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August 26, 2011
Article Co-Authored by Brattle Economists on Natural Gas Demand Response Programs Featured in Public Utilities Fortnightly’s Spark

An article co-authored by Brattle principals Ahmad Faruqui and Jürgen Weiss on the benefits of implementing demand response programs for natural gas has been featured in a recent issue of Public Utilities Fortnightly’s publication Spark.

In the article, “Are LCDs and customers ready for dynamic pricing?” Drs. Faruqui and Weiss argue that due to the increasing role of natural gas for power generation, enabling dynamic pricing programs can assist in managing the potential volatility expected in the gas markets. Demand response programs are already heavily used in the electricity sector, particularly since the California energy crisis, and have aided in managing demand and improving economic efficiency.

The article points out that during this past winter and summer, daily wholesale gas prices reached levels two and three times the amount typically paid by residential consumers. Coupled with the fact that a slight change in thermostat settings has the potential to lower gas demand by five percent, Drs. Faruqui and Weiss believe that participation in demand response programs can alleviate the strain placed on the natural gas sector. Because many customers are already on some type of electricity demand response program, the authors agree that customers would most likely be willing to accept a natural gas demand response program as well.

The entire article is available on the Spark website.