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In comments in a Texas PUC proceeding on the goal for the average total residential load reduction in ERCOT, Octopus Energy said that the PUC should require that retail electric providers serving residential customers must offer a demand response program to residential customers.

As previously reported PURA 39.919(b)(1) requires that PUC rules implementing the demand reduction goal, “must provide for the adoption of a program that … provides demand response participation to residential customers where reasonably available.”

In response to this legislative mandate Texas PUC staff published a draft Proposal for Publication that narrowly implements PURA 39.919 by addressing the REP offering of a residential “responsive device program” (smart thermostat, smart appliance) rather than broadly addressing residential “demand response.”

Excerpts from Base Power Company’s Comments suggested that the ESI ID requirement in the above-quoted proposed rule section should be replaced with a “total customers enrolled” reporting requirement.Base Power Company’s comments:

“Base recommends exclusion of residential batteries from application of the proposed rule. 

Base opposes any mandated blanket requirements for all REPs to adopt a specific DR program. 

Base also emphasizes the recommendations made by SPEER included below: 

Replacing “responsive device program” with “demand response program” for flexibility in designing demand response programs for residential customers.

Establishing a framework to allow for REP’s to compensate residential customers for participation in demand response programs. 

Under §25.186(d)(1)(A-B) removing the ESI ID requirement in favor of a broader total customers enrolled would provide REPs an easier reporting requirement which may otherwise disincentivize REPs from participating or potentially create privacy concerns for customers.”

Excerpts from ERCOT’s Comments:
{***} “ERCOT suggests a few revisions to the proposed rule language, which are reflected in ERCOT Proposed Revisions, below. First, ERCOT suggests clarifying subsection (d)(2) to describe how ESI IDs with behind-the-meter photovoltaic (PV) generation are accounted for in the calculation of the load reduction values ERCOT is required to file with the Commission. ERCOT recommends that the load reduction from customers with PV be based on the reduction in their actual energy consumption at the premise rather than a reduction in metered load, since PV power production would offset consumption and in fact could result in an export to the grid during peak net load hours. For these customers, the load reduction can be manifested as a decrease in consumption from the grid, an increase in export to the grid, or both. Calculating the load value for a premise with PV as the sum of the customer’s metered energy consumption plus its PV generation less PV export would allow this more accurate calculation of load reduction for these customers. A significant number of participants in existing REP programs have PV, and a 1 kW reduction in their load would have the same benefit to the grid as a 1 kW load reduction by a customer without PV. ERCOT has included clarifying language in new (d)(2)(C). 

ERCOT also proposes revisions to the reporting requirements in subsection (d)(2)(B) to provide that ERCOT’ s filing should specify not only the load-reduction values and metered-load values for all customers in a responsive device program but also those values for the specific subset of those customers that were directed to deploy during a peak demand period or energy emergency alert, since not all REP responsive device programs may have been deployed in each instance. Because ERCOT would intend to provide this information in its filing, ERCOT believes it would serve the interests of transparency to include this in the rule language. 

Next, ERCOT recommends removing proposed subsection (c)(1)(D). ERCOT believes it is unnecessary to prohibit recipients of smart devices from participating in other demand response programs. Allowing such customers to participate in these programs could facilitate growth of demand response. 

ERCOT also suggests revising the definition of “ERCOT peak demand period” in subsection (c)(3) to clarify that only ERCOT-registered wind and solar generation should be included, since ERCOT does not have any way to account for unused stored wind and solar generation output. For clarity, ERCOT also recommends defining “gross load” to align with the value ERCOT uses to determine load for purposes of determining four coincident peak (4CP) intervals. 

Furthermore, ERCOT assumes that the information due each March 3rd from ERCOT to the Commission should be publicly available, in which case ERCOT recommends that the rule be clarified that ERCOT must publicly file the information. 

ERCOT also notes that, as currently proposed, the rule requires ERCOT to determine and submit data for each daily ERCOT peak demand period. To maximize the value of this reporting requirement, ERCOT recommends that the load reduction reporting be limited to days with one or more REP-reported deployment events. ERCOT notes that, during the summer of 2023, one or more REPs deployed their responsive device programs on only 33 different days. If the calculation were not limited to days during which a REP deployment occurred, the vast majority of data provided would show little meaningful information, because the calculated load reduction values on most days would likely be very small or zero. 

