Big local electricity users step up to ease peak load

PJM Interconnection said yesterday that, as electricity use soared Wednesday, the region's power grid set a record in the amount of peak need that was met by so-called demand response, in which power customers are paid market rates to curtail consumption.

With high temperatures and humidity across the eastern portion of its 13-state electricity pool, PJM said demand topped 139,700 megawatts - less than the record of 144,644 megawatts set Aug. 2, 2006, but the highest so far this year. PJM, of Valley Forge, oversees a power grid that serves 51 million people from New Jersey to Illinois.

Although peak demand did not approach the system's rated capacity of 165,000 megawatts, grid managers were concerned enough about potential overloads in the eastern portion of the grid to order a 5 percent voltage reduction - commonly called a "brownout" - in PJM's Mid-Atlantic section.

PJM said it ordered the reduction after the failure of two units at an unidentified power plant. The brownout lasted less than 11/2 hours, and reduced usage about 1,000 megawatts - enough to serve about 800,000 to one million homes.

PJM said demand-response providers, typically businesses or institutions that offer to cut their consumption as needed, provided nearly twice that much, 1,945 megawatts of power, to meet the system's peak requirements Wednesday afternoon.

The volume of demand response was "similar to the amount of power used by a mid-size city," PJM said.

"This was the largest amount of demand response we've ever had on one day, and it's an encouraging milestone," PJM vice president Andrew L. Ott said in a statement. "Participating consumers responded to price signals in the wholesale electricity market and to system needs."

In PJM's wholesale power markets, electricity customers that voluntarily curtail consumption to meet peak demand can be paid the same amount for the power they offer back to the system that generators are paid for producing electricity.

As demand forced grid operators to turn to rarely used and expensive "peaker plants" Wednesday, power prices topped out at about $1,000 per megawatt-hour, or $1 per kilowatt-hour - nearly 20 times the year-round average price.

At least one power-market observer said yesterday that Wednesday's demand response, while impressive, fell far short of what was needed to keep power prices in check as retail customers become increasingly exposed to the impact of high wholesale prices. In Peco Energy's territory, retail rate caps are scheduled to end in December 2010.

"It's a nice step in the right direction. But, really, we should be at 10,000 to 20,000 megawatts of demand response so that no one is paying $1 per kilowatt," said John Hanger, a former Pennsylvania utility commissioner and president of PennFuture, an environmental advocacy group.

Hanger said one key to expanding demand response was enabling consumers and small businesses to participate in the market through the installation of computerized "smart meters." The meters would allow residential customers to reap a financial benefit if they were willing, for example, to cut back use of air-conditioning on hot summer afternoons - much as businesses benefited Wednesday by shutting down unneeded equipment.

In a package of energy bills to be considered next month at a special session of the Pennsylvania legislature, Gov. Rendell has proposed that the state's utilities be required to install smart meters in all customers' homes and businesses. Much of the state's power industry opposes the proposal.