Connecting Wholesale and Retail Pricing: A Look at Required Policy and Market Design Decisions
Dana Point, California
7 March 2013
Hosted By: the Harvard Electricity Policy Group (HEPG)
The architects of wholesale energy markets in the US and elsewhere envisioned that signals generated in those markets would be passed onto end users in a timely manner through retail prices. For a variety of reasons this has not been the case. On 7 March 2013, to examine the implications on the progress of wholesale market designs moving forward, the Harvard Electricity Policy Group hosted a panel of demand response experts for a discussion on "Wholesale/Retail Pricing: Can the Disconnected Realities Be Bridged?" As part of the panel, NERA Senior Consultant Amparo Nieto discussed the key conditions that need to exist to enable straightforward, market-based price incentives via an effective price responsive demand (PRD). Ms. Nieto argued that PRD, as enabled by smart meters, can bring back the missing value of scarce capacity at times of system constraints to the energy markets, but PRD will only attract enough interest if the right measures are taken to acknowledge the impact of PRD at the ISO level. She also pointed out that meaningful progress of PRD will require state regulatory commissions to embrace dynamic rates for default service for small commercial and residential customers, not just for the largest customers. In addition to the expert presentations, the panel also featured a Q&A session between the panel and the audience.
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