Pricing and Demand Response Practice
UtiliPoint’s® Pricing and Demand Response practice is dedicated to providing wholesale and retail electricity market design and pricing services to electricity market stakeholders. Our clients include independent system operators, utilities, competitive load serving entities, demand response program providers, state and federal regulatory agencies, and business and investment entities with a commercial interest in the design and operation of electricity markets. Services available include:
- Characterization of how and why customers respond to electricity prices and to other inducements to adjust usage
- Quantification of the level and distribution of benefits attributable to demand response
- Evaluation and optimization of the performance of demand response programs and pricing plans
- Design and management of a portfolio of diverse demand response and pricing services
- Benefit/Cost studies and business case preparation to support strategic decision-making
- Regulatory support through preparation of marginal and embedded cost studies and retail rate design
The practice is unique in its dedication to providing the industry with the full array of services required to design, get approval for, implement, and evaluate demand response programs and pricing plans. Its staff is comprised of experts, including economists, engineers and technology analysts, with over 100 years of experience promoting retail customer interests, managing multi-billion dollar rate bases, designing pricing plans to link wholesale and retail markets, and formulating public policies regarding market structure and operation. The principals are articulate, convey economic concepts in a straightforward and accessible manner, and they are recognized for their dedication to training client staff so that they understand and apply the methods and protocols that are adopted. They are seasoned expert witnesses who have prepared state and federal FERC filings in matters related to wholesale and retail pricing, contributed to regional and national studies of how demand response and pricing impacts market performance, and summarized their research findings in articles for refereed journals, trade magazines and in a variety of public forums.
Clients utilize this knowledge and these capabilities under a variety of arrangements:
Retail Pricing Effectiveness Audit. EPACT 2005 underscores the need for all retailers to take a close look at how they price their retail services. UtiliPoint helps electricity retailers assess the extent to which their rates and pricing plans are responsive to their customers’ demands for choices in how they buy electricity, meet regulatory mandates and initiatives, and create linkages between wholesale and retail price formation that improve market and enterprise performance. This first-level assessment establishes performance in areas where pricing plays strategic, tactical and operational functions.
Characterizing and quantifying price response potential. Recent studies demonstrate that customers respond differently to apparently similar pricing circumstances and price structures. UtiliPoint has unparalleled experience in quantifying how customers respond to price and identifying the key non-price drivers to price response. The practice staff combines the results of primary research with practical experience to assign a credible response intensity value to customer segments and individual customers attributable to the pricing design itself and account for the influence of factors like price topology (frequency and duration of elevated prices), non-compliance penalties, weather, on-site generation, and enabling technologies.
Demand response valuation. To answer the question: “How much demand response is needed?”, it is first necessary to quantify the benefits that would result from alternative initiatives. UtiliPoint has pioneered the development of valuation methods and tools to quantify who gains, and how much, from load changes induced by demand response and pricing plans. Our Price FX model has been used by ISOs to satisfy stakeholders and FERC requirements to demonstrate the value of demand response programs they implement, by utilities and load serving entities to conduct program impact and valuation studies, and by state and federal agencies to estimate the value of price and demand response programs. UtiliPoint conducts comprehensive benefit/cost studies to quantify the expected level and value of price response given current customer circumstances and under enhanced conditions, and helps clients derive sensible and achievable goals for achieving and promoting demand response.