1. 1 Demand Response A 28 Year History of Demand Response Programs for the Electric Cooperatives of Arkansas by Forest Kessinger Manager, Rates and Forecasting

2. 2 Why do Utilities / Consumers Engage in Demand Response? 1.To gain an economic advantage in their bill. 2.To avoid a short-term capacity shortage. 3.To avoid a long-term capacity investment. Thought - In the long-run, if your pricing signal (rate) encourages demand response, objective number 3 is met through a reaction to that pricing signal.

3. 3 Currently, AR Cooperatives have Approximately 730 MWs of Demand Response - This is Achieved by: 1.Direct control by the member cooperatives. 2.Voluntary control by a retail consumer using cooperative supplied instantaneous and hourly load data. 3.Direct control of industrial loads by AECC. 4.Voltage Reduction during peak periods.

4. 4 Arkansas Co-op. Demand Response Quantified Controlled by Member Cooperatives 107 MW Voluntary Retail Peak Avoidance 80 MW Controlled by AECC 550 MW Total Demand Response ≈ 737 MW

5. 5 Firm Load 73% Load Controlled by AECC 20% C&I Voluntary Control 3% Load Controlled by Member Cooperatives 4% Note: AECC’s 2006 firm load = 1,971 MW

6. 6 How did Demand Response Begin for the Electric Cooperatives?

7. 7 Category # 1 Direct Load Control by the Member Cooperative “It is all economics…”

8. 8 Time-based Metering In 1978, Arkansas Electric Cooperative Corporation (“AECC”) installed wholesale metering which recorded hourly kW demand by wholesale point of delivery. This hourly data could be processed into simultaneous hourly coincident totals for wholesale points of delivery for each member cooperative.

9. 9 Coincident Peak Rate Design Further, AECC’s Board of Directors approved a wholesale rate design which included billing demands based on the member cooperative’s contribution to AECC’s simultaneous summer peak(s). Billing demands established during the peak(s) were charged until the new peak(s) was set the following summer.

10. 10 Cost-of-Service Cost Allocation Methodology At the same time, AECC’s Board of Directors adopted a cost of service approach which placed its fixed costs in the demand charge while variable costs flowed through the energy charge and fuel adder.

11. 11 By 1985, AECC’s Wholesale Rates were as Follows: Demand Charge$ 12.14 / kW / month Energy Charge$ 0.0199 per kWh

12. 12 The Short-term Reward for Control Needless to say, the reward for controlling peak was great. If there was potential for a member cooperative to control its annual peak, a load control system might economically be justified. The reward to the member cooperative was a reduced demand billing for the following year.

13. 13 The Long-term Reward for Control The long-term reward for controlling peaks is also great. All (even those who do not have demand response capabilities) benefit through AECC’s ability to avoid building future peaking plants.

14. 14 Early Target Loads for Demand Response 1.Irrigation Water Pumping: (a)row crop, (b)field flooding (rice), and (c)catfish farming 2.Residential: (a)air-conditioning, and (b)water heating

15. 15 Means of Control The member cooperatives control ≈ 107 MW of peak demand using approximately 40,000 radio control switches. Twelve of Arkansas’ seventeen member cooperatives currently engage in direct load control.

16. 16 Reported Member Load Control 1979 1,962kW under Control 1985 58,869 1995 153,217 2000 159,285 2004 147,706 All numbers represent reported installed control. Achieved control will always be less.

17. 17 Estimated Achieved Load Control by Cooperative Craighead 4,382kWMississippi 10,817kW First 17,235Ozarks - Farmers 2,977North AR 9,219 Southwest -Ouachita - AR Valley -Petit Jean 2,946 Woodruff 47,490So. Central 2,838 Carroll 3,846Ashley-Chicot 4,431 C&L 2,254Rich Mt. - Clay 1,659 Total ≈ 107,117kW

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23. 23 Category # 2 Retail Voluntary Load Control In the 1990’s, member cooperatives began offering C&I retail members rate designs that mirrored AECC’s wholesale firm rate. If the retail member avoided AECC’s peak, then the member cooperative passed along its wholesale savings to the retail consumer.

24. 24 Requirements A communications system that allows the retail consumer instantaneous load data so that the consumer might evaluate potential peak periods. Time based retail hourly metering so that the distribution cooperative can confirm that the retail consumer actually avoided AECC’s billing peaks.

25. 25 Participation Currently, at least ten member cooperatives offer some type of voluntary peak avoidance rate to their retail C&I consumers. There are probably in excess of 29 C&I consumers taking advantage of voluntary peak avoidance rates. AECC believes that voluntary control provides at least 80 MW of peak avoidance.

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28. 28 Category # 3 Loads Controlled by AECC 1.The retail member must be 5 MW or larger. 2.AECC places the load within an assigned block. 3.The retail load has three hour’s notice of interruption. 4.½ of the hours may be interrupted for any reason. * 5.½ of the hours may be interrupted only to avoid the interruption of firm load (for capacity shortage). * 6.The member cooperative implements AECC’s IC Rider with a retail tariff or special rate contract. * Note: Interruptions for any reason will not begin until 1 Jan 2008.

29. 29 Load Limit Maximum Annual Interruption Block - 12674,001 kW to 714,000 kW 1,200 hours Block - 11574,001 kW to 674,000 kW 993 hours Block - 10529,001 kW to 574,000 kW 933 hours Block - 9489,001 kW to 529,000 kW 804 hours Block - 8444,001 kW to 489,000 kW 724 hours Block - 7409,001 kW to 444,000 kW 633 hours Block - 6369,001 kW to 409,000 kW 555 hours Block - 5329,001 kW to 369,000 kW 481 hours Block - 4289,001 kW to 329,000 kW 408 hours Block - 3249,001 kW to 289,000 kW 340 hours Block - 2209,001 kW to 249,000 kW 274 hours Block - 1 0 kW to 209,000 kW 200 hours Interruptible Load Blocks

30. 30 Supplemental Service / Buy-through While AECC may interrupt a load served under the IC Rider, AECC and the member cooperative will, if available, offer supplemental service to prevent the interruptible load from physically being interrupted.

31. 31 Supplemental Service / Buy-through - Continued - When available from the market, AECC will offer interruptible supplemental service * to member cooperative for their interruptible retail members. Supplemental service is offered at an incremental market price plus a small adder. The retail member may accept or decline the supplemental offer. Interruptions for fuel economics, when combined with supplemental service, also introduces an element of “critical time pricing”. Note:Interruptible supplemental service has a five minutes interruption notice.

32. 32 Category # 4 Voltage Reduction Currently, Southwest Arkansas Electric Cooperative Corporation is using a voltage reduction measure to reduce their peak(s) by approximately one MW. When Southwest’s voltage reduction measures are fully implemented, Southwest estimates that they will reduce their peak(s) by as much as 5 MW.

33. 33 Issues to Consider 1.Don’t allow the interruptible rate or interruptible credit to overcompensate the member cooperative or retail member for peak avoidance. 2.It is best to interrupt your interruptible loads.

34. 34 AR Public Service Commission Docket No. 06-004-R Energy Efficiency One of the goals of the EERs is “Permanent Peak Demand Reduction”.

35. 35 Questions ?