The Supreme Court has issued a ruling that will be a huge boon to the fight against climate change. But it’s a bit complex so we wanted to take a moment to explain it in greater depth. The decision was handed down last week, when the Supreme Court announced that the Federal Energy Regulatory Commission (FERC) can regulate demand response programs, rather than just states. The move will pave the way for regional energy markets to maximize efficiency in electricity consumption at peak times.
So what does that mean?
Demand response refers to a new model of energy consumption that provides incentives for cutting down on use. Essentially, when utilities provide energy, consumers pay a flat rate, regardless of how much it costs the utility to collect and distribute electricity from power plants. For much of the history of energy generation, plants and utilities simply produced power as they anticipated and sent it to their clients at a steady pace, for a steady price, regardless of how much was actually used. This, in turn, increased the strain not he electric grid during peak hours.
Demand response allows prices to fluctuate based on demand. This creates an incentive for consumers to use less energy during peak hours, which will, in turn, prevent blackouts and crashes. As a result, energy producers can slow production, which can slash green house gas emissions. A slight reduction in power plant usage could take some 200 million metric tons of greenhouse gases out of the air annually.
With that out of the way, here’s the complicated part.
Companies, known as demand response aggregators, make deals with utilities to reduce energy consumption at certain times – they call these “negawatts,” and consumers can sign up under these programs to reduce their electricity bills. The FERC has sought, for the past decade, to regulate “negawatts” the same as megawatts – essentially, to oversee non-usage the same way the oversee consumption.
With the conclusion of this potentially landmark case, Federal Energy Regulatory Commission vs. Electric Power Supply Association, the Supreme Court has affirmed the federal governments role in demand response programs.
This outcome has a number of positive environmental effects. With FERC regulation, environmental advocates anticipate the proliferation of demand response initiatives – now they can get more efficient, and more widespread. Demand response plans already in use will not require renegotiation. Consumers will now have easy access to programs that will protect their finances, and the environment.
Energy companies have argued that FERC regulation interferes with commerce. The FERC has required wholesale market operators to compensate individual customers with similar rates use to pay generators. The Supreme Court found that the FERC’s actions did not constitute an interference on retail rates, and upheld the authority of the FERC to regulate interstate electricity markets, by a 6-to-2 decision, with Justice Samuel Alito abstaining from the case.