In January, 2016, the Federal Energy Regulatory Commission (FERC) won a legal victory that warranted high-fives from energy consumers everywhere.

The Supreme Court of the United States ruled that FERC does, indeed, have the authority to establish rules and grant Federal Regulatory Commission Incentives in order to reduce energy consumption during high demand periods.

What Exactly is the Federal Energy Regulatory Commission (FERC) and What do Thet DO?

Much like Marvel’s Avengers, the Federal Energy Regulatory Commission is an independent government agency within the Department of Energy. Their goal (not-so-top-secret mission?) is to protect energy consumers, and the public, by ensuring energy companies (including natural gas, electricity, oil, and hydropower industries) act within the law.

FERC oversees most of the United States’ energy transmission grid—the electrical distribution network carrying electricity from plant to user.

In Canada, FERC works with the Canadian government to oversee the North American Electric Reliability Corporation (NERC), an international regulatory authority assuring the bulk power system in North America is reliable.

While provincial governments have leading jurisdiction over the generation and transmission of electricity, they recognize and support NERC in its role as standards setter with regards to electric reliability. Some provinces have even made NERC standards mandatory.

With the ties between FERC, NERC, and Canadian governing authorities so intertwined, it’s easy to see the impact FERC’s initiatives, rules, and regulations can have on all of North America’s power transmission and distribution. Introducing Federal Regulatory Commission Incentives into the market assists FERC in maintaining reliability and regulation, so when one of these incentives is taken all the way to the Supreme Court, the world (of energy, anyway) takes notice.


Federal Regulatory Commission Incentives aim to promote energy conservation and save consumer’s money. They typically offer financial gain or savings to encourage or incite a certain action; for example, FERC gives energy companies financial benefits if they build a natural gas or electric generation facility to keep up with demand. Another incentive is Demand Response (Order 745) which affects wholesale sales of electricity and oil.

Demand Response means a customer can respond to triggers like reliability (blackouts) or price (supply and demand increasing costs) by changing their usage patterns. More plainly, when a customer reduces their electricity usage during high demand periods (when a high number of people are consuming energy for things like laundry or running air conditioners), FERC will pay them.

FERC’s order 719 allowed this unused, or canceled electricity demand, called negawatts, to be sold the same way megawatts are sold, and for the same price too.

It all sounds very Tony Stark, doesn’t it?

The Demand Response incentive is a win-win for consumers. Voluntarily reducing energy consumption during peak times gives the wholesale consumer (typically industrial consumers, factories, local utilities …) the power to push the market price of electricity down by bidding their unused energy consumption on the wholesale market.

This creates a more competitive market, increases grid reliability, and reduces the amount of pollution contributing to climate change by cutting the overall demand for electricity and avoiding the need to utilize the least efficient, most polluting power plants (peaker plants), which operate during peak periods. As wholesale customers save, they are able to provide cheaper retail rates for their customers.

Power producers, led by the Electric Power Supply Association (EPSA), weren’t thrilled with the added competition from aggregators (negawatt distributors) and challenged FERC’s authority to grant incentives.

In May 2014, the Court of Appeals maintained the original decision that Order 745 infringes on the States’ exclusive jurisdiction over retail rate regulation since the wholesale affects trickle down into the retail markets.


The Supreme Court’s ruling in favour of FERC’s authority to offer FederalEnergy  Regulatory Commission Incentives has softened the lines between wholesale and retail, promising more incentives for exciting innovations and business models that will undoubtedly benefit both the environment and consumer’s pocket books

About The Author

John Keirstead
John Keirstead
Serial Entrepreneur, Technologist and Inventor my objective is to develop useful products that have a net positive effect in the lives of those that use them and the environment that we live in. CEO of Mission LED Lighting Company Ltd.

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