Reliability in the Midwest: Banning Resources that Keep the Lights On
It’s time to unlock the full potential of demand response to create an affordable, sustainable, and reliable modern grid.
Friends of Demand Response,
If you are participating in Pennsylvania’s Act 129 Demand Response program (available to Duquesne, Met-Ed, PECO, Penelec, Penn Power, PPL, and West Penn Power customers), you may be asked by your Curtailment Service Provider (CSP) to sign what is known as an “Add Back Attestation” document. Signing this document would NOT be in your best economic interest and we want to explain why.
Background: The Act 129 program that you participated in this past summer offered a great benefit to the grid – in fact, these utilities utilized this program precisely to help alleviate peak grid demand during hot summer days. It’s not surprising, then, that these dispatches happened to coincide with the PJM grid operator’s “Peak Load Contribution” (PLC) hours. A given hour becomes a PLC hour when it was one of the five highest peaks the PJM grid reached from June 1 – September 30. Your contribution to PJM’s peak (which is called your PLC) is measured by your average electric demand during these hours. Your PLC costs typically represent about 30% of your annual energy costs.
The “Add- Back Ask”: By submitting the attestation form you would be electing to have the load reduction you demonstrated during Act 129 events added back (or “reconstituted”) to your individual facility’s PLC calculation, unnecessarily increasing your annual capacity-related costs. Reconstituting your PLC benefits the CSP serving you in the PJM demand response program. This is because your participation is capped by your PLC value – if you have a lower PLC you have lower potential to earn through in-market demand response with PJM. CSPs like this option because they get a share of your program earnings, whereas they would not be able to reap the benefits of your reduced PLC – 100% of that benefit goes to your business’s bottom line. In fact, the only scenario we can think of where a customer might financially benefit from the add-back is if that customer is on a flat electricity supply rate that includes all capacity costs. If this is you come talk to us – we recommend that you switch to a rate that does expose you to demand charges and then work to reduce those charges through Act 129 and other peak reduction methods.
In short, we advise that you do NOT sign this document – for every MW of Act 129 participation you’d be foregoing approximately $100,000 in future savings. Instead, enjoy the additional savings that your Act 129 program participation has brought you– there’s no need to share it with anyone (including us!) You’ve earned it through your efforts this past summer – for which we thank you. If you have any questions, feel free to contact me directly.
Gregg Dixon – Chief Executive Officer