1 STAFF REPORT
DATE: August 22, 2023
TO: Justin Hess, City Manager
FROM: Dawn Roth Lindell, General Manager, Burbank Water and Power VIA: Drew Johnstone, Sustainability Officer, Sustainability, Marketing and Strategy
BY: Myles Collins, Energy Services and Utility Rates Manager Drew Kidd, Marketing Associate
SUBJECT: Approval of Burbank Water and Power’s Continued Status as a ‘Provider’ in the California Energy Commission’s Demand Side Grid Support Program, and Approval of the Cool Rewards Demand Response Program for Implementation
RECOMMENDATION
1) Approve Burbank Water and Power’s (BWP) continued status as a ‘Provider’ in the California Energy Commission’s (CEC) Demand Side Grid Support (DSGS) Program; and
2) Approve the Cool Rewards Demand Response (DR) Program for implementation; and
3) Find that the DSGS and DR programs have no reasonably foreseeable significant negative change to the environment under the California Environmental Quality Act (CEQA) 14 Cal. Code Regs § 15061(b)(3).
BACKGROUND
Demand Response (DR) programs implemented by utilities aim to get customers to reduce electricity consumption during the times of day when system loads are high and/or energy is most expensive to provide. BWP offers several energy efficiency and conservation programs to its customers but does not currently offer any DR programs.
BWP has requested voluntary peak load reductions from its residential customers in previous summers during high system load days as part of a “behavioral DR” pilot. It has also reduced certain City of Burbank ( city) loads during the heat dome event in early September 2022 as part of a new CEC program called DSGS. BWP staff is aiming to expand DR offerings across the customer base—with a Bring Your Own Device (BYOD) program for residential and small commercial customers and the facilitation of an expanded DSGS program for larger commercial customers.
2 BYOD Smart Thermostat Program Cool Rewards
A BYOD program allows utility customers to enroll certain types of devices in a program and have the devices receive signals to reduce electricity usage during DR events. In return, customers earn a monetary incentive each year by participati ng in the program.
The most common type of BYOD program is for customers with smart thermostats, where utilities can use Distributed Energy Resource Management Systems (DERMS) to turn up the temperature on participating thermostats by several degrees, ther eby reducing the electricity required by the air conditioner or heat pump. This temperature increase is generally preceded by about an hour of “precooling,” where the premise is cooled to a temperature below the thermostat setpoint to lessen the imp act of the event. BWP’s program will be called “Cool Rewards.” It is a smart thermostat program, but the DERMS could host other programs if BWP decides to expand offerings in the fut ure to include other devices such as electric vehicle chargers or water heaters.
The ability of a BYOD program to directly reduce cooling load from customers enrolled in the program will allow BWP to reduce system load during peak period s and provide a more reliable load reduction than behavioral DR. Reducing cooling load lowers operating costs by reducing energy purchases during the most expensive market periods and reduce stress on the grid during heat wave events.
Example Smart Thermostat
Demand Side Grid Support
The CEC began offering incentives for load reductions during grid emergencies through the DSGS program during the heat dome event of 2022, which ran from August 31 st through September 9 th. Created by Assembly Bill (AB) 205 as part of the Strategic Reliability Reserve, and expanded by AB 209, the DSGS program compensates eligible customers and aggregators enrolled with their electric retail supplier for upfront capacity commitments and per-unit reductions in net energy load during extreme events achieved through reduced usage or use of dispatchable resources or both. DSGS Program funding is $314 million over five years.
3 Publicly Owned Utilities (POUs) such as BWP can sign up to be DSGS Providers, which enroll eligible customers as DSGS Participants, coordinate load reductions, calculate the load reductions, and reimburse the participants. Providers then apply for reimbursements from the CEC, plus 10% of the incentive amount to compensate for administrative costs.
