In the article “Expanding the Toolbox: How to Use Demand Response to Increase Grid Reliability”, Power Engineering, a global consulting company for engineering, takes a deeper look at some states who have implemented “innovative regulatory mechanisms to incentivize utilities to help customers better manage their energy."
After Michigan recognized the savings achieved by energy waste reduction after the 2008 regulation, the state started allowing utilities to retain the ability to earn their current incentive as long as they retain a 1% reduction in retail sales each year. This new law gives flexibility to the Michigan Public Service Commission to develop an alternative methodology for decoupling and/or other incentives should the commission determine that current methods are insufficient to ensure energy efficiency and demand response are not "disfavored compared to utility supply-side investments."
By combining efficiency, demand response and advanced metering, Maryland created one of the most successful cost-recovery mechanisms for energy efficiency in the country. Operating expenses and demand response were converted into capital expenditures that are able to earn a full authorized return amortized over five year.
“This arrangement in Maryland has not only created significant return on investment for utilities, but it has boosted customer satisfaction scores. As recently as 2008, its JD Power scores were near the bottom, but have since reached the top quartile”.
Utah Legislature passed the Sustainable Transportation and Energy Plan Act, also known as Bill 115. This bill allows electric company Rocky Mountain Power “to capitalize the annual cost incurred for demand-side management" and to "amortize the annual cost for demand side management over a period of 10 years." SB 115 makes energy efficiency programs a 10-year regulatory asset. With this law, Rocky Mountain Power can recover the cost of aging power plant, retire it early, and replace it with an energy efficiency asset, making for cleaner air at lowers cost for consumers.
Along with other energy efficiency programs, Demand Response continue to ensure that utilities will be able to provide safe, reliable, and affordable energy through distributed a structured network model rather than a central plant model.
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Content Credit: Power Engineering