Demand response is a resource that allows end-use electric customers to reduce their electricity usage in a given time period, or shift that usage to another time period, in response to a price signal, a financial incentive, an environmental condition or a reliability signal. Demand response saves ratepayers money by lowering peak time energy usage, which are high-priced. This lowers the price of wholesale energy, and in turn, retail rates. Demand response may also prevent rolling blackouts by offsetting the need for more electricity generation and can mitigate generator market power.
Currently, demand response programs are administered by California’s three regulated investor-owned utilities: PG&E, SCE, and SDG&E. Most of the utility demand response programs target large commercial and industrial customers that are equipped with meters that are capable of measuring and reporting energy usage in one hour intervals or less.
Customers without an interval meter (essentially residential and small commercial customers) will eventually be able to participate in demand response programs as utilities’ proposals for Advanced Metering make their way through the regulatory approval and implementation processes.