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Market Redesign and Technology Upgrade

Skip Navigation LinksPUC > Energy > Federal and Regional Energy Policy > California's Wholesale Market Design and Operations > Market Redesign and Technology Upgrade > Demand Response

Demand Response

 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.

The CPUC’s Position:

The CPUC staff have aggressively pursued the expansion of demand response capabilities under MRTU. As the California Independent System Operator (CAISO) implements MRTU, demand response will begin to play a greater role in the wholesale market as a competitive bid-in resource.  Beginning approximately one year after MRTU startup the CAISO will allow demand response resources to compete directly with generation resources for supply of energy (i.e. - the non-use of energy will appear in the Day-Ahead and Real-Time energy markets as energy and will be purchased from customers. The CAISO is not requiring telemetry (two-way real-time communication of energy usage) for participation of demand response resources in their market.  By lowering the resource size threshold and allowing hourly-metered resources, such as residential customers with advanced meters, the CAISO will allow California residential energy consumers to sell their demand response kilowatts in the wholesale market.

The CPUC staff continue to work with the CAISO, the California Energy Commission, California’s investor-owned utilities and other parties to ensure the CAISO opens its wholesale markets to the widest variety of demand response resources as possible. The CAISO has responded well to the CPUC request to bring their market forward. For more information about the CAISO’s plans for wholesale market design and the integration of demand response resources, please go to:


The CPUC Filings: Highlights

23.  Demand response/CPUC Comment to FERC/Nov 2006/FERC Multiple Docket No. ER06-615-000.


Last Modified: 12/9/2008

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