Supreme Court Allows ‘Socialized Electricity’ To Make Green Energy Profitable

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Andrew Follett Energy and Science Reporter
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The U.S. Supreme Court upheld the sale of “socialized electricity” Monday, in a move that allows regulators to force electrical utilities to artificially make green energy more cost-effective.

“The Supreme Court once again has decided that constitutional federalism must be subordinated to politically correct climate and energy policies,” Myron Ebell, director of the Center for Energy and Environment at the libertarian Competitive Enterprise Institute, told The Daily Caller News Foundation. “This is only one of a series of ridiculous decisions beginning with Mass. vs. EPA in 2007, in which the Court ruled 5-4 that the Clean Air Act gave EPA authority to regulate greenhouse gas emissions–which was a complete surprise to Members of Congress.”

The policy, called “demand-side management,” has been pushed by the Federal Energy Regulatory Commission (FERC) since 2011. It forces energy companies to pay middlemen for “negative electricity” — power theoretically saved by consumers during peak demand times. FERC’s policy allows regulators to recoup those payments through increases in the cost consumers pay for electricity, earning these middleman billions of dollars.

“The way FERC approached the demand response question opens the door for companies to get paid for selling electricity they never bought,” Travis Fisher, an economist at the Institute for Energy Research, told TheDCNF. “By not accounting for that huge flaw, FERC’s compensation scheme overpays participants and is a handout to demand response companies. That is why FERC’s plan was demolished point-by-point in an amicus brief by a group of academic economists and rejected by the Court of Appeals.”

The U.S. Court of Appeals for the District of Columbia previously held that FERC did not have the statutory authority to impose demand-side management. The court also stated that the rule was arbitrary and capricious, because FERC did not consider or respond to the arguments made in opposition to the rule.

The Supreme Court ruling is great news for the wind and solar industry, as demand response makes it seem like people are using more wind and solar power than they actually are. The Sierra Club issued a statement after the Supreme Court ruling claiming that demand response “makes it easier to integrate clean energy technologies like wind and solar” and serves as a “key building block of America’s clean energy economy.”

Normally, the timing and magnitude of electricity demand do not coincide with the limited availability and intermittent nature of wind and solar power. Wind power is only available when the wind is blowing and solar power is only available during certain times of the day. The Supreme Court ruling allows regulators to hike consumers’ rates in order to make wind and solar more competitive.

Studies have shown that demand-side management generally results in higher electricity costs for consumers, which disproportionately harm the poor.

FERC’s policy “creates a counterproductive demand response mechanism that produces economically undesirable behavior and wasteful outcomes that will injure consumers and society in the long run,” stated an amicus curiae brief to the Supreme Court filed against FERC by economists from Harvard University.

The Supreme Court voted 6 to 2 in FERC’s favor with Justices Antonin Scalia and Clarence Thomas dissenting while Justice Samuel Alito didn’t take part in the case because of a stock holding. Justice Elena Kagan wrote the court’s majority opinion.

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