  The electricity market is threatened by supply scarcity, which may lead to
very sharp price spikes in the spot market. On the other hand, demand-side's
activities could effectively mitigate the supply scarcity and absorb most of
these shocks and therefore smooth out the price volatility. In this paper, the
positive effects of employing demand response programs on the spot market price
are investigated. A demand-price elasticity based model is used to simulate the
customer reaction function in the presence of a real time pricing. The demand
achieve by DR program is used to adjust the spot market price by using a price
regression model. SAS software is used to run the multiple linear regression
model and MATLAB is used to simulate the demand response model. The approach is
applied on one week data in summer 2014 of Connecticut in New England ISO. It
could be concluded from the results of this study that applying DR program
smooths out most of the price spikes in the electricity spot market and
considerably reduces the customers' electricity cost.
