A Solution for the Integration of Demand-Response Resources in Mainees Competitive Retail Market

Abstract

This Note addresses Maine’s legislative options in light of the possible impending doom of demand-response electricity resources in wholesale markets. The Supreme Court is currently reviewing a case that may spell the end of demand-response integration in wholesale markets. Acknowledging this potential issue, the Maine House of Representatives passed “Resolve, to Study Options for a State Demand Response Program” in February 2015. Within, the House requested Efficiency Maine produce a study detailing how Maine could integrate demand-response resources into the state’s retail electricity market. Efficiency Maine is an “independent administrator for efficiency programs in Maine.” In response, this Note proposes one possible solution.Demand-response resources are an important part of the electricity grid. At the state retail level, demand-response systems broadly consist of consumers reducing electricity usage in response to price signals. The presence of demand-response resources in an electricity market can mean less need for generation (and therefore less fossil fuels used), less strain on the electricity grid, greater reliability, lower costs for both consumers and producers, and a lower overall environmental impact. The benefits are so great that the United States Congress officially supports demand-response integration. Maine has some unique characteristics that will affect how demand-response may fit. First, since state electricity markets fall outside of federal jurisdiction, the upcoming Supreme Court case will not determine the future of demand-response in state retail markets. Thus it is important for Maine to figure out how demand-response resources fit within the state’s electricity industry. Maine’s retail electricity market is currently regulated by the state Public Utility Commission. The retail market was drastically altered in 2000, and the current deregulated system implies that utilities serve merely as distribution companies and purchase power from the wholesale markets. Maine consumers then purchase the power from their choice of competitive retail providers or rely on the standard offer. There are legislative solutions to integrating demand-response resources in Maine’s deregulated retail electricity market. This Note hypothesizes that major hurdles include finding financial incentives, providing sufficient subsidization, implementing market oversight, and enforcing demand-response performance. The Note then suggests additional language for Maine’s Electricity Industry Restructuring Act that may help integrate demand-response resources with economic and legislative success.