Pay-to-save energy plans often being cheated
Cheaters are pocketing millions of dollars a year from increasingly popular utility programs that pay consumers and businesses to conserve energy, industry officials say.
Businesses that don't cut their power usage at all reap windfalls. Misspent money is an expense all utility customers bear.
"It's possible to do nothing, literally, and get paid," says Joseph Bowring, monitor of PJM Interconnection, which manages the power grid in the Mid-Atlantic and parts of the Midwest and Southeast.
Some free riders are gaming the system, but many others simply benefit from loosely written standards, officials say.
Energy-conservation programs exploded in recent years to relieve stress on the power grid, especially on hot summer days. Even a small cutback in power demand can save customers millions of dollars in electricity costs.
Thousands of business and residential customers across the USA take part. While the vast majority do temper their power usage, some are gaming the system by:
Inflating benchmarks. In PJM's territory, an office building can offer to slash its power usage on a given day by a set amount below its previous 10-day average in exchange for a payment from PJM. But it could inflate its 10-day average, or baseline, by blasting its air conditioner, for example. Then, it would appear to be cutting back even when it's not, netting an undeserved bounty.
A factory can get paid to conserve when it might be shuttered anyway due to an equipment failure. About 10 percent of PJM's payments - which totaled $48 million last year - are questionable, says PJM executive Jeff Bladen.
In New England, a customer must specify a price it will accept to cut its energy use that at least equals the minimum set by the New England Independent System Operator (ISO). Wholesale prices last year were far above the ISO's minimum, leading it to accept offers daily.
Here's the rub: Energy-conservation days aren't counted in the customer's baseline. A customer could maintain for months a high baseline in the energy-intensive summer and earn cash in the fall without conserving.
One plant raked in $390,000 over five months last year without cutting back by inflating its baseline, the ISO says. The ISO recently raised the minimum asking price so it accepts offers much less often.
Tim Healy, CEO of EnerNOC, which runs conservation programs, strongly agrees loopholes must be closed but says the low acceptance rate has severely dampened participation, erasing the program's benefits.
Playing by flawed rules. In New York, an office or apartment building can earn a monthly fee to cut power use when the grid is under the greatest stress.
Most power-curbing events are midafternoon - peak time for offices - but in apartments, few tenants are home. A building can net $50,000 a year even if no one conserves.
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