Additionally, ERCOT recommends that subsection (d)(3) should be revised to clarify how achievement of the “average total residential load reduction goal of 0.25” will be determined. Consistent with ERCOT’ s proposed revisions to subsection (d)(2)(B), ERCOT recommends that the assessment of whether the goal has been met should be limited to those peak demand periods in which a REP deployment occurred. The Commission may wish to further consider whether achievement of the goal should be based on an average of multiple peak demand periods during a reporting year, such as all of the peak demand periods in which a deployment occurred, or just the peak demand periods during a summer or winter month in which a deployment occurred.

Finally, ERCOT has also included several minor clarifications in the attached revisions. ERCOT appreciates the Commission’ s consideration of these comments and would be pleased to provide the Commission any information that may be useful to its evaluation of the policy issues in this proceeding.” {***}

Octopus Comments  – {***} “The core elements of the policy set forth in the newly enacted statute are to: 1) establish goals to reduce average total residential load and 2) achieve demand reductions for both summer and winter seasons.2 While the proposed rule may “check the boxes” for some of the statutory provisions in SB 1699, it unfortunately misses the target with regard to actually achieving the purpose of reducing average total residential load. Overall, the rule does more to create disincentives for REPs to provide demand response than anything else. Octopus Energy supports a more assertive version of the rule to be adopted by the Commission so that meaningful policy change can be effected in this state by reducing average total residential load to the benefit of retail customers and the ERCOT electricity system. It is with this perspective that Octopus Energy offers several proposed changes to the proposed rule.” {***}

Regarding wholesale-linked retail customer rates, Octopus said that the PUC should advise the legislature to re-think the current ban on residential retail electric rates that are indexed to the wholesale market, adopted after Winter Storm Uri.

Octopus argued that such a ban resulted from, “one specific REP’s business model that allowed for full indexed pricing for residential customers.” In contrast, Octopus said that it implemented a wholesale-index retail product with guardrails that prevented, “runaway pricing”.

Octopus argued that wholesale-indexed products could be offered with a price cap. Or alternatively, wholesale-indexed product participation could be limited to customers with batteries, flexible loads, or on-site generation.

Octopus further contends that that the current ban on residential wholesale-indexed products, “has been to completely eliminate the best incentive available to promote residential demand response: wholesale price transparency.” Modifying the current ban on wholesale-indexed products could serve to incentivize residential demand response, Octopus said.

Octopus also said that the proposed reporting requirements, “punish good actors with additional compliance obligations without any corresponding benefit or incentive to provide DR services.”

Among other things, the proposed rule would mandate that REPs offering a qualifying program shall report, “the date of each demand response event, including each demand response event start time and stop time and the ESI IDs deployed for each event.”

Octopus said that this provision is needlessly “intrusive” into a REP’s competitively sensitive operations

Excerpts from OhnConnect’s Comments :
{***} “The PUC should make meaningful changes to demand response in ERCOT 

OhmConnect believes instead, the PUC should take this opportunity to adopt a real ‘stretch goal’ for the enablement and participation of residential customers to reduce the impact of their peakor net-peak demand. That goal should be accompanied by a proposed pathway to meet that goal. SB1699 provides an opportunity to adopt a goal and accompanying policy initiatives or market programs that will both increase grid reliability and reduce energy cost, and that will incent the enrollment of more customers in demand response programs and scale up this distributed resource to address the real need. OhmConnect provides the following suggestions:

The PUC should consult ERCOT, and other resources available, including university energy centers, and stakeholders, to determine what a reasonable and cost-effective statewide goal for demand response would be. Would it not be reasonable to adopt a goal of 10% of residential demand reduction at peakor net-peakora specific MW goal by 2030, for example, and perhaps intermediate goals, as was done with efficiency? 

