Responding to the Federal Energy Regulatory Commission’s recent order in EnerNOC, Inc., 134 FERC ¶ 61,158 (2011), on April 7, 2011, PJM Interconnection, L.L.C. (PJM) submitted a Federal Power Act section 205 filing intended to clarify the measurement of capacity curtailment by demand response resources in PJM’s capacity market. PJM’s filing proposes changes to its tariff, Operating Agreement and Reliability Assurance Agreement to resolve the so-called “double counting” controversy discussed in EnerNOC. Consistent with its position in EnerNOC, PJM’s proposals ultimately would cap the load reduction that a demand response resource could provide during system emergencies at its Peak Load Contribution (PLC).

Measuring Demand Response

PJM’s filing seeks to change the way in which demand response provided to meet a system emergency can be measured. Measuring a demand response resource’s performance requires a comparison of its actual metered demand during an emergency with a predetermined reference point. The crux of the double-counting debate is the appropriate reference point.

PJM maintains that the proper reference point is a demand response resource’s PLC. An entity’s PLC represents its contribution to PJM’s need to procure capacity resources, and is determined based on the average of the entity’s actual load during the five coincident peak hours of the preceding delivery year. PJM’s emergency load response program, however, also permits a reference point based on the Guaranteed Load Drop (GLD) baseline methodology, which measures the amount of demand response that an entity would have consumed absent the emergency conditions, referred to as the Customer Baseline Load (CBL).

PJM contends that load reduction “double counting” occurs because many end use consumers reduce their load during system peak hours to minimize their PLC and that load reduction “counts” toward a lower PLC. At the same time, the GLD method also “counts” that same load reduction (the reduction between CBL and PLC) toward the amount of demand response provided to meet a system emergency. Curtailment Service Providers (CSPs) that maintain portfolios of demand response resources may use an “overperforming” resource (i.e., one providing load reduction in excess of its PLC) to offset an underperforming resource. PJM maintains that such double counting skews its capacity procurements and poses a threat to system reliability.