When demand-side management competes in an electric resource solicitation - Issues from a case study in New York

In this study we analyse a New York utility's integrated bidding programme, focusing on the techniques used to incorporate demand-side management (DSM) options. The utility relied on a two-stage bid evaluation process. In the first stage, an objective self-scoring system was em ployed, where points were awarded for price and other attributes of DSM and supply proposals. A short list of projects was selected, which were then subjected to more detailed analysis by the utility. Several additional screening criteria were used in the evaluation of DSM bids, including technical and economic feasibility, riskiness, and potential impact on the company's own DSM programmes. Out of the 33 DSM bids originally submitted (for a total of 163 MW), 30 made it through the first stage, but only seven survived the second stage (for a total of 36 MW). The scoring system did not effectively discriminate among or adequately value DSM bids, primarily because it was designed to evaluate supply-side projects. In the second stage, the utility evalua tion process was too stringent in eliminating DSM bids that potentially competed with utility DSM programmes or overlapped with other DSM bids. To avoid these problems in future solicitations conducted by this or other utilities, we recommend that separate auctions be held for supply and demand resources, that DSM bid evaluation criteria be tailored to the characteris tics of the DSM resource, that contract negotia tions be more heavily relied upon to resolve issues between the utility and bidders, and that utilities consider partnerships between them selves and third-party DSM providers in im plementing their DSM programmes as an alternative to bidding programmes such as the one discussed here.