Review of demand-side bidding programs: Impacts, costs, and cost-effectiveness

In December 1987, Central Maine Power (CMP) instituted the first competitive bidding program that allowed developers to propose installation of conservation measures. Since then, about 30 utilities in 14 states have solicited bids from energy service companies (ESCOs) and customers to reduce energy demand in residential homes and in commercial and industrial facilities. Interest in the use of competitive procurement mechanisms for demand-side resources continues to grow. In this study, the authors build upon earlier work conducted by LBL in collaboration with others (Goldman and Busch 1992; Wolcott and Goldman 1992). They have developed methods to compare bid prices and program costs among utilities. They also characterize approaches used by utilities and developers to allocate risks associated with DSM resources based on their review of a large sample of signed contracts. These contracts are analyzed in some detail because they provide insights into the evolving roles and responsibilities of utilities, customers, and third party contractors in providing demand-side management (DSM) services. The analysis also highlights differences in the allocation of risks between traditional utility rebate programs and DSM bidding programs.