Portable Entitlements: Unlikely to Resolve Transition Dilemma

15 November 2004
Dr. Hethie Parmesano

In a Letter to the Editor published in the November 2004 issue of The Electricity Journal titled "Portable Entitlements: Unlikely to Resolve Transition Dilemma," NERA Special Consultant Dr. Hethie Parmesano responds to a recent article published by Federal Energy Regulatory Commission staffers Richard P. O'Neill and Marsh Gransee. In their article, "Supporting Retail Choice and Resource Adequacy Under Wholesale Market Choice: A Portable Entitlements Program," the authors point out the importance of an active demand side in competitive wholesale electricity markets and suggest a "portable entitlements program" as a way to satisfy resource adequacy and allow for a smooth transition to retail choice.

Dr. Parmesano agrees with the authors that demand response is a critical component of a competitive wholesale market. However, she disagrees with their characterization of what is required to achieve demand response and also with the workability of their portable entitlements program. Dr. Parmesano maintains that the portable entitlements program seems unlikely to smooth the transition to retail competition, promote customer switching, ensure resource adequacy, or improve demand response.