Extending Demand Response to the Natural Gas Industry

01 March 2019
Dr. Laura T. W. Olive

In the Winter 2019 issue of the Energy & Environment Litigation Journal, NERA Senior Consultant Dr. Laura T. W. Olive explores demand response for natural gas that considers the usefulness of prices that better reflect the forward-looking costs of investing in infrastructure to meet winter peak months. Such price signals may incentivize customers to reduce peak consumption, 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.