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Demand Response
Cost Allocation Analysis
Demand Response Working Group
10 July 2013
Analysis of Cost-Allocation Method for
Recovering Demand Response Compensation
Statement of Issue:
• Order No. 745 required MISO pay demand response
resources the LMP when certain conditions are met,
including when dispatch of the demand response
resource is cost-effective as determined by a net
benefits test.
• Stakeholders asked MISO to demonstrate that its
demand response cost allocation methodology
appropriately allocates costs to those that benefit from
the demand reduction
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Analysis of Cost-Allocation Method for
Recovering Demand Response Compensation
•
March 2012 Compliance Filing:
 MISO proposed

eliminating direct cost allocation to load-serving entities (MFRR)

a new, zonal cost allocation methodology

costs allocated in a given hour to the “Real-Time Energy buyers” in
the applicable reserve zone(s)

reserve zone(s) to which costs are allocated based on the elemental
pricing nodes identified during the resource’s registration and
Reserve Zone Configuration Studies

if a DRR is located in more than one reserve zone, then the costs of
compensating it will be apportioned pro rata to the affected reserve
zones
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Analysis of Cost-Allocation Method for
Recovering Demand Response Compensation
•
Approaches considered:
 Econometric:

Data: hourly LMP data by CPNode for the last year for MISO
footprint

Approach: disentangle the contribution of the DRR asset to LMPs,
by CPNode
 Day-Ahead (DA) Simulations:

Identify DA cases where DRRs cleared at LMPs >= NBPT

Select a few of the above cases randomly

Re-run DA case without DRR asset to calculate ‘LMPs’
 Some combination of above:

Bayesian approach?
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Analysis of Cost-Allocation Method for
Recovering Demand Response Compensation
•
Status:
 Since “MISO’s proposed cost allocation methodology does not fully
address the concerns the Commission expressed in the July 19 Order”.
(¶ 43)
 This analysis is moot
 An alternative cost allocation proposal is being considered.
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Questions?
Contact
Mike Robinson ( [email protected] )
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