In a companion to the article published in the Winter 2019 edition of Energy & Environment Litigation Journal titled “Extending Demand Response to the Natural Gas Industry,” NERA Senior Consultant Dr. Laura T. W. Olive takes an in-depth look into demand response for natural gas. Dr. Olive considers the usefulness of prices that better reflect the forward-looking costs of investing in infrastructure to meet winter peak months, finding that such price signals may incentivize customers to reduce peak consumption, thereby leading to less infrastructure investment and fossil fuel use. Thus far, only electricity markets have utilized demand response programs on a large scale. Dr. Olive contrasts demand response actions and relevant peaks in electricity and gas and describes a novel form of marginal cost pricing to modify rate design.
Dr. Olive concludes that clear signals to consumers about the costs of consuming gas during peak winter months can help reduce reliance on fossil fuels. Building demand response programs into the gas market is a useful pursuit with low regulatory costs.