In 2022, BWP signed up as a DSGS Provider and enrolled the Valley Pumping Plant (VPP) as a DSGS Participant. VPP is expected to receive a total payment of $34,650 for load reductions during the 2022 heat wave events. In 2023, BWP will again be a DSGS Provider for city facilities . For large commercial customers, BWP will not be a DSGS Provider, but rather help facilitate direct enrollment with the CEC.
DISCUSSION
Cool Rewards Smart Thermostat Program – Vendor Selection On February 17, 2023, BWP issued a request for proposals (RFP) for a demand response BYOD program and DERMS platform. Myles Collins , Energy Services & Utility Rates Manager, was the lead for the RFP, and BWP received two responses to the RFP. Myles established an RFP review committee which included Drew Kidd , Marketing Associate - Sustainability, Marketing, and Strategy, Ruzan Soloyan , Marketing Associate - Sustainability, Marketing, and Strategy, and Matt Ko, Principal Power Resources Planner – Power Supply.
The three -member review committee read and evaluated the two proposals —one submitted by Open Access Technology International Inc. (OATI) and the other by Sagewell Inc. The process consisted of a proposal review, which was scored as follows:
• Proposal Review
o Firm’s Experience, Background, and Past Performance (25%) o Qualifications of Proposed Project Team (15%)
o Technical Approach and Appropriate Credentials (30%)
o Proposed Price (30%)
The table below shows the average of the total scores from the evaluators for each vendor. The total score is out of 100. Note that the proposals were structured differently in terms of fixed and variable costs. The table is not reflective of the total program cost all-inclusive but is a way of achieving an “apples -to-apples” comparison. The “Total 3 - Year Program Price” does not include per-device costs. For OATI, the total program price represents an option that includes 4 thermostat Original Equipment Manufacturers (OEMS), and BWP was free to select anywhere between 1-4 OEMs.
Vendor Score Total 3-Year
Program Price
OATI 82 $181,200
Sagewell Inc. 58 $80,000
OATI received the highest score in the selection process. OATI has experience working with BWP and is the current provider of BWP’s power trading software. Sagewell Inc. was not considered qualified by evaluators based on the pro posal, which was for behavioral DR instead of a DERMS-based BYOD. OATI has over 25 years of experience providing 4 software solutions to the energy industry. One-hundred-fifty utilities throughout the country use the webSmartEnergy DERMS platform that will be deployed for Cool Rewards.
Enrollment
Single family residential, multi-family residential, and small commercia l customers with cooling controlled b y a sma rt thermostat can enroll in Coo l Rewards. The DR event season, during which BWP can call events and trigger load reductions, will start on May 1 of each year and conclude on Octobe r 31 of each year. Enrollmen t will be open year- round, and if enrollmen t levels exceed the budget, new custome r enrollment can be paused. Conve rsely, i f enrollment leve ls are lagging , the incentive amoun ts can be increased.
Customers can enroll and de-enroll from the program at any time. Through OATI, BWP will select Google Nest and Honeywell as eligible thermostat manufacturers as they represent nearly 95% of the smart thermostat market share in Burbank combined. Customers who enroll will be automatically re-enrolled in the program for the following year unless the customer opts out of the program. In 2023, enrollment is expected to start by the end of September.
Incentive Structure
BWP will provide an enrollment incentive of $75 plus an annual participation incentive of $50. These incentive amounts are comparable to similar utility DR programs.
Customers will receive the incentive immediately upon enrolling but will have to stay enrolled in the program for at least one DR event season. The $50 annual incentive will be paid after the close of the DR event season for the year on October 31st. Customers must enroll before June 1st of the DR event season to receive the $50 for participating during that season. They have the option of opting out of events but must fully participate in at least half of the events during the DR event season to receive the $50 incentive.
Incentives will be given as bill credits. Participants can only enroll up to two smart thermostats per electric account, and they can only receive the enrollment incentive once (for each thermostat). The program budget is estimated to support 1,500 customers for 2023 and 2024 and up to 2,100 customers for 2025.
