Abstract-Demand relief from customers can help a utility (or any "Load Serving Entity") solve a variety of problems. There exist all sorts of different demand management programs that utilities use. A critical issue is the incentive paid to the customer to participate in demand management programs and provide load relief. The utility has to design cost effective yet attractive demand management contracts. The main goal is to get load relief when needed, and to do so in a cost effective way. Customers sign up for programs when the benefits they derive in the form of up front payments, demand discounts and interruption payments exceed their cost of interruption. In order to design such contracts, mechanism design with revelation principle is adopted from Game Theory and applied to the interaction between a utility and its customers. The idea behind mechanism design is to design an incentive structure that encourages customers to sign up for the right contract and reveal their true value of power (and thus, the value of power interruptibility).

Demand relief from customers can help a utility solve a variety of problems. There exist all sorts of different demand management programs that utilities use. A critical issue is the incentive paid to the customer to participate in demand management programs and provide load relief. The utility has to design cost effective yet attractive demand management contracts. The main goal is to get load relief when needed. If the contracts are designed to be cost effective they can help the utility reduce costs. Customers sign up for programs when the benefits they derive in the form of up front payments and interruption payments exceed their cost of interruption. In order to design such contracts, mechanism design with revelation principle is adopted from Game Theory and applied to the interaction between a utility and its customers.The idea behind mechanism design is to design an incentive structure that encourages customers to sign up for the right contract and reveal their true value of power (and thus, the value of power interruptibility).

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Abstract-In times of stress customers can help a utility by means of voluntary demand management programs if they are offered the right incentives. The incentives offered can be optimized if the utility can estimate the outage or substitution costs of its customers. This paper illustrates how existing utility data can be used to predict customer demand management behavior. More specifically, it shows how estimated customer cost functions can be calibrated to help in designing efficient demand management contracts.Index Terms-Contract design, customer cost, data calibration, demand management, load curtailment, system security.

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