Paying for Demand-Side Response at the Wholesale Level
By Jonathan Falk
This article from The Electricity Journal, by NERA Vice President Jonathan Falk, examines the Federal Energy Regulatory Commission's controversial Notice of Proposed Rulemaking on the "just and reasonable" payment in FERC-regulated wholesale markets to consumers who offer to cut back their power purchases to reduce demand on costly electric generating capacity. On one side are those who want to pay the marginal costs saved, while on the other side are those who would pay less -- sometimes much less. Mr. Falk, elaborating on testimony filed before FERC by NERA Special Consultant Dr. Alfred Kahn earlier this year, critically assesses the arguments for paying less and finds them both short on substance and highly impractical.
