There's a bright side to those recently soaring electricity prices we've seen on both coasts: a renewed interest in controlling customers' peak power demands.

Some utilities are now paying customers who can cut back load (or turn on backup generators) when called upon to do so. Contractors offering load management systems (e.g., bas, EMS) would be wise to investigate how they might take advantage of this opportunity.

What Happened?

As seen in California, New York, and elsewhere, as the margin between supply and demand narrows, the price of the last kilowatt-hour (kWh) may spike for hours or days. Until new generation comes on-line, the only other way to narrow that gap is to minimize demand.

For years, utilities offered rate discounts (ranging from 15% to 40%) to those who could interrupt their loads when called upon to do so. If a customer failed to cut back, he was charged a hefty penalty (as high as 100 times the usual electric rate). Most paying "interruptible" rates did so thinking that such interruptions would be rare. All were stunned in California when they were told to interrupt 17 times during the summer, and then again during an early fall cold snap. One university paid penalties exceeding $10,000 a day, a near disaster for a nonprofit on a tight budget.

To get around these problems, utilities on both coasts and in the Midwest are now offering new, "curtailable" electric rates under which customers may be paid handsomely after cutting load in response to a utility call. If they fail, there is no penalty. If they succeed, they receive at least $0.30 (and as much as $1.00) per avoided kWh.

Making Curtailable Rates Produce Profits

Success requires careful design and preparation beyond the system (e.g., chiller, lighting, fans) to be controlled. Issues related to communication, metering, and timing are paramount to ensure that an opportunity does not become a problem. New software and demand management services have recently appeared to help customers manage this option. All must be able to handle the following types of requirements:

  • Work with at least 100 kW of curtailable customer load;
  • Receive and act upon the signal (e.g., beeper, radio) sent by the utility;
  • Be able to do so between 9 a.m. and 10 p.m. on any day of the week;
  • Cut load within 1/2 to 4 hours (depending on the utility) of receiving a call to do so; and;
  • Monitor, measure, and record the time, duration, and level of demand reduction (or onsite power generated).

Rules vary; check tariffs on utility websites (e.g., Alliant Energy at, Consolidated Edison at under tariff Rider U), and some Independent System Operators (ISOs) that manage transmission systems (e.g., PJM at

Avoiding The Pitfalls

Some thought is needed to deal with each of the following: Short notification time and intervals between them. One utility originally thought it could call on customers to switch loads on and off in 10-minute intervals, regardless of the impact that could have on mechanical systems.

Unknown frequency and number of curtailments. If fully automated, such calls should not be a problem, but asking a facility manager to manually respond to 17 calls in one summer is asking for trouble.

Shaky communications. Unless the system is fully automated, the customer's building manager must be ready and able to receive and act upon curtailment calls regardless of where he is. Beepers don't work everywhere, and faxes and e-mails may not be seen in time.

Limitations on access to competitive power options. Some utilities only offer the curtailment option if the customer takes power from them, thus blocking access to competitively priced electricity (where retail deregulation has occurred).

Resurgence of regulation, or expanded generation. What happens if retail power prices become regulated again, or new power plants come swiftly on-line, forcing on-peak power prices to drop? How will the customer feel about his "stranded investment" in unused hardware and/or software?

Is This Change Happening In My Backyard?

Examples of curtailable rates may be found in California, Wisconsin, Iowa, Minnesota, Illinois, New York, and Oregon. Both the PJM ISO (covering Pennsylvania, New Jersey, Maryland, and Delaware) and the New England ISO (covering Maine, Massachusetts, Connecticut, Rhode Island, Vermont, and New Hampshire) have load reduction programs at the wholesale level, which filter down to customers at the option of their local utilities. Call your local utility to see if one is available.

While others may continue to see price volatility only as a source of problems, here is a chance to make it a source of profit. ES