1. Demand Response as Capacity in New York National Association of Regulatory Utility Commissioners Winter Committee Meetings Washington, DC February 17, 2008 David J. Lawrence Manager, Auxiliary Market Products New York Independent System Operator

2. 2 Topics Covered  How the NYISO Capacity Market recognizes demand response  Historic demand response registration, performance  Current issues impacting demand response in the NYISO Capacity Market

3. 3 Demand Response Program Overview The NYISO operates two reliability-directed demand response programs:  The Emergency Demand Response Program (EDRP):  resources paid the greater of $500/MWh or the prevailing LBMP for curtailments  no consequences for enrolled participants that fail to curtail  minimum 100 kW requirement – can aggregate resources  The Installed Capacity Special Case Resources Program (SCR):  certified resources can offer unforced capacity (UCAP) to Load Serving Entities (LSEs).  resources are obligated to curtail when called upon to do so with two or more hour’s notice, provided that they were notified on the day prior  resources are subject to testing to verify that they can fulfill their curtailment requirement.  failure to curtail could result in penalties administered under the ICAP program. Participants register either for EDRP or ICAP/SCR but not both.

4. 4 TDRP The Targeted Demand Response Program  Effective July 1 st, 2007  Allows for activation of ICAP/SCR and EDRP resources in select locations within zone J (NYC)  Voluntary Response – No Penalties for Non-Performance  Normal Payments for Reduction  Cannot set real-time market price

5. 5 Registered MW by Program In 2003, EDRP and SCR/ICAP registration became mutually exclusive

6. 6 Demand Response Registration

7. 7 Actual Performance History

8. 8 Current Issues Impacting Demand Response  Forward Capacity Market design effort  Stakeholder process underway  Need to factor in demand response as an element of the forward market supply, while recognizing that some forms of demand response are best acquired in spot market capacity auctions  Potential NY environmental restrictions on behind-the-fence generation

9. 9 Standards Development  Market designs may have evolved differently in the various regions of the country, but they all deal with similar concerns when looking to incorporate demand response.  How is reliability maintained? How is the response measured? How do we communicate with demand response?  Standards development will allow the markets to build upon the successes of each other. Standards development will allow service providers to more quickly and efficiently enter markets and grow participation.  Standards creation efforts occurring at NAESB (North American Energy Standards Board) and at ISO/RTO Council (IRC)

10. The New York Independent System Operator (NYISO) is a not-for-profit corporation that began operations in 1999. The NYISO operates New York’s bulk electricity grid, administers the state’s wholesale electricity markets, and performs comprehensive reliability planning for state’s bulk electricity system. __________________________________________________________www.nyiso.com