Demand Response: 
Phase 2 - Policy Guidance



In September 2013, the CPUC issued a Rulemaking to address a number of issues for improving Demand Response programs, including adding Phase 2 to address foundational policy issues, including: 

  • Determine whether bifurcation is necessary between demand-side and supply-side resources Demand Response strategies. 
  • Create a competitive procurement mechanism for supply-side demand response resources.  
  • Approve program and funding cycle. 
  • Provide guidance for transition years.  
  • Develop a strategic roadmap that coordinates with other CPUC proceedings and state agencies. 

Demand Response Bifurcations 

In March 2014, the CPUC issued a Decision ordering that Demand Response programs be bifurcated into: 

  • Load Modifying Resources:  Strategies to shift energy consumption to reshape or reduce the net load curve. 
  • Supply Resources:  DR programs competitively bid into the CAISO wholesale electricity market 

The purpose of bifurcating Demand Response strategies is to assist the CPUC in focusing on the strengths of each Demand Response category to improve effectiveness and increase the amount of overall load shed. 

Policy Guidance on Unresolved Issues 

In April 2014, the CPUC issued a Ruling to address the unresolved foundational issues:   

  • Cost Allocation/Recovery  
  • Use of fossil-fueled Back-up Generation to support Demand Response 
  • Cost-effectiveness Protocols  

The Ruling also included a proposal from CPUC staff for a Demand Response Auction Mechanism.  

In June 2014, the CPUC issued a Ruling attaching its Staff’s Proposal on Proposed Revisions to Cost-effectiveness Protocols, which recommended refinements to protocols on: 

  • The calculation of costs and benefits  
  • Inconsistency among the utilities 
  • Clarification of definition of qualitative analysis.  

On July 31, 2014, the CPUC issued a Ruling suspending comment on the Staff Proposal in order to first hold a workshop. A future Ruling is expected to address the issues.  

In December 2014, the CPUC issued a Decision resolving the issues on cost allocation/recovery and the use of fossil-fueled Back-up Generation, finding that:   

  • Cost Causation: Any Demand Response program or tariff that is available to all customers shall be paid for by all customers; however, if they are available only to bundled customers, the costs can be borne only by bundled customers. 
  • Fossil-fueled Back-up Generation: This resource should not be allowed as part of a Demand Response program for Resource Adequacy purposes, subject to rules adopted in future Resource Adequacy proceedings.  


ORA Position

ORA supports the CPUC’s March 2014 Decision to bifurcate the Demand Response program because Supply-side and Load-Modifying strategies are fundamentally different. This approach will allow the CPUC and utilities to address more effectively improvements to the Demand Response programs.

The CPUC’s December 2014 Decision did not adopt ORA’s recommendation for Demand Response that 1) program costs should be recovered from all customers unless clear evidence shows that benefits accrue to only a certain group of customers; 2) program tariffs should explicitly state the use of Fossil-fueled Back-up Generation to provide Demand Response is strictly prohibited to meet CPUC’s environmental goals in the Energy Action Plan because Fossil-fueled Back-up Generation is not a preferred resource.

See ORA’s November 17, 2014 Opening Comments on the Proposed Decision. 

See ORA’s November 24, 2014 Reply Comments on the Proposed Decision. 

See ORA’s August 25, 2014 Opening Brief. 

See ORA’s December 13, 2013 Response to the Scoping Memo. 


Proceeding Docket 

See the Proceeding docket. 


Other Resources

ORA Demand Response Portal  

ORA Resource Adequacy Portal