Brattle Economists Author Article on Demand-Side Management for Public Utilities Fortnightly

Brattle principal Ahmad Faruqui and research analyst Eric Shultz recently co-authored an article for Public Utility Fortnightly’s Spark Magazine on the challenges faced by utilities employing demand-side management (DSM) and the methods they use to deal with these challenges. The paper explains the findings of a recent survey, conducted by The Brattle Group, of medium-to-large sized North American utilities.

DSM has become increasingly important for utilities across the country for reducing the amount of energy consumed over the course of the year and/or during peak periods. This is done using incentives that encourage customers to buy more energy efficient technologies and to shift demand from peak hours (where the power grid is stressed due to high demand) to off-peak hours. But DSM has also made it difficult for utilities to recover their fixed costs since it has lowered sales growth.

In the article “Chartering The DSM Sales Slump: A Survey of Rate Case Methods for Sales Forecasting,” the authors explain the outcome of the survey which attempted to determine what exogenous adjustments utilities made to their load forecasts for DSM. The authors find that there are five main methods used to deal with DSM in sales forecasting: 1. Already Reflected – No Adjustment Needed; 2. No Prior History – Forward Only; 3. Prior DSM History – Embedded + Incremental; 4. Reconstructed Data – As If No DSM; 5. Econometric estimation of DSM impacts. In the article, Dr. Faruqui and Mr. Shultz provide explanations of these five methods and provide a sample of the responses from the survey.

For more information, or to read the article in its entirety, please visit Spark’s website.