Third-Party Service Providers
and Compliance Concerns
Only one-third of survey participants who
currently participate in a demand response
program reported that they were aware that
those programs are regulated at the state
or federal level. This could be problematic
because if manufacturers don’t recognize
the program is regulated they may be out of
compliance without even knowing it.
Many survey participants were not sure
how their company had enrolled in their
demand response program, which is typi-
cally through a third-party provider or their
local electric utility.
Furthermore, the survey results indicate
that communications between the manufacturer and the demand response provider
could be improved. Few survey participants
seem to have regular communications
with their service provider. While demand
response service providers may be doing a
good job, a significant 29 percent of our survey participants who responded to this question reported that they believe their service
provider “never” communicates with them
about compliance. Less than half reported
communications once or twice a year. Only
seven participants reported that their service provider communicates in writing on
a regular basis. This raises questions about
the amount and quality of information that
companies receive about demand response
programs, which can impact their ability to
comply with federal and state regulations.
Manufacturers Should Review
While it’s clear from the responses that
demand response service providers may
not be initiating adequate communica-
tions with their customers, it’s really a
two-way street. Manufacturers should not
hesitate to ask for more information about
the program in which they participate.
Likewise, the burden lies with manufacturers to ensure that their procedures comply
with regulatory requirements and, in this
regard, incorporating written protocols
into a compliance program is a step in the
right direction. The vast majority of survey
participants who reported that they do not
have written protocols for their demand
response program also reported that they
never discuss compliance issues with their
provider or did not answer the question
about communications with their third-party service provider.
When asked why participants did not
have written protocols to assist with compliance, the answers suggest that they may
believe that compliance is not an issue
because demand response programs are
voluntary — participants choose whether
to enroll and if they are not able to make
committed energy reductions whenever
requested, they are assessed financial penalties for failing to respond. Although this
is true, enrollment in a demand response
program subjects the participant to oversight by the electric market regulator, and
every participant must comply with program rules or risk an investigation of their
practices. Compliance issues may arise, for
example, if a participant deliberately overstates the amount of energy it is capable
of curtailing or takes steps that artificially
increase its consumption baseline.
pants who do uti-
lize written pro-
tocols, those pro-
do not focus
with the demand
gram. A number
to ensure that
ed by, for exam-
ple, bringing all
equipment down and back up in an orderly
manner to avoid damage to the equipment
and to ensure no loss of production capacity.
These are good reasons for having written
procedures, but manufacturers may want to
consider elaborating on them to cover regula-
tory compliance as well.
Even if you already deploy technologies
to reduce energy consumption, you may
be able to realize additional savings by
enrolling in a demand response program.
To learn more about the demand response
options available to you, consider starting
your research with established providers
endorsed by local Chambers of Commerce
or industry associations.
While participating in a demand
response program is voluntary, you must
nonetheless comply with state and/or federal rules or potentially risk incurring substantial penalties.
To maximize your relationship with
your demand response program provider,
request that it provide you with the most
current information regarding demand
response programs and issues in your
region on a regular basis, including compliance rules.
To stay abreast of current compliance
requirements that affect you or if you have
unanswered concerns about your participation in a program, consider consulting with
experienced legal counsel for some basic
advice and a review of your procedures.
About the Respondents:
The majority of respondents ( 34. 6 percent) came from the Midwest, the Mid-Atlantic ( 18.1 percent) and New England
( 13. 3 percent). Nearly 11 percent came
from the West and the South Atlantic each,
with eight percent coming from South
Central. Two-thirds of the survey participants employed up to 500 employees,
and nearly 20 percent employed more
About the Authors
Kimberly Frank, David Cousineau
and Jeffrey A. Fuisz are lawyers in Kaye
Scholer’s Energy & Infrastructure Group.
They represent clients before the Federal
Energy Regulatory Commission in matters
that have direct and measurable impacts
on the cost of electric energy.