A Self-Reported Baseline Demand Response Program for Mitigation of Baseline Manipulation

The customer baseline is the counterfactual consumption without any demand response (DR) programs and thus is only known to end users. As a result, baseline manipulation arises in DR programs where the customer baseline is required to assign rebates. To address this issue, we propose a self-reported DR program under which customers only need to report their baseline. The customer's stochastic programming problem is simplified as a two-stage optimization, where the incentive-compatible (truth-telling) condition is derived. However, the incentive compatibility cannot be achieved due to the baseline information asymmetry between customers and program providers. As an alternative, we relax the threshold (allowed) baseline inflation from zero to a certain level and obtain the corresponding near-incentive compatibility. The self-report approach and the near-incentive compatibility provide new directions in designing effective DR programs.