CAISO & California Utility Demand Response Programs

California's Demand Response landscape is complex, involving the California Independent System Operator (CAISO), the California Public Utilities Commission (CPUC) which oversees utility programs, and the large Investor-Owned Utilities (IOUs) like Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E).

Most C&I DR participation occurs through utility-administered programs, with some of these resources then being bid into the CAISO wholesale market by the utilities or third-party aggregators as Proxy Demand Resources (PDRs) or Reliability Demand Response Resources (RDRRs).

California's DR programs are frequently evolving due to policy changes aimed at grid reliability (especially during summer evenings 4-9 PM), integration of renewables (the "duck curve"), and preventing emergencies.

Key Utility-Administered DR Programs for C&I

Base Interruptible Program (BIP)

  • Administered By: IOUs (PG&E, SCE, SDG&E)
  • Type: Emergency Capacity (Utility-triggered)
  • Goal: Provide highly reliable load reduction during grid emergencies.
  • Participation: Large C&I customers (often ≥100 kW) willing to commit to dropping load down to a pre-set Firm Service Level (FSL) upon utility notification.
  • Response: Fast notice (15 or 30 minutes). Events can occur year-round, max ~10/month, ~180 hrs/year.
  • Compensation: Lucrative monthly bill credits ($/kW-month) based on the committed reduction amount (load minus FSL). Rates vary seasonally (higher in summer) and by notice option (e.g., ~$9.50 to $14.80/kW-month, equating to ~$120–$177/kW-year). Paid even if no events occur.
  • Stackability: Generally Not Stackable with other DR programs for the same load.
  • Requirements: Interval meter, ability to reliably curtail to FSL.
  • Penalties: Severe financial penalties (e.g., $6/kWh) for any energy usage above the FSL during a called event. High reliability is essential.

Capacity Bidding Program (CBP)

  • Administered By: IOUs (PG&E, SCE, SDG&E); often facilitated by aggregators.
  • Type: Economic Capacity (Utility-triggered)
  • Goal: Provide flexible load reductions based on day-ahead or day-of nominations.
  • Participation: C&I customers (often via aggregators) nominate available load reduction (kW) on a month-ahead or day-ahead basis. Different product options (notice time, duration).
  • Response: Day-ahead or shorter notice (e.g., 30 min, 1-2 hours) depending on the chosen product. Events typically 1-4 hours during May-Oct.
  • Compensation: Two parts:
    • Capacity Payment: Monthly payment ($/kW-month) for nominated capacity, pro-rated based on performance (e.g., ~$5-12/kW-month depending on options).
    • Energy/Performance Payment: Payment per kWh reduced during events (e.g., ~$0.50/kWh).
    Total potential earnings often ~$50-80/kW-year.
  • Stackability: Generally exclusive with BIP. Aggregated CBP resources are often bid into CAISO market as PDRs by IOUs/aggregators.
  • Requirements: Interval meter, baseline calculation (typically 10-day average with adjustment).
  • Penalties: Low Risk. No direct financial penalty beyond forfeiting capacity payments if load isn't reduced as nominated. Poor performance can limit future nominations.

Emergency Load Reduction Program (ELRP)

  • Administered By: IOUs (CPUC-directed pilot program)
  • Type: Emergency Energy (Voluntary)
  • Goal: Incentivize additional voluntary load reductions during extreme grid emergencies (CAISO Stage 2 or 3 Alerts).
  • Participation: Broad eligibility for customers (potentially including those in CBP if providing *additional* reduction beyond CBP commitment). Sign-up required.
  • Response: Voluntary curtailment during declared grid emergencies (typically summer afternoons/evenings, 1-5 hours/event, up to ~60 hrs/year).
  • Compensation: High Energy Payment Only: $2.00 per kWh for measured load reduction. No capacity payment.
  • Stackability: Additive – can potentially earn ELRP payment on top of other program participation if providing incremental curtailment during an ELRP event.
  • Requirements: Baseline measurement (e.g., 5-of-10 days).
  • Penalties: None. Voluntary participation.

Peak Day Pricing (PDP) / Critical Peak Pricing (CPP)

  • Administered By: IOUs
  • Type: Tariff-Based DSM (Price Signal)
  • Goal: Incentivize load reduction on critical peak days through higher electricity prices.
  • How it Works: Not an enrollment program with separate payments, but a rate structure. On 9-15 designated "event days" per year (usually hot summer afternoons), the price per kWh during peak hours (e.g., 4-9 PM) increases dramatically (e.g., +$1/kWh). Prices during other hours/days may be slightly lower than standard rates.
  • Compensation: Bill savings achieved by avoiding the high event day prices.
  • Note: Many C&I customers in California are on default CPP/PDP rates.

CAISO Market Participation & Procurement

  • Proxy Demand Resource (PDR) / Reliability DR Resource (RDRR): These are the mechanisms by which aggregated load reductions (often from utility programs like CBP or aggregator portfolios) participate in CAISO's wholesale energy and ancillary services markets. PDRs bid economically; RDRRs are dispatched for reliability. They earn capacity value via Resource Adequacy (RA) contracts and energy payments at CAISO LMP.
  • Demand Response Auction Mechanism (DRAM): A CPUC procurement mechanism where aggregators bid to provide DR capacity (counts towards RA) under contract to the IOUs. Aggregators enroll C&I/residential customers to fulfill these contracts, often bidding them as PDRs into CAISO. DRAM provides a key pathway for third-party DR providers.
  • Demand Side Grid Support (DSGS): A newer (pilot) CPUC program offering multiple options (energy-only payment, capacity + energy, capacity bidding) aimed at incentivizing DR during critical evening ramp hours (4-9 PM). Incentive structures are complex, potentially offering high $/kW-year value (e.g., up to ~$75/kW-year for capacity option) plus energy payments. Integrates with CAISO market bids.

Given the dynamic nature of California's DR landscape, C&I customers often rely heavily on aggregators to navigate program rules, enrollment, and participation strategies, especially for maximizing stacked value across utility and CAISO opportunities.

Disclaimer: Incentive rates, program rules, and availability are subject to frequent changes based on CPUC decisions and utility filings. Always consult current official program documents from the CPUC, CAISO, and your specific IOU or DR provider.