THE ENERGY POLICY ACT OF 2005 HELPED TO ACCELERATE RENEWED industry interest in demand response (DR), time-based pricing, and the advanced metering infrastructure (AMI) needed to support them. Much of the recent interest in DR, particularly in areas with organized regional wholesale power markets, has focused on the need for price-responsive demand (PRD) to improve the efficiency of operation of those markets. This author considers PRD to be the most general term for describing consumer demand for electricity that is sensitive to conditions in wholesale markets. This is the case largely because the alternative term demand response is often used to refer only to programs offered by independent system operators (ISOs) rather than as a feature of consumer demand that can be initiated by more flexible retail pricing mechanisms. As described below, PRD may be achieved either through retail pricing or DR programs. Historically, economists have argued that more efficient retail electricity pricing that better reflects time-varying wholesale power costs will improve economic efficiency, thus producing resource cost savings and enhanced customer value when compared with traditional fixed prices. However, a lack of state regulatory encouragement and utility initiative, along with concerns about metering costs and effects on consumers, has delayed the widespread adoption of dynamic, time-based pricing. Partly as a result of this inaction at the state level, most recent attention regarding PRD has focused on DR programs offered through regional ISOs like PJM, the New York ISO, and ISO New England. © 2006 IEEE.
