Critical Peak Pricing (CPP)

CPP is not a static tariff; it is an event-driven overlay applied on top of a standard Time-of-Use (TOU) or flat rate. During a Critical Peak Event, the price per kilowatt-hour (kWh) can spike to 3–10 times the normal peak rate.

• Event Frequency: Typically limited to 10–15 events per summer season.
• Event Duration: Usually 4–6 consecutive hours on non-holiday weekdays.
• Notification: Day-ahead or day-of notice is sent via SMS, email, or automated signal.

The defining feature of CPP is the extreme price differential designed to overcome consumer inertia. While a standard TOU rate might charge $0.15/kWh off-peak and $0.30/kWh on-peak, a CPP event can push the rate to $1.00/kWh or higher.

• Cost Reflection: The high price reflects the true marginal cost of generation during grid scarcity, often tied to inefficient peaker plants.
• Behavioral Trigger: The sharp price spike creates a powerful economic incentive to curtail non-essential loads immediately.

To maximize load reduction without requiring constant occupant attention, CPP rates are often paired with Automated Demand Response (ADR) technologies. A utility signal can automatically adjust smart thermostats or battery dispatch.

• OpenADR Protocol: Standardized communication (IEC 62746-10) allows energy management systems to receive price signals and execute pre-programmed curtailment strategies.
• Behind-the-Meter Control: Smart appliances and EV chargers can autonomously shut down or delay cycles when the CPP price threshold is breached.

The financial settlement of CPP programs relies on calculating the Customer Baseline Load (CBL) to determine the actual load reduction achieved during the event.

• CBL Methodology: Statistical models use recent, non-event days to predict what consumption would have been.
• Performance Metrics: The delta between the CBL and actual metered load during the event window determines the bill credit or penalty.
• M&V Rigor: Advanced Measurement and Verification ensures that load reduction is genuine, not just a shift to a different hour.

CPP is a direct countermeasure against Locational Marginal Price (LMP) spikes and capacity shortages. By suppressing demand during the top 1% of hours, it flattens the system load curve.

• Peaker Plant Avoidance: Reduces reliance on high-cost, high-emission combustion turbines.
• Transmission Relief: Alleviates congestion on constrained distribution feeders.
• Ancillary Service Alternative: Aggregated CPP load reduction can function as a virtual resource, competing with generation in capacity markets.

CPP is not a one-size-fits-all solution. It is typically offered as an opt-in or mandatory overlay for specific customer classes, balancing risk and reward.

• Opt-In CPP: Customers choose the rate and often receive a baseline bill credit in exchange for accepting high event prices.
• Mandatory CPP: Default assignment with a lower base rate but higher peak exposure.
• Hedging Strategies: Commercial and industrial (C&I) customers often combine CPP with on-site generation or battery storage to arbitrage the price differential.

A static pricing structure that defines fixed, predetermined rates for specific blocks of time—typically on-peak, mid-peak, and off-peak periods. Unlike CPP, TOU rates are published months or years in advance and do not change based on real-time grid conditions.

• Key distinction: TOU is predictable and passive; CPP is event-driven and punitive
• Typical structure: Higher rates from 4-9 PM on weekdays, lower rates overnight
• Limitation: Does not respond to unexpected grid stress events like a heat wave exceeding forecasts
• Common use case: Residential rate design that encourages routine load shifting of EV charging and laundry to off-peak hours

An electricity rate structure where the price per kilowatt-hour fluctuates continuously, typically at hourly intervals, to reflect actual wholesale market conditions. Unlike CPP's binary event-based approach, RTP exposes consumers to constant price volatility.

• Granularity: Prices change every hour (or sub-hourly) rather than on a handful of critical days
• Risk profile: Consumers bear full wholesale price exposure without the protection of a fixed baseline rate
• Enabling technology: Requires advanced metering infrastructure and automated price-responsive controls
• Adoption context: Most common for large commercial and industrial customers with energy managers actively monitoring markets

The strategic reduction of power consumption during periods of highest grid demand to avoid capacity charges and mitigate the need for peaker plant activation. CPP is a price-based mechanism that incentivizes peak shaving behavior through extreme rate differentials.

• Mechanism: Temporarily reducing non-critical loads (HVAC setpoint adjustment, lighting dimming, battery discharge)
• Financial driver: Commercial customers often pay demand charges based on their highest 15-minute interval of the month
• Relationship to CPP: CPP events create the economic signal that makes peak shaving financially rational
• Storage integration: Battery energy storage systems can discharge during CPP events to shave facility net load to near zero

A fully automated system where a utility signal directly controls customer loads based on pre-programmed permissions, eliminating manual intervention. ADR is the technological backbone that makes CPP participation feasible at scale.

• Signal flow: Utility dispatches OpenADR signal → customer energy management system receives it → pre-authorized load reduction executes automatically
• Latency requirement: Response must initiate within seconds to minutes of event notification
• CPP integration: ADR systems can be programmed to trigger specific load shed strategies when a CPP event price threshold is detected
• Standard protocol: OpenADR 2.0b provides the standardized communication framework for this automation

A statistical calculation of what a customer's energy consumption would have been in the absence of a CPP event, used to measure and verify actual load reduction performance. Accurate CBL methodology is critical to fair financial settlement.

• Common methods: 10-day rolling average of non-event days, weather-adjusted regression models, or matched-day approaches
• CPP relevance: The extreme price differential during events makes precise baseline calculation essential—overestimating the baseline unfairly penalizes the customer
• Measurement challenge: CPP events occur on the hottest days, which are inherently atypical, making baseline estimation difficult
• Settlement formula: Load reduction = CBL − actual metered load during the event period

A third-party entity that enrolls multiple retail customers into a single portfolio to bid aggregated load reduction capacity into wholesale markets. Aggregators bridge the gap between individual CPP rate exposure and market participation.

• Value proposition: Individual commercial buildings lack the scale to participate directly in wholesale markets; aggregators pool them into a tradable resource
• CPP arbitrage: Aggregators can help customers avoid CPP charges by dispatching behind-the-meter batteries or generators during events
• Revenue model: Shared savings or fixed capacity payments from the utility for guaranteed load reduction
• Technology stack: Aggregators operate a DRMS to monitor, dispatch, and settle across their entire portfolio of enrolled assets