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March 29th, 2013

Enernoc Exits ISO New England Demand Response Program

by Andrew Price, President & COO

Demand Response has suffered a big setback in New England. Enernoc (logo from, one of the leading demand response providers in the country, recently announced that it was exiting the traditional demand response program in New England. While it will still offer customers in New England many related services, Enernoc will not offer new Forward Capacity Market Demand Response (DR) contracts for an indefinite period of time. Further, it has notified its DR clients that it was unilaterally terminating existing DR contracts due to “material changes” to the DR program in New England. This decision impacts a number of CES clients who participate in formal demand response programs.                                            

The Independent System Operator of New England (ISO-NE) has offered a forward capacity market demand response program for many years. Businesses agree to reduce electric load during hours that the electric transmission system is stressed. In exchange for this pledge to reduce load when called, the business is paid a monthly reservation fee. The ISO-NE does not deal directly with electrical end-users. In order to participate, a business needs to select a demand response provider. Leading demand response providers in New England included Enernoc, Constellation, Comverge and (sometimes) Hess.

The demand response provider performs a number of tasks including: aggregation of participants, installation of metering equipment on customer facilities, procurement of forward market capacity, as well as data gathering event notification and payment functions. In exchange for providing these necessary services, DR providers keep a share of the payments earned by customers for participating in the program. CES has helped many of its clients conduct competitive bids for DR services, focusing on the revenue share between the customer and the service provider. Depending on the amount of load that a customer is willing to interrupt on demand, the amount they need to share with their DR provider can vary from 60% to 10%.   

Enernoc has cited a number of material changes to the DR program that have resulted in their decision to unilaterally terminate contracts. These changes include: less favorable rules associated with setting customer baselines, shorter data reporting response times required by ISO-NE; more onerous auditing requirements, and; elimination of a floor price for capacity. Enernoc has determined that these, and other changes, have made the program unprofitable.

Unfortunately, while Enernoc’s decision may be a prudent business decision for a public company that has a duty to its shareholders, it has left some DR participants scrambling. Certain businesses who had multiple years left on their DR contract with Enernoc must find new DR providers before June 1st. Enrolling with a new DR provider can also be a burden on participant’s time, requiring the installation of new metering equipment.

The name Enernoc has long been synonymous with DR. The forward capacity market DR program will be much worse without this high quality participant. Perhaps Enernoc’s withdrawal will lead to program changes at ISO-NE that favor DR participation. Unfortunately businesses will suffer as well as they try to adapt to this surprising and unexpected move.

CES clients who participate in DR programs with Enernoc - or another DR provider -  should not hesitate to contact their Account Executive with any questions or concerns about this news.    

(Tags: Enernoc, Comverge, Hess, Constellation, Demand Response, ISO-NE, Independent System Operator of New England, Forward Capacity Market)


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