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Demand Response Pricing In Organized Wholesale Markets

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Executive Summary

The Federal Energy Regulatory Commission's Notice of Proposed Rulemaking (NOPR) addresses the question of proper compensation for demand response in organized wholesale electricity markets. The Commission proposes to pay the full Locational Marginal Price (LMP) for all types of demand response acting as a resource in the energy market. The differences lead to different frameworks for appropriate pricing and incentives. Real-time pricing demand response and explicit contract demand response have straightforward frameworks for using the applicable LMP. The method for full LMP application would be different in each case, but easy to understand.

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