Lea Márquez Peterson
Chairwoman

UPDATE - APS Receives Bids in Response to RFP that Seeks Affordable Rates for Customers through Competitive All-Source Distributed Demand-Side Resources

PHOENIX - In a progress report Arizona Public Service Company (APS) filed with the Arizona Corporation Commission (Commission) on Friday, October 15, 2021, the electric utility, which is the state’s largest investor-owned electric service provider and provides electricity to over 1.3 million customers in Arizona, gave regulators an update on the preliminary results of a request for proposals (RFP) the company issued in the context of developing a new energy program. (Oct. 15 Progress Report)

Background

In December 2020, the Commission voted unanimously to adopt a proposal from Chairwoman Lea Márquez Peterson to direct APS to develop a “DDSR Aggregation Tariff” that will accomplish the following:

 ●        compensate aggregators of distributed demand-side resources (DDSRs) (such as smart thermostats, connected hot water heaters, smart pool pumps, batteries, and bundled energy efficiency) for the value that each resource provides the grid (such as energy, capacity, demand response, load shifting, and ancillary services such as voltage and frequency support); and

●        save commercial and residential customers of APS money through the synchronization of potentially millions of DDSRs on the grid.

According to APS, the DDSR Aggregation Tariff the Commission requested in December 2020, “has not been established anywhere else in the country.” “This tariff will make the state of Arizona the leader in aggregating these new and evolving demand-side technologies,” said APS.

According to the Southwest Energy Efficiency Project (SWEEP), the concept represents a “first-of-its-kind” in the nation and is “incredibly innovative and groundbreaking.” “We are excited to see what Arizona brings forward in terms of a new tariff and mechanism to enable customer side technologies to help diversify and bring flexibility to the grid,” said SWEEP.

According to Chairwoman Márquez Peterson, “The State of Arizona represents one of the most ideal jurisdictions to launch an all-encompassing demand-side resource tariff. Our smart infrastructure, combined with Arizona’s digital connectivity and demand curve, which is unique to the Western United States, make the Desert Southwest, and Arizona specifically, the perfect place to study demand-side optimization and lead on cutting-edge energy innovations and regulatory policies.” (Press Release)

In February 2021, the Commission announced that the U.S. Department of Energy (DOE) had approved a request to receive technical assistance from the Lawrence Berkeley National Laboratory (LBNL) regarding the development of the DDSR Aggregation Tariff (Announcement). Acting Assistant Secretary for Energy Efficiency and Renewable Energy Kelly Speakes-Backman said DOE was “pleased to provide technical assistance to Arizona for this innovative tariff."

Bidders Respond to RFP

On June 30, 2021, APS issued an RFP to help inform the tariff valuation analysis and design framework. The RFP allowed aggregators of DDSRs to bid directly to APS and provide market-based information on the value of the operating characteristics of DDSRs. The RFP elicited bids for three distinct use cases for DDSRs, which included the following: systemwide peak capacity during summer months; locational peak capacity during summer months and load shifting during non-summer months on specific distribution feeders; and ancillary services such as voltage and frequency support.

The deadline for submission was September 7, 2021. On October 15, 2021, APS filed a progress report with preliminary results of the RFP, including the number of bidders, the number of bids, the types of DDSRs, and the capacity amounts, among other information. Information highlighted in the report include the following:

●        APS received responses from a total of six respondents.

●        The respondents provided a total of 12 bids across the three use cases.

●        Most respondents offered bids for more than one product.

●        Bids ranged in capacity from 1 MW to 40 MW.

●        Bids encompassed “a wide range” of DDSR technologies, including “residential and commercial energy storage (batteries), residential thermostats, managed EV charging and commercial demand response.”

●        Respondents offered “a range of proposals” for the amount of capacity they could bring online, with some respondents saying they could bring capacity online “as soon as June 1, 2022.”

“The RFP marks a positive step in the development of Arizona’s innovative DDSR Aggregation Tariff concept,” said Chairwoman Márquez Peterson.

“Utilizing a market-based approach to gather more information was the appropriate way to go, especially considering the ‘uncharted’ quality of this endeavour in the energy industry,” said Chairwoman Márquez Peterson.

“I’m happy to see the level of interest and participation among the respondents,” said Chairwoman Márquez Peterson. “Their responses play a vital role in helping us learn more about these emerging technologies and whether they can help customers save.”

“I look forward to seeing the cost estimates when APS files its future progress reports. The information should give us a more accurate picture of the real value of these resources for the grid.”

Next Steps

APS says that it is currently evaluating the bids it received in response to its RFP and plans to choose a short list of finalists by October 26, 2021.

According to APS, the company intends to complete the RFP selection process and preliminary selections of projects to be awarded by November 30, 2021.

The company hopes to finalize and execute contracts with vendors for selected projects in RFP by March 1, 2022.

The company is required to develop and file a proposed DDSR Aggregation Tariff by May 1, 2022.

In the meantime, the company indicates that it will continue to collaborate with LBNL to help provide data and coordination to the Commission in the development of the tariff.

The blackout period for the RFP ends in December, at which time APS intends to reconvene stakeholder meetings.

A link to Chairwoman Márquez Peterson’s press release can be found here.

A link to the Commission’s announcement regarding DOE can be found here.

A link to APS’s October 15 progress report can be found here

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