SB 1699 does not limit demand response support to the limited funding available from utility efficiency programs. It says that utility efficiency program funding may be used but does not direct the PUC to rely upon that exclusively and it is doubtful that reliance on this funding mechanism alone will provide sufficient incentives to stimulate the growth required for residential DR to deliver the magnitude of potential reductions the system will require as load growth continues. 

Utility funds should be dispensed to REPs that demonstrate the enrollment of new customers in demand response programs meeting the requirements established by the PUC. A customer can be required to be enrolled by a REP in a Responsive Device Program in order to receive the incentive payment for devices or a REP can be provided an incentive payment based on its aggregate performance or amount of reduction, earning more money 3 for better performance. Either of these options would provide an additional incentive to customers and/or REPs to maximize the reductions associated with the incentives. 

The utility funds provided per customer or, per kW of response, should be sufficient to engage new customers, not customers who have previously participated in a demand response program. These initial funds should be used to drive enrollment of new customers. Additional funding sources will be required to ensure continuing participation both by the REP and its enrolled customers. These ongoing funds to ensure long-term viability, could be derived from ERCOT as contemplated below. 

ERCOT has already developed and currently operates one of the nation’s leading demand response programs, although its potential benefit is being constrained by virtue of limited residential participation. Emphasis should be placed on growing the “weather sensitive loads” component of the Emergency Response Service (ERS). Weather-sensitive loads are simply those whose demand is driven by the heat of summer and cold of winter, largely for space conditioning. ERCOT acknowledges these very loads are the ones that drive the vast majority of the demand at peak(over the average demand). The PUC stretch goal for demand response should largely be met by the market, which will set the appropriate ultimate price for its value. The PUC can simply direct ERCOT to expand its existing capability or, split the weather-sensitive loads element of ERS away from that service and create a new ERCOT weather-sensitive demand response service, and authorize funding sufficient to meet that goal. SB 1699 specifically requires the PUC ensure that the residential demand response resource resulting from its passage is capable of responding to an emergency alert related to low operating reserves. This is the purpose of ERS. Unlike the utility efficiency programs which will likely always be limited for a variety of reasons, ERCOT is in position to simply purchase the resources that reliability of ERCOT requires. Creating a more aggressive demand response goal, and expansion of this service, will allow the market to establish what the real cost of that resource is at scale. The PUC and ERCOT can periodically weigh the cost of this weather-sensitive load program against the other means of meeting peak or net-peak loads and responding to emergency conditions and, make adjustments as appropriate. Evaluation of relative cost/benefit should include consideration of other out-of-market actions, and subsidies to fossil generation and other resources. 

It is realistic to assume that the new service contemplated above could be paid for, in whole or in part, if ERCOT reduces the purchase of ancillary services in proportion to the demand reduction achieved by the new program or reduce the ancillary services charge to participating REPs based on their specific performance.

Excerpt from REP Coalition comments:
{***} “To meet the residential load reduction goal, more robust market incentives for responsive device programs are needed beyond transmission and distribution utility (TDU)-offered programs.1 Under the leadership of the Commission, the Electric Reliability Council of Texas (ERCOT) should work collaboratively with market participants to propose new market products or modify existing market products to incentivize the aggregation of residential customers with smart responsive appliances or devices to support responsive device programs offered by retail electric providers (REPs) to residential customers. Good groundwork has been established in the Aggregate Distributed Energy Resource Pilot Program.2 However, participation in this program is specific to distributed energy resources (DERs) and is not targeted at demand response.3 The REP Coalition is concerned that if the proposed rule’s focus on increasing residential responsive device programs is limited to programs offered by TDUs, participation rates may be unnecessarily restricted. 

To alleviate that concern, the REP Coalition’ s proposed language in subsection (g) would increase participation in responsive device programs by allowing for a more diverse and competitive set of options providing incentives to drive load-responsive behavior in residential customers. More specifically, the proposed language signals that, under PUC Staff leadership, ERCOT and the stakeholders should work collaboratively to incentivize the aggregation of residential customers with a smart responsive appliance or device who are enrolled in a responsive device program offered by REPs. As these programs move forward, ERCOT will serve a critical role in supporting a structure that allows these programs to be brought to customers in the most effective way possible. 

