could be combined with energy based program –Could be called either for reliability or when DR is more economic than generated electricity –Performance should be mandatory to justify capacity payments Energy Based –Can be voluntary if capacity is not valued –Could be called either for reliability or when DR is more economic than generated electricity –If scheduled economically, performance should be mandatory

9. New York’s Capacity Program NY has a capacity based program where DR is bid into the same capacity market as generators Resources are paid LMP for energy (not less than $500/MWh) DR is penalized for underperformance as a generator would be Resources are called for grid reliability, not price mitigation

10. New York’s Emergency DR Program (Energy Based) Resources are paid LMP for energy (not less than $500/MWh) Resources are called for grid reliability, not price mitigation Response is voluntary Participants are often in this program to be good citizens rather than for the money

11. New York’s Day Ahead DR Bidding Program DR bids an energy price at which they are willing to load-shed Bids are entered in competition with generators If DR bids are less than the market clearing price, they are selected to run and receive the clearing price, just as a generator would This provides the market with the option of choosing DR instead of generators when DR is more cost effective

12. DR – Safety Net or Market Efficiency? Both – DR can serve as a safety net to avoid brownouts or blackouts, but… Why schedule a generator at $300/MWh if DR will provide a like resource for $200/MWh? DR could be integrated into the market to compete with generators on both a capacity and energy basis for either emergency or economic dispatch

13. The System Benefit In addition to the reliability benefit, DR can result in ratepayer savings If DR is more cost effective than the more expensive generators, rate payers pay less DR empowers end users to act like a resource, giving them market power DR is more than just an “insurance policy”, it’s an alternative to generation and can delay T&D upgrades

14. Questions/Comments? Chris Smith NYSERDA 518-862-1090 ext. 3360