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Demand response programs play an essential role in ensuring grid reliability for the California Independent System Operator (CAISO), the region’s electric grid operator responsible for managing electricity flow across California’s power grid. These programs are specifically designed to balance electricity supply and demand during peak periods or when grid stability is threatened, such as during extreme weather events or unexpected outages.

By enrolling in demand response programs, commercial and industrial companies agree to temporarily lower their electricity usage when called upon to avoid the risk of blackouts due to supply and demand imbalances. These companies not only contribute to grid stability but also unlock a practical avenue for revenue generation. In exchange for their energy reduction and conservation efforts, participants receive payments, making these programs a financially rewarding venture for companies in California – especially when they partner with the world leader in demand response, Enel.

What demand response programs are available in California?

Demand response programs in California are administered through the state’s three regulated investor-owned utilities (IOUs): Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E). Two main programs are offered across the state, each with its own set of eligibility requirements, earning potential, and participation rules.

1. Capacity Bidding Program (CBP)

2. Time of Use – Base Interruptible Program (BIP)

Dual enrollment in these programs is not permitted, which means companies cannot participate in both programs simultaneously. Therefore, companies must select which program best fits their operations. Let’s discuss what each program involves at a high level. 

Capacity Bidding Program (CBP)

The CBP is a demand response program that runs from May to October and is typically triggered during periods of high demand, extreme weather, or grid emergencies. It provides financial incentives for commercial and industrial companies to reduce their energy usage during specific timeframes when called upon by the utility. Participants are notified of an event the day before, giving them time to plan their load reductions.

The program compensates participants through two primary payment types: capacity payments and energy payments:

• Capacity payments are recurring payments provided for a company simply standing by and being on-call to reduce energy use when an event is dispatched. These payments account for the most significant portion of the total compensation, rewarding a company’s commitment to be available as a grid resource.

• Energy payments are additional rewards companies earn for every hour they actively reduce energy usage during a demand response event. These payments are based on their actual performance during the event and make up a smaller portion of the total compensation. 

How much a company can earn in the program depends on how much energy they commit to reduce during demand response events. They must achieve at least 75% of their committed reduction target to qualify for payments. This program rewards consistent and reliable participation, even if participants occasionally fall short. Payments are calculated and distributed monthly, so poor performance in one month does not impact future payments.

Ultimately, the better a company can perform, the more they can earn. By meeting or exceeding reduction targets, participating companies maximize their financial rewards while contributing to grid reliability.

Time of Use – Base Interruptible Program (BIP)

The BIP program differs from CBP because it requires more effort from participating companies, but the earning potential with BIP is higher – double to almost triple the rates in CBP. The two main differences that can drive the decision-making process for whether a company chooses to participate in CBP or BIP is that BIP operates year-round, 24x7x365, and event notification is much less than BIP – just 30 minutes. Companies that choose to participate in BIP must be able to respond in time to participate successfully in this program.

BIP pays companies to reduce electricity consumption to a predetermined level, or Firm Service Level (FSL), when energy supplies are short. Companies must set an FSL to participate – this is the maximum allowable demand at which they can operate during an event.

Payments in the program are determined by how much companies reduce their energy usage relative to their designated FSL. If a demand response event is triggered, participants are compensated as long as they reduce their energy consumption to, or below, their pre-committed FSL target. The program tracks performance and calculates payments monthly, with payments being distributed on a quarterly basis. This structure provides regular opportunities to earn rewards while giving participants time to adjust their performance between events.

The program primarily compensates participants through quarterly payments that are based on the difference between typical energy usage and the committed FSL. Participants must successfully curtail their energy consumption to the FSL during demand response dispatches to maximize earnings. If they fail to reduce their usage to the agreed level, their quarterly payment will be reduced proportionally to their performance shortfall.

In this program, performance is key – the more consistently companies meet or exceed their FSL target during dispatches, the higher their overall payments will be. Participants who achieve strong and reliable performance are rewarded with more significant financial incentives, reinforcing the value of curtailing energy usage during critical grid events to support a stable, cleaner grid.

Are CBP and BIP offered in every California utility?

It’s important to note that in some cases, CBP and BIP are not offered simultaneously. Here is the program breakdown across PG&E, SCE, and SDG&E.

• PG&E – both CBP and BIP are offered to commercial and industrial customers of PG&E.

• SCE – both CBP and BIP is offered to SCE’s commercial and industrial customers. However, SCE’s CBP program has until recently required more demand response events than CBP programs in the other IOUs. Enel has advocated that SCE’s CBP programs should be modeled after changes that were adopted by the other IOUs to create more flexibility for participants. These changes take effect in 2025. Companies that found the previous iteration of the CBP too demanding or struggled with the fast-response requirements of BIP may find this new program a better fit for their operations. If you want to start a conversation with our team so you are ready to hit the ground running when the changes take effect, contact us. 

• SDG&E – only CBP is offered to commercial and industrial customers of SDG&E.

Enel – leader in California demand response

To drive maximum value from demand response, companies need to work with a demand response aggregator, like Enel North America. Ensuring you’re working with a demand response aggregator with experience in the California market is essential for successful participation. Enel was one of California’s first demand response aggregators and has almost two decades of experience in the state. Over 300 companies in California have partnered with Enel for the current demand response season. 

Enel’s footprint expands well beyond California. Companies with multiple locations across North America can benefit from Enel’s expertise in more than 15 energy markets across the United States and Canada. As the global leader in demand response, Enel has the resources to help you drive value from demand response, with personalized energy reduction plans, deep market expertise, and a team by your side every step of the way, with your company’s best interests at heart.  

Enel has consistently demonstrated our ability to:  

• Identify and initiate new demand response opportunities

• Accurately and transparently represent earning potential

• Fully capitalize on available revenue streams

• Shield our customers from penalties associated with underperformance

At every stage in the demand response cycle, Enel consistently applies participant-friendly approaches, leverages the deepest experience in the industry, and deploys world-class people and technology to maximize and ensure the predictability of revenue streams. These capabilities, among many others, have made Enel the provider of choice for companies looking to maximize the value of demand response.

Contact our team today to learn more about participating in demand response in California.

Play your part in ensuring grid stability and enabling California’s clean energy transition

Demand response is about more than just grid stability and revenue generation. It’s a significant step toward California’s broader goals of transitioning to a clean energy future. By reducing the need for fossil fuel-based peaking power plants during peak demand, demand response helps to decrease greenhouse gas emissions and align energy consumption with the availability of renewable energy sources. This partnership between California utilities and their customers is a testament to how collaborative efforts can promote both environmental sustainability and reliable access to electricity.

Contact the Enel team today to learn more about participating in demand response in California and how Enel can help drive value for your company.