FERC Cites NERA Special Consultant Dr. Alfred Kahn in Proposed Electric Demand Response Rulemaking
14 April 2010
New York -- Dr. Alfred Kahn, a NERA Economic Consulting Special Consultant, was cited in a recent Federal Energy Regulatory Commission (FERC) proposed rulemaking related to compensation for reductions in electricity consumption.
Dr. Kahn, with the assistance of NERA staff, filed an affidavit in an earlier FERC tariff proceeding addressing the issue of the proper price for demand side resources in competitive electricity markets. Rather than decide that case, the FERC determined that there should be uniformity in the pricing schemes across US power markets and chose to develop a rule to address the issue. In its proposed rulemaking, the FERC agrees with and essentially adopts Dr. Kahn's position from the earlier case as the proposed rule.
The FERC agrees with Dr. Kahn's view that because consuming one megawatt less of electricity has the same market impact as generating one megawatt more, "providers" of reduced consumption should be compensated at the same market rates as providers of electricity. The rule would require regional transmission operators and independent system operators to pay such demand response providers the market price for electricity for reducing consumption below what would normally be expected.
"Fred Kahn's thinking has had a tremendous impact in energy industry regulation for decades," said Mike King, Chair of NERA's Global Energy, Environment, and Network Industries Practice. "We are pleased that regulators continue to take Fred's wise counsel into account when they tackle thorny issues like regulatory treatment of 'negawatts'."
Dr. Kahn has been affiliated with NERA for almost 50 years, and is also the Robert Julius Thorne Professor of Political Economy, Emeritus, at Cornell University. He has been a key influence on the regulation and deregulation of several industries, including energy, airlines, and telecommunications.
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