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What is Electric Rule 24?

October 1st, 2013 by Erich Huffaker

Electric Rule 24, currently being finalized by the California Public Utilities Commission (CPUC), paves the way for the “direct participation” of demand response (DR) in the CAISO wholesale market.

One may contrast direct participation with the existing utility-administered DR programs that are not bid directly into the market. Demand Response is typically represented to the CAISO indirectly, as a reduction in load forecasts. As a result these resources are not able to be dispatched directly by the CAISO or to compete economically with supply-side resources. Rule 24 intends to change that and define the rules for Demand Response Providers (DRPs) to be able to bid Bundled Customers (those that receive electric service from a CA IOU) into the wholesale market.

State policy objectives have been encouraging direct participation for some time and the concept of Rule 24 and its development has been in process for several years as a result of the CPUC DR proceeding R.07-01-041. While on the surface the implementation of this rule may seem simple, it is actually quite complex and there are many non-trivial issues to be dealt with. While the implementation of Rule 24 in itself will not result in widespread direct participation, it is a critical step to achieve it. The high-profile closure of the San Onofre Nuclear Generating Station (SONGS) and the planned retirement of other key generating units have placed a new sense of urgency for the completion of Rule 24.

These challenges associated with the implementation of Rule 24 are significant. Resolution will require communication, coordination and the development of process changes from all of the entities subject to Rule 24 including LSEs, UDCs, DRPs, and MDMAs for Bundled Customers. Entities acting on behalf of Direct Access and CCA customers are not prohibited from bidding directly into the CAISO market. However, the reality of current participation levels in DR programs where both Bundled and Direct Access customers are marketed to indiscriminately, enrolled by third parties, and provided equivalent capacity payments, makes participation at this time highly unlikely. In addition:

  • DR programs were not designed to integrate directly as CAISO resources. Many rules, including timelines for notifications, will require adjustments for customers as well as likely changes in third-party aggregator portfolios. IOU tariffs will require updating before the programs can synchronize with ISO market requirements; customers who may have previously met the tariff requirements may not be able to meet the amended requirements for integration.
  • A host of communication issues including enrollment status and metering must be addressed as well. There is a broad consensus among stakeholders that Rule 24 will entail a new set of metering responsibilities for DR providers. ISO Settlement requires aggregated and processed metered data – referred to as “Settlement Quality Meter Data” – which providers have not had to deliver before. With these new responsibilities comes a variety of process changes, requirements for the various parties, consumer protection considerations and risk mitigation activities.

The finalization of Rule 24 is on-track for the latter part of 2013. Completion of the Rule, though, does not mean that all implementation issues will have been resolved, or that the resulting infrastructure and process changes can be dealt with quickly. Each IOU has produced widely differing timelines, and some may need as long as two or three years before they can support integration of their DR programs with the wholesale market.

As issues become known and challenges dealt with, the prospect of reducing this timeline becomes more of a possibility. Transition steps are being planned and some interesting projects are underway. The lessons learned from such projects will be instrumental to inform the larger shift to direct participation for the industry as a whole. We believe that understanding the issues and complexities are critical to reaching the goal of transition. To transform, information and perspective are key and we will continue to post more on these important topics!

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