Additionally, the REP Coalition strongly recommends adding language to subsection (c) to avoid overly limiting the measurement of use of residential demand response to periods of ERCOT peak net load. Demand response price signaling during an ERCOT peak net demand period is an important function already provided by the real-time wholesale market, and times of high residential energy usage do not necessarily align with periods of peak net load or periods of ERCOT system peaks. Those peaks are influenced by the behavior of renewable resources or large industrial consumers, and therefore may not reflect the times when residential demand response can be most impactful. Therefore, by expanding the measured periods to include peak demand periods that better account for the specific behaviors of residential customers, the Commission would enable the creation of responsive device programs that are more aptly tailored to the capabilities and needs of residential customers.

To enhance the proposed rule’ s clarity, the REP Coalition proposes the addition of definitions and requests the Commission provide guidance in the rule’ s preamble on critical care and chronic condition residential customer participation. On definitions, the REP Coalition maintains that the final rule will be stronger, and customers will be better served if the terms used in the rule are clearly defined within the context of the rule itself rather than relying on terms

defined in other sections of the rule or leaving the terms ambiguous. Accordingly, the REP Coalition’ s proposed definitions in section (b) set the appropriate context for the implementation of SB 1699 and ensure that critical terms, such as “demand response,” are defined by the Commission’s rules. 

On the need for preamble clarity, subsection (c)(2)(C) is unclear as to whether the Commission intends to prohibit REPs from enrolling critical care and chronic condition customers in responsive device programs or if the Commission’s intent is that REPs would be able to enroll those customers in responsive device programs if a REP obtains the appropriate consents and/or provides a customer with the ability to adjust participation during an event. The REP Coalition is acutely aware of the importance of protecting the interests of critical care and chronic condition customers. However, based on the proposed language, it is unclear whether a fully informed and consenting residential customer with a chronic condition or one receiving critical care would be able to elect to enroll in a responsive device program under this rule. Accordingly, guidance by the Commission in the preamble of the rule ultimately adopted in this project would be helpful.

Finally, under subsection (h), the REP Coalition supports the Commission’ s goals of developing a robust evaluation and assessment process for these programs. However, the rule should recognize the importance of protecting private customer data and confidential business information. The REP Coalition has included language to ensure that ERCOT’s responses to Commission inquiries safeguard both customer and REP confidential information. {***}

Excerpts from Tesla Comments:
{***} “As such, Tesla must weigh in on the proposal from staff related to responsive device programs from REPs. As proposed, the rule would limit the ability for REPs and demand response providers to contract. For example, some programs may have winter or summer features, but not both. While the Powerwall is fully capable of responding in a variety of situations, mentioning a requirement for winter and summer participation may create confusion, and doesn’t add any real value to customers. Similarly, many customers purchase Powerwalls to be used during emergencies for their own needs, and not for the grid. While numerous customers may be willing to do provide services to the grid during emergencies, a requirement to respond to alerts may be problematic or at least create confusion. Finally, one device can participate in multiple programs at the same time. Batteries can provide multiple services simultaneously and often do. A general requirement for participation in a single program is unnecessary, as ERCOT already has procedures to avoid double dipping into services where it may be inappropriate to provide two services at the same time. Each ancillary service or demand response program has its own program requirements, and failure to meet those requirements is already a violation of the rules and protocols. This additional requirement is simply unnecessary. For all these reasons, Tesla suggests that the Commission reconsider its approach to responsive device programs to be permissive instead of restrictive or in the alternative consider whether any specific rule language is necessary at this time for this specific topic in order to comply with SB 1699.” {***}

Other comments include:

Environmental Defense Fund and Alison Silverstein Consulting jointly recommended that the rule add language to mandate that residential demand response customers receive “reasonable” compensation that, “reflects the resource adequacy and cost relief value of their demand response efforts.”

In terms of reporting requirements contained in the proposed rule, several stakeholders raised concerns.

See all stakeholder comments at overall project link below.

Proposal for Publication (08/23/2024)
Project 56966
Goal For Reducing Average Total Residential Load In The ERCOT Region.