In 2023, as the program period is expected to run for a shorter time from late September to October 31 st, BWP will only pay the $75 enrollment incentive. The participation incentive of $50 will begin for the 2024 DR event season.
Events
Customers who enroll in Cool Rewards will agree to adjust their thermostats during DR events from May 1st through October 31st. In 2023, the program will only take place from mid-September through October 31 st. Enrolled customers can anticipate at least one adjustment and a maximum of 20 adjustments per summer. DR events will typically occur on relatively hotter days when system peak loads are high, between the hours of 12 noon and 9:00 pm. BWP will not call DR events on weekends or holidays.
After a precooling period leading up to the event, the typical thermostat adjustment will be 3-4 degrees Fahrenheit, and the event will last no longer than 4 hours. 5 Standard practice will be to notify customers of an event 24 hours ahead of time. Staff will provide a minimum of 1-hour notice before calling an event.
Program Parameters
Season Window for Events May 1st to October 31st
Available Days: Monday-Friday, no holidays
Control Window: 12:00 pm-09:00 pm local
Scheduling Lead time: Typical: 24 hours
Minimum: 1 hour
Maximum Number of Events: No more than 3 events per week No more than 20 events per DR season
Maximum Event Duration: 4 hours
Deployment
BWP plans to commence the first year of the BYOD smart thermostat program before the end of September 2023 and call its first event in October. Summer 2024 will be the first year of full participation from May 1st to October 31st.
Demand Side Grid Support Program – BWP Participation
BWP will maintain its status as a DSGS Provider from 2022. BWP staff will work with DSGS program staff at the CEC to maintain VPP as a program participant and work with Public Works staff to enroll the Burbank Water Reclamation Plant in the program for 2023.
Coordination with Los Angeles Department of Water and Power (LADWP) and the CEC A new requirement of the DSGS program for 2023 is for utilities to coordinate any participation with their balancing authority (BA). BWP’s BA is the Los Angeles Department of Water and Power (LADWP). The BA has the authority to approve participation in the DSGS program for their member utilities. BWP staff has discussed the program with LADWP staff and agreed to general guidelines. BWP customers can participate in events called by the LADWP BA without restriction. For other events called by the California Independent System Operator ( CAISO), which is the BA for most of California, BWP customers can participate, but only as long as the reductions maintain grid balance per the Balancing Authority Service Agreement (BASA) between BWP and LADWP.
Olivine, which is the third-party DSGS implementer retained by the CEC, is scheduling one-on-one meetings with utilities and their BAs in August to establish program dispatch processes and procedures. This meeting will further clarify how BWP cus tomers may participate in the program.
6 Customer Participation
BWP is aiming to facilitate customer participation in DSGS . BWP staff has determined that the optimal way to do this is to assist customers in participating directly with the CEC.
The CEC allows direct enrollment from non-residential customers who are not eligible through their POU DSGS Providers. The updated DSGS Program Guidelines were made public on June 30, 2023, and approved by the CEC on July 26, 2023, so facilitating direct participation with the CEC is more expedient than standing up a program with updated participant terms and conditions. BWP will provide approval letters to customers that are eligible for the program after careful coordination between BWP program staff and Energy Control Center (ECC) staff, who maintain the balance on the grid.
BWP began outreach to customers in the large and extra-large general service classes in July 2023 to inform and educate them about their ability to enroll in the program.
Customers received an email informing them of the program, guiding them to call BWP staff for additional information if interested. BWP will respond to inquiries and reach out to select large and extra-large electric customers in August to gauge further interest. BWP will offer assistance in signing up with the CEC , offer assistance in estimating load reductions, and provide interval data to DSGS implementers for load reduction verification.
Incentive Payments
The available incentive through BWP (“Option 1” in the CEC DSGS Program Guidelines) is for standby and energy payments. “Standby payment ” refers to customers having onsite combustion generation available for dispatch during a heatwave event. Customers are reimbursed at $0.25 per kWh for each hour or portion thereof that this standby commitment is not actually dispatched (i.e., if the balancing authority d oes not issue an Energy Emergency Alert (EEA) that would require the customer to dispatch their energy).
