In 2008, The Brattle Group was retained by ISO New England (ISO-NE) to provide research and analytical services to support stakeholder discussions concerning the participation of demand response (DR) resources in wholesale energy markets. The result of those discussions was the development of five alternative approaches to DR compensation. The same five DR compensation approaches were presented to the Federal Energy Regulatory Commission (Commission) in response to the March 18, 2010 Notice of Proposed Rulemaking regarding Demand Response Compensation in Organized Wholesale Energy Markets. On August 2, 2010, the Commission issued a Supplemental Notice of Proposed Rulemaking and Notice of Technical Conference (Supplemental NOPR) in which parties were asked to comment on whether the Commission should adopt a “net benefits test” for determining when to compensate demand response providers. In response to the Supplemental NOPR, ISO-NE asked The Brattle Group to complete a study evaluating alternative DR compensation approaches and to prepare this report.

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Economic Evaluation of Alternative Demand Response Compensation Options