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Electricity Demand Response: Problems of Searching for a Legal Structure
 
PIIS231243500022410-9-1
DOI10.18572/2410-4396-2021-3-45-48
Publication type Article
Status Published
Authors
Vladimir V. Prokhorenko 
Occupation: Deputy Director for Legal Affairs — Head of the Legal Support Department of SO EES, JSC, Senior Lecturer of the Department of Civil Law of the Kutafin Moscow State Law University (MSAL)
Affiliation:
JSC SO UES
Kutafin Moscow State Law University
Address: Russian Federation, Moscow
Journal nameEnergy law forum
EditionIssue 3
Pages45-48
Abstract

During the implementation of a pilot electricity demand response project, it has become obvious that the demand response model is of interest to market participants and end consumers. One of the main goals of the pilot project is fine-tuning of the regulatory, contractual and engineering solutions for the target electricity demand response model. The paper substantiates the conclusion that a deep doctrinal study of this issue will make it possible to find even more significant differences between the actions of a consumer within the framework of demand response and the actions involving the performance of an energy supply agreement, and will confirm the correctness of the regulator’s position on the governance of demand response relations within the framework of a special contractual type. It seems expedient to work out a comprehensive methodology combining civil and public law approaches to the regulation of the corresponding relations, which will be a significant stage in the development of the energy law science.

Keywordsenergy law, legal regulation in the electric power industry, electricity demand response
Received01.09.2021
Publication date30.09.2021
Number of characters9702
Cite     Download pdf
1 With the adoption of Resolution of the Government of the Russian Federation No. 287 of March 20, 2019 [1], Russia started to implement a pilot electricity demand response project for consumers of the retail electric energy market.
2 Electricity demand response stipulates a reduction in energy consumption by the end consumer at the presence of certain economic signals from the electric energy market and the receipt of payment for the implementation of such reduction.
3 The economic effect within the framework of the demand response relations is achieved due to the fact that consumers participating in the project reduce their consumption during peak periods for the energy system. Hence, there is no need to use ineffective and thus more expensive generating capacities to meet the electricity demand. This, in turn, leads to a relative decrease in the market price of electric energy in general.
4 During the implementation of the pilot project, it has become obvious that the demand response model is of interest to market participants and end consumers. Since July 2019, the total volume of capacity outtake within the framework of the reduction program has increased from 48 MW in Q3 2019 to 737 MW in Q2 2021.
5 The direct effect from the price decrease on the day-ahead market (DAM) for all wholesale electric energy market buyers amounted to about 320 million rubles from July 2019 to December 2020.
6 It should be noted that the emergence of electricity demand response relations is rather a consequence of than a reason for their statutory regulation. The state acting as the regulator does not describe the economic relations existing on the market but in fact creates them. In this regard, there appears a number of theoretical and practical problems associated with the search for the optimal legal structure to mediate such relations.
7 One of these problems is the problem of the determination of the legal nature of the end consumer’s actions aimed at the intentional limitation of its own electric energy consumption.
8 The actions of the supply and the corresponding consumption of electric energy are traditionally associated with the relations arising out of an energy supply agreement.
9 According to Clause 1 Art. 539 of the Civil Code of the Russian Federation (the “CC RF”) an energy provider undertakes to supply energy to a subscriber (consumer) through the connected network under an energy supply agreement, and the subscriber undertakes to pay for the received energy and comply with the energy consumption regime stipulated by the agreement.
10 Based on the legal definition of an energy supply agreement and the provisions of Art. 541 of the CC RF regulating the terms and conditions related to the transmitted energy amount, it can be assumed that consumption reduction actions are covered by the said “contractual consumption regime”. But is it really so?
11 When determining the contractual electric energy consumption regime, it is impossible to take into account in advance the need to reduce consumption during specific periods of time as they are defined daily based on the energy system operation parameters.
12 The contractual electric energy consumption regime modeled for the electricity demand response purposes is not applicable to household consumers, who are entitled to use energy in the required amount in virtue of the imperative provision of Clause 3 Art. 541 of the CC RF.
13 And most importantly, hypothetical inclusion of demand response relations in an energy supply agreement with the end consumer creates no incentives to limit consumption as the only thing saved in this case is the money for the non-supplied energy.
14 It seems that a deep doctrinal study of this issue will make it possible to find even more significant differences between the actions of a consumer within the framework of demand response and the actions involving the performance of an energy supply agreement, and will confirm the correctness of the regulator’s position on the governance of demand response relations within the framework of a special contractual type.
15 The independence of the relations under consideration from the electric power supply agreement is also confirmed by the fact that, firstly, the end consumer’s actions aimed at the intentional limitation of its own consumption create an independent economic effect that goes beyond the framework of the “consumer – energy provider” relations.
16 Secondly, not every consumption limitation creates the corresponding effect, but only the one associated with a “demand response event”, i.e., which is carried out during peak periods for the electric energy system and is economically feasible. Consequently, there is a need for a system of relations beyond the scope of an energy supply agreement to determine such events, inform the consumer accordingly, assess the economic effect, etc.
17 And most importantly, one requires a model providing economic incentives for the consumer behavior that is beneficial to the market.

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1. Resolution of the Government of the Russian Federation No. 287 of March 20, 2019 On the Amendments to Certain Acts of the Government of the Russian Federation on the Operation of Electricity Demand Response Aggregators in the Russian Unified Energy System and the Improvement of the Mechanism of the Price-Dependent Reduction in Electric Energy Consumption and Rendering System Reliability Services // Collection of Laws of the Russian Federation. 2019. No. 13. Art. 1403.
2. Resolution of the Government of the Russian Federation No. 117 of March 3, 2010 On the Procedure for the Selection of Electric Power Industry Subjects and Electric Energy Consumers Rendering System Reliability Services and the Provision of Such Services, and on the Approval of Amendments to the Acts of the Government of the Russian Federation on Rendering System Reliability Services // Collection of Laws of the Russian Federation. 2010. No. 12. Art. 1333.
Federal Portal of Drafts of Regulatory Acts. URL: https://regulation.gov.ru/

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