How a Supreme Court Decision Affects Your Electricity Bill

Posted by K R on

Any American who pays electricity bills has good reason to care that earlier this week the U.S. Supreme Court voted in support of a federal rule to compensate customers who conserve energy during peak periods. The practice can reduce the chance for blackouts and lower electricity prices for everyone by easing loads on the power grid as well as promote energy conservation, experts say. The main legal issue was whether the Federal Energy Regulatory Commission (FERC) has the authority to regulate such programs, known as demand response. FERC authority technically covers wholesale electricity markets that buy and sell electricity across state lines. Wholesale electricity prices fluctuate based on supply and demand. But homes and businesses do not typically respond to wholesale market price changes because they pay fixed prices on their monthly utility bills. Demand-response programs help bridge that gap: Wholesale market operators pay customers on the retail market level to stop using electricity at times when high demand has driven up wholesale market prices. The Supreme Court decision effectively upheld FERC's authority to regulate the wholesale market through demand response—even if the regulations pose consequences for retail market sales. "The general impact is we’re a little less likely to have blackouts and brownouts, and more likely to have lower electricity bills than higher bills," says Tom Mullooly, an energy lawyer with the firm Foley & Lardner, LLP, who did not participate in the case. "In the large sense, just about everybody wins." In 2011 FERC issued Order No. 745: a demand-response rule requiring wholesale market operators to pay the same price for every unit of electricity customers do not use as the price paid to power generation companies. That means large customers or groups of customers would get paid the same price for not using a megawatt of power—in this case sometimes called a "negawatt"—as the price a company gets for producing a megawatt of power from a power plant. "If you have demand-response capability, you don’t need to bring in a new power plant to meet the load," says Kevin Lucas, director of research for the Alliance to Save Energy, a nonprofit coalition that promotes energy efficiency. "It's a lower-cost solution in the long term." It can also benefit the environment by reducing the need to meet high demand with less-efficient power sources that give off more greenhouse gas emissions, such as old coal power plant. Read More: Scientific American

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