The Federal Energy Management Program developed profiles of demand response and time-variable pricing programs throughout the United States. These profiles are grouped regionally by state.
Demand response (DR) is a short-term, voluntary decrease in electrical consumption by end-use customers that is generally triggered by compromised grid reliability or high wholesale market prices. In exchange for conducting (and sometimes just committing) to curtail their load, customers are remunerated.
The majority of U.S. utilities offer their commercial and industrial customers at least some kind of DR option. In addition, the country’s seven independent system operators/regional transmission organizations (ISO/RTOs) each sponsor DR programs.
Time-variable pricing (TVP)—in which electricity prices vary at different times of day (and often seasonally)—is also widespread in the electricity markets. Most utilities offer at least one TVP option for any given customer class. These often include simple time-of-use (TOU) rates, where prices move at set times and amounts through the day—generally with an afternoon peak period, overnight off-peak hours, and two "shoulder" periods in the hours in between.
Additional TVP types are:
- Real-time pricing (RTP): The prices charged to customers closely match either the underlying wholesale electricity market or the utility’s cost of production
- Day-ahead hourly pricing: The provider publishes its prices (reflecting its cost of acquisition or production) for the following day
- Block-and-index pricing (sometimes called block-and swing pricing): A combination of fixed pricing and RTP (i.e., the customer locks in some of its load at fixed prices and floats with market pricing for additional usage).
There are other types of TVP, but most are variants of those listed above.
DR programs and TVP recognize that electricity availability and production costs are almost always changing, sometimes dramatically. DR and TVP are simply means by which electricity purveyors can incentivize load management (load curtailment and shifting) in order to minimize some of this change, or to shoulder some of its risk. Customers can greatly benefit from both DR and TVP options, particularly if they have the ability to modulate their loads, at least occasionally, in response to market signals (e.g., DR event notifications or prices).