ComEd Rolls out CLR
What’s Best for You?
With January of each new year comes the roll out of ComEd’s demand response program – Rider CLR. Although the basic structure is the same as previous years, there are some changes that may cause one to consider other demand response options. The big changes in ComEd’s program are the magnitude of the payout, the enforcement of penalties and the timing of enrollment in their program.
The demand response programs all originate with PJM – our RTO (Regional Transmission Organization) if you are behind ComEd. PJM determines the rules by which they conduct the capacity auction (that determines the value of the payout for demand response programs), along with the length and duration of curtailment periods. Service providers for PJM’s curtailment programs are called CSP (Curtailment Service Providers). The basic idea behind demand response programs is that PJM will pay CSPs who can aggregate electricity customers that will act in unison to curtail usage, thereby insuring integrity of the transmission system during times of stress. The financial payout from PJM is basically equivalent to the amount each customer is charged per unit cost of capacity. The curtailment season runs from June 1st to September 30th each year.
There are two basic programs that are offered by all CSPs (CSPs include third parties and ComEd): Guaranteed Load Drop (GLD); and Firm Service Level (FSL). For the GLD program the customer agrees to reduce demand for a predetermined quantity. The basis used for the calculation datum is the average of the five preceding business days. For the FSL program the customer commits to not exceeding a demand quantity during the curtailment period.
CSP Program Differences
There are three distinct differences between ComEd’s demand response programs and those typically offered by third party CSPs:
Curtailment Hours – ComEd’s programs have an eight-hour curtailment duration and they have more possible curtailments per season (up to 15 curtailments per year). Total possible curtailment hours are 120 per season. ComEd’s programs are designed to not only support the RTO system, but also maintain the integrity of ComEd’s distribution system, hence more possible curtailment hours. PJM requires a maximum of 10 curtailments per season with a maximum duration of six hours. Total possible curtailment hours are 60 per season (half of ComEd’s)
Penalties – Prior to the current year, PJM had no penalty provisions for non-performing entities. As a result, many customers who had no intention of complying signed up for demand response programs, thereby getting a nice, undeserved payout. Although ComEd formalized a penalty structure, they didn’t levy any penalties this past curtailment season as the group as a whole performed adequately. This year, independent of the group’s performance, ComEd will be levying penalties on non-performing entities. Third party CSPs have a wide variation in programs that range from insulating the customer from all penalties to those that are pretty punitive.
Payout – In return for longer curtailment hours along with the risk of stiff penalties, ComEd offers the highest payout. It is 100% of the payment received from PJM. Other CSPs offer a range of percentages of PJM’s payment starting with 50% or so. This coming curtailment season (i.e., June 1, 2010 – September 30, 2011) the payout from PJM will be approximately $40/kW or $40,000/mW of demonstrated demand response.
There are some other differences beyond the three major ones cited above. Third party CSPs will typically provide hardware and software that will assist the customer in achieving their highest level of performance. With some third parties assuming full risk for non-performance, it is in their best interest that their customers perform to the highest level possible. Also, the accounting for installed equipment varies among CSPs. Some pay for everything out of their share of the payment, while others pay for the investment before anything is shared with the customer.
Making a Decision
If you have the ability to shed load, shut down operations or start a generator when requested, then you should consider joining a demand response program. What actions you can reasonably take and the cost to your operations of taking said actions, will determine whether you sign up with ComEd for their high payout, punitive program or chose a third party CSP’s program.
If you can shut down your facility (and there isn’t a huge cost to your operation for stopping production) or you can start up a generator (that you can depend on starting when needed), then ComEd’s program should be seriously considered. Even though you believe you can perform 100% of the time at the committed level, you should fully understand the penalty structure. It will be worth the time invested.
On the other hand, if you think you can curtail load some of the time and/or you aren’t sure how much you could curtail on any particular day, you should consider a third party CSP. The less sure you are in being able to curtail, the more you want to be insulated from penalties and the more help you’d want in performing. Shopping around to see what some of the major CSPs have to offer would be wise.
This year ComEd has extended the open enrollment window through March 10th. In past years, the program closed almost as soon as it opened (typically there was a four-week window in which to act). Some third party CSPs will take customers through late spring. Take advantage of the additional time allotted while all options are available for making a decision. Start working on it today.
Mideast Unrest and Your Utility Budget
With political change sweeping the Arab world, you might be wondering what effect this may have on your utility budget. It’s obvious that things are going to change in Tunisia and Egypt, the most populous country in the Middle East, but at this time no one knows how things are going to turn out. Will President Mubarak be able hang on to power, thereby providing stability to energy markets? Or will the protestors prevail in overthrowing his dictatorship? What would a new Egypt look like?
The majority of OPEC’s oil comes from the Persian Gulf. Most countries in the Gulf with significant oil production manage to keep political opposition in check very effectively. With the forces for change spreading to Jordan and Syria, could the Gulf nations be far behind? The price of crude is nudging $100/bbl. Will other energy commodities be caught in the upward flow?
While there isn’t a 1:1 correspondence between crude prices and the price of gas and electricity, there is a substantial correlation. It may make sense to re-evaluate your current futures position in light of recent political unrest.