Getting Paid for NegaWatts

The supreme court recently held that a FERC rule requiring utilities to pay large customers for not using electricity was legal.

While FERC may have acted legally, the concept of paying a customer for not using electricity defies common sense.

From FERC Web Site
From FERC Web Site

The concept of Negawatts, however, has been widely promoted by extreme environmentalists in their efforts to reduce CO2 emissions.

If customers use less electricity there will be less need to generate electricity, which, with the exception of nuclear and renewables, such as wind and solar, would require the use of fewer fossil fuels, ergo, fewer CO2 emissions.

Historically, over the past 80 years or so, utilities have reached agreements with large users to cut back their use of electricity during peak periods so as to temporarily reduce the load.

Large users usually obtained a preferential rate for agreeing to shed load when asked to do so. This preferential rate was justified economically by recognizing that customers might require some investment to allow the segregation of circuits and that the customer could be inconvenienced by shutting down selected circuits when instructed by the utility to do so, and that it would reduce, temporarily, the need for the utility to invest in peaking turbines.

Now, with the FERC ruling, utilities are required to pay large users for providing Demand Response, which is a fancy term for what utilities have already been doing with load shedding programs. Presumably aggregators who bundle large numbers of smaller users into a package, can also receive payments for not using electricity.

The bizarre concept could be utilized in other applications.

The most obvious is traffic control in metropolitan areas.

For example:

If major routes into a city are congested, the Department of Transportation could pay people to not to drive into the city. Instead of paying a toll to enter the city, the driver would take a bus, get a credit and not be required to pay the toll next time he drove into the city. The mechanics for such a system would be straight forward and easy to implement.

This demonstrates why the concept of forcing utilities to pay for Negawatts, the term used to reflect that watts weren’t used, defies logic.

It may now be legal, but is absurd on its face.

Customers who participate in NegaWatt DR programs are now benefiting twice. First, for not paying for the electricity they don’t use, and, second, for being paid for the same electricity they didn’t use.

Utilities are essentially now paying for buying nothing.

The entire concept of Negawatts and paying for Demand Response, demonstrates how far the system is being manipulated in order to cut CO2 emissions.

It will also increase the cost of electricity for ordinary Americans

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Nothing to Fear explores how the system is being manipulated with Renewable Portfolio Standards and Net Metering, which places utilities at risk while increasing the cost of electricity for ordinary Americans as well as industry.

Link to Amazon:

Book Cover, Nothing to Fear
Book Cover, Nothing to Fear

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0 Replies to “Getting Paid for NegaWatts”

  1. Donn,

    There’s another FERC rule that is flying below the radar: FERC rule 1000
    Basically, transmission line costs are generally shared between power companies if the lines are considered necessary for grid reliability. The new rule, Rule 1000, says transmission costs can be shared if the lines are needed for public policy.

    So if my state has a public policy of wind energy, and your state has a public policy of buying wind energy, then we can share the costs of the newly required transmission lines with other states, even though the new lines are not needed for grid reliability.

    • Thanks. Another important point. Here is a quote from the FERC website you identified.

      The key takeaway is that public policy now trumps actual needs in so far as how transmission line costs are allocated.

      • Yes. That is true. In a recent meeting I attended (the Consumer Liaison Group of ISO-NE), it was clear that people are just beginning to assess the implications of this rule. I am on the Coordinating Committee for that group.

  2. Nice post, Donn. You have a strong supporter of your double payment argument from the good folks atop Monitoring Analytics, by the way… The parallels to an entitled welfare state and over-taxed society are frightening: Make people pay to be productive, but pay them to stop being productive. I would encourage you to team up with Stephen King, pick up where Ayn Rand left off, and author the scariest predictive novel in history.

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