What Works in DR Program Design NPCC Demand Response Workshop February 24, 2006

2 Contents 1. PGE DR Capability 2. What Works 1. Level of Control 2. Customization vs. Mass Market design 3. Marketing & Education 3. RD&D for the Future of DR

3 Portland General’s Demand Response Capability Justification for implementation measured against total resource cost effectiveness, reliability, dispatchability, avoided supply side capacity costs, and environmental impact. Load Control Large Customers  Dispatchable Standby Generation - ~30 MW online, 10 MW under construction.  Custom peak load curtailment contracts available for large customers. Residential and Small Non-Residential Customers  Experience with direct control of space heat and water heat. Pricing Large Customers  Demand Exchange (DBB) for large customers - 30 MW enrolled, ~4 MW likely.  Large customer programs supported by Energy Information Services (EIS) - ~500 bills.  RTP pilot available for large customers. Residential and Small Non-Residential Customers  TOU for residential and small non-residential - ~1,800 customers. Active Demonstration Projects Fuel cells, microturbines, and combined heat & power (CHP).

4 1 - Degree of Utility Control Win-Win Dispatchable Standby Generation Number of controllable hours is specified contractually. It doesn’t interfere with customers’ schedule. Power marketers have put DSG on reserve frequently in last 6 months. So-So Demand Exchange (DBB) The range is broad, and is not firm resource. Reduction is based not only on price, but on the customers’ priorities at the time. Direct control of water heat. Customers reported they liked it. Timing of when water heater on may not coincide with system need. Who Knows Direct control of space heat. Not comparable to AC results; heat tolerances are narrower. First hour of reduction is more reliable than subsequent hours, due to overrides. TOU for residential and small non-residential Takes 1-2 years of history and data collection to determine amount of likely shift. Need large volume to realize large reductions. Results vary with pricing. I’m not going to have anyone telling me how to use electricity – l have to use it when I need it in order to keep my business running. It’s so convenient for me to not have to worry about when my water heater is on or not. I’m sure I’m saving energy and money!

5 What Works – Degree of Utility Control High Degree of Utility Control works WHEN: It doesn’t interfere with customers’ schedule, AND Number of controllable hours is specified contractually.

6 2 - Customer-by-Customer Negotiations and Mass Market Implementation Customary Approach - Pragmatic  Large customers require a customized approach.  Opened RFP for customized mandatory contract. Responding customers negotiated one-by-one.  Even with “mass market” approach, via rate design or tariffs, large customers tend to work one-on-one with the utility, e.g., DBB needs baseline per account.  Mass Market design is most cost effective with small and residential customers.  Need to show the benefit to varying customer groups, e.g. spectators/converts/teammates, purchase classifications such as country traditionals/young moderns, business SICs.

7 What Works – One-on-One vs. Mass Market Design Higher Customer Interest WHEN: It doesn’t interfere with customers’ schedule, AND Customers see an economic benefit.

8 3 - Marketing/Education – SDG&E Non-Participants offer the best insight  SDG&E learned customers shy away from programs that:  Are not a mainstream concept  Are complex and technical  They believe will result in higher bills  Don’t have an advantage for the customer Improved their response rate when:  Simplified the materials  Mailed direct mail, twice  Telephone follow up  Targeted likely customer group  4,000 letters, mailed twice = 744 responses Information from SPP CPP-V Track A Redeployment, JC Martin, June 9, 2004

9 3 - Marketing/Education SDG&E used a brief letter and simple brochure in recruiting for their residential thermostat program. They highlighted that customers receive a free thermostat, a $100 value in addition to cash incentives. They also recruit new customers where technology has already been installed: Information courtesy of Lela Manning, SDG&E. “ Get a new digital thermostat like this one installed in your home for free… And earn some cash back too!” “Dear Customer: “Did you know that the thermostat in your home can earn you up to $100 this year. Your home is equipped with a state of the art, programmable `smart thermostat’….”

Marketing/Education - LIPA LIPA is aggressive in recruiting and retaining customers in contracted C&I program and residential load control. 1. Community 2. Compensation 3. Communication Information courtesy Bill Jackson, April Community - Appealed to the sense of helping the sense of economic development for the community, alliance with McDonald’s through the school program. Contests and Prizes. 2. Compensation – Always provided a monetary incentive; absence of penalties helps. Customers’ business or lifestyle come first. Power Perks Loyalty Card for discount shopping. Tickets to Islanders’ hockey games. 3. Communication – Requires multiple means, e.g. brochures, direct mail, community events, school pizza parties, a mascot, pre-curtailment notification, post-curtailment follow up, status of impact made by customers/communities (helps with retention).

Marketing/Education – City of Anaheim City of Anaheim rewards customers with a high value credit for energy not used during peak hours.  A “rebate driven DR program” Education/Information/Incentive and Technology  Technology is a “key enabler in success of DR programs”. Information from Linda LeDuc presentation September Recruitment through Direct Mail = 150 Fact sheets, refrigerator magnet Reports sent to participants after each event Positive Incentive, not a pricing program, no rate reduction, no penalties $0.35/kWh rebate at end of season Measured against control baseline Regular rate is $0.11/kWh

12 What Works – Marketing/Education Higher Customer Interest WHEN messaging includes: It doesn’t interfere with customers’ schedule, AND Customers see an economic benefit. Tactics: Brief letters Clear Direct Mail brochures Telephone follow up Free technology Monetary benefit Appeal to community benefit No penalties Visual reminders – mascots and magnets Follow up reports help retention

13 Vision for the End State PGE’s Vision is for Market Transformation: DR and other Distributed Generation will reach critical mass. Smart Homes and Smart Businesses, with smart appliances, will become common.  Appliance manufacturers will find ways to build intelligence into their production line appliances or it will be driven by standards.