UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Demand Response in Organized Electric Markets Docket No. AD08-8-000

**[STATEMENT OF ANNE C. GEORGE]{.underline}**

**[ON BEHALF OF THE CONNECTICUT DEPARTMENT]{.underline}**

**[OF PUBLIC UTILITY CONTROL AND THE NEW ENGLAND CONFERENCE OF PUBLIC
UTILITY COMMISSIONERS]{.underline}**

Good afternoon, I am Anne George, a Commissioner at the Connecticut
Department of Public Utility Control and Past President of the New
England Conference of Public Utility Commissioners (NECPUC). I am also
the Chairman of the Electricity Committee of the National Association of
Utility Regulatory Commissioner (NARUC). It is a pleasure to be here
today to speak about the importance of demand response in wholesale
markets and to explore some of the barriers that exist to greater
deployment of demand response.

**[Wholesale Markets]{.underline}**

The New England states have long supported demand response programs,
both on the retail level and the wholesale level. Individually, the
states have created and implemented rate design changes, metering
initiatives and incentive programs to enhance the deployment of demand
response in the region. Collectively, the states have worked with
ISO-New England to develop rules that facilitate greater demand response
in the wholesale markets. A primary example of this collaboration is the
treatment of demand resources in the Forward Capacity Market (FCM).

In New England, 2500 MW of demand response cleared in the first Forward
Capacity Auction (FCA), and another 850 MW have expressed interest in
the next FCA. The amount of demand response in the first auction was a
primary factor in driving the FCA clearing price to the floor -- as it
should when load has an opportunity to respond to price signals in the
same way as supply.

During our regional debates on the creation of the FCM, NECPUC was
steadfast in its arguments that demand resources should be comparable to
supply resources. Beyond the capacity markets, NECPUC has been working
with ISO-New England to integrate demand resources into other wholesale
markets, such as the reserves and regulation markets and has been
supportive of ISO-NE's recent pilot programs in these areas. As the
Commission's Competition NOPR reflects, one of the greatest barriers to
full deployment of demand resources is the disparate treatment of the
resource in certain wholesale markets. NECPUC will continue to work with
regional bodies to integrate demand resources into the ancillary
services markets.

As we find ways to deploy increased demand resources, NECPUC is
cognizant that some have raised concerns regarding the reliance on
greater amounts of demand response without appropriate data
demonstrating the legitimacy of the resource. NECPUC understands that
ensuring the consistency, accessibility and reliability of demand
resources is necessary to support the participation and expansion of
these resources in the wholesale markets and regional system planning
process. To this end, NECPUC recently approved a resolution supporting a
regional forum to develop common protocols to measure, verify and report
demand resource savings. One important aspect of this review is to look
at how customer baselines are developed and provide standards to ensure
the accuracy and integrity of the demand response event. The New England
states look forward to working with other Northeastern states to
coordinate research and evaluation of these important resources.

**[Retail/Wholesale Linkages]{.underline}**

Connecticut and other New England states have been developing ways to
integrate their retail programs with the ISO-New England programs.
Variations in rules for wholesale market participation and retail
programs is often cited as a barrier to deployment of demand response
and the states have strived to achieve comparable requirements, or at
the very least, requirements that do not conflict, with ISO-New England
programs. For example, in Connecticut the DPUC launched a successful
distributed generation program that has resulted in increased emergency
generation in the state. The program ties incentives and low-interest
financing with requirements to participate in ISO-New England demand
response programs. By coordinating the state program with the wholesale
program, the state receives a greater return on its investment of
ratepayer dollars.

Connecticut is actively implementing greater advanced metering
capability and additional rate structures to provide enhanced ability to
respond to prices. With new rate structures in place, such as critical
peak pricing, and the metering equipment to go along with such
structures, we anticipate that customers will have greater ability to
participate in demand response programs. As we go forward, we are
continuing to look at how our state programs can work in conjunction
with wholesale markets.

Further examination of the potential barriers to demand response and the
interplay between retail and wholesale markets is underway as part of
the FERC/NARUC Collaboration on Demand Response. The research project,
entitled "Overcoming Barriers to Customer Demand Response through
Coordinated Retail and Wholesale Regulatory Policies," will identify
market barriers and provide options to coordinate retail and wholesale
programs policies. The New England states look forward to the results of
the study.

**[Conclusion]{.underline}**

In summary, Connecticut and the other New England States will continue
to work with our regional partners to enhance the participation of
demand resources in all of the ISO-New England markets. We commend the
Commission for taking on this review and for acknowledging the important
jurisdictional lines between the states and the federal government in
regulating demand response.