Energy payments are $2.00 per kWh of verified incremental load reduction during a dispatch period. Providers such as BWP can also receive an additional payment of up to 10% of the total incentive received from the CEC to cover administrative costs.
ENVIRONMENTAL REVIEW
This activity is covered by the common -sense exemption because it does not have a reasonably foreseeable significant negative change to the environment under the California Environmental Quality Act (CEQA) 14 Cal. Code Regs § 15061(b)(3).
FISCAL IMPACT
Cool Rewards
The cost of the DERMS base service is $ 153,400 and would include devices from two manufacturers: Google Nest and Honeywell. These two manufacturers together comprise nearly 95% of the existing smart thermostat market share in Burbank. Annual costs per enrolled thermostat is $23, participation is expected to be no more than 1,500 customers by summer 2024, at a total cost of $34,500. Altogether this is a cost of $187,900, well within the $350,000 program budget between t he FY 22/23 manual carryover and FY 23/24 PSA listings. The remaining budget will be allocated to incentive payments to Burbank customers enrolled in the program.
Funding for the program would be covered by the following two PSA listings:
7 • FY 22/23 manual carryover - line item #49 for Load Management and Resource Efficiency Programs Development for $175,000
(496.PS44B.62085.0000.000000.90800)
• FY 23/24 – line item 51 for Residential and Commercial Demand Response Program for $175,000 (496.PS44B.62170.0000.000000.90800) Benefits for utility DR programs generally include avoided generation capacity, avoided transportation and distribution capacity, avoided energy, and avoided greenhouse gas emissions. A full quantification of these values for BWP is a non-trivial analysis and is beyond the scope of this staff report. However, the avoided cost of energy is a more straightforward estimate, and one may look at the difference in market energy prices between different time periods.
DSGS
As a DSGS provider, BWP dedicates resou rces to administering the program and is compensated by the CEC at the rate of 10% of total incentive payments. As participants, the City of Burbank can earn $2 pe r kWh reduced during events. The tota l amount of compensation is dependent on the need for calling DSGS events, which is determined by weather and the needs of CAISO and LADWP. VPP was able to reduce 15.4 MWh across 8 days in 2022, which resulted in an estimated incentive payment of $34,650.
Outside of incentive payments, load reductions at peak times can reduce the cost of energy needed to be purchased on the spot market, which can have a positive impact for ratepayers. The fiscal impact of load reductions to ratepayers depends on the market price of energy that no longer needs to be procured for customers (avoided cost of energy), the amount of energy BWP would need to procure, and the timing of that procurement.
One way to benchmark the potential range of values is to examine the market prices during the 2022 heat dome event. Although BWP is not a member of CAISO, as an example, average CAISO DAM prices from August 31 st to September 9 th were $219/MWh, and average real-time market (RTM) prices were $198/MWh. For the 15.4 MWh of savings by VPP, this corresponds to savings of roughly $3,000-$3,400. Daily maximum hourly DAM prices during the time period ranged from $356/MWh to $1,343/MWh ($5,500-$20,700 for 15.4 MWh), and 5-minute interval RTM prices ranged from $144/MWh to $2,000/MWh ($2,200-$30,800 for 15.4 MWh).
CONCLUSION
BWP staff is aiming to expand DR offering s across the custome r base—with the Cool Rewards program for residential and small commercial customers and the facilitation of an expanded DSGS program fo r large r commercia l custome rs. These program s will provide customers with a way to earn incentive payments for reducing load during peak times. The Coo l Rewards smart thermostat program will provide a foundation that can expand to include more customers and eventually more types of controllable devices. As the programs grow, they can allow BWP to avoid procuring energy during peak times and to contribute to state efforts to improve grid reliability during heat wave events.
ATTACHMENTS
None.