There is another approach that could also alleviate some of the pressure. Instead of keeping the consumer price fixed and allowing the utility to control your load, you can allow the consumer price to float.

Most of these markets have a 24hr-ahead clearing price for energy. I think you aught to be able to expose retail consumers to fluctuations based on the day-ahead market to let people make their own choices for energy usage. Given that exposure, enough consumers will change their behavior to soften the variability in price. It might also make distributed energy storage Just Work (TM) if individual battery owners have a vector to profit from supporting the grid.

In the USA I thought the price already floated based on market rates.

Yes, absolutely this is the way to go. It works well for gasoline, for instance.

Retail consumer prices don't float in most markets. Some markets have time-of-use pricing for some part of the year, but even those have a fixed peak/off-peak rate that is fixed well in advance.

>I think you aught to be able to expose retail consumers to fluctuations based on the day-ahead market to let people make their own choices for energy usage.

What prevents an electric company from significantly raising prices for a day to catch people off guard? I can't exactly switch electric companies to punish them.

Isn't that basically what Enron did to California? Theoretically they are already doing this, just not to retail customers.

Yep. In Germany, afaik, we have Aluminium plants that are very precisely regulated like this.

You can't switch electric companies, but you can choose to switch off your load (or increase your source), thus denying them revenue or increasing their payments to you.

It also gets harder to game this system as distributed generation gets better penetration. The optimal thing to do as a residential energy provider is also naturally stabilizing for the grid. If a cabal of generators acts to restrict supply and artificially raise the price, then everyone who isn't a member of the cabal makes a killing selling energy into the market.

Its also hard for a cabal to squeeze residential providers out of the market through lower prices. Distributed generation is a small fraction of any individual provider's income. In most cases, a residential provider is paying for their system over several years. So in order to squeeze them out, a cabal would also have to sustain a campaign of artificially low prices for a span of years in order to have an impact.

Distributed generation means that there is a pool of small independent suppliers whose rational choice always acts to counter the actions of any oligopoly that attempts to form.

The UK can manage to have competing power companies, so its clearly possible.

what prevents them from significantly raising rates permanently?

There are other futures markets that are bootstrapped off of the day-ahead market. Weeks/months out are used to schedule maintenance operations. Years out are used to schedule construction/decommissioning.

So if the extended market prices are high enough, then this acts as a signal to add generation and/or distribution capacity. Likewise, if the extended market prices are low enough, this acts as a signal to retire capacity that has a higher operating cost/lower profit margins.

People would notice, protest, lobby government for regulation, the usual methods of expressing civil discontent. I'm talking about a situation where people don't notice until after the fact.

Nest partners with utilities to support demand shedding/load response [1]; you get a utility bill credit for allowing the utility to send Nest demand shedding signals when local power demand is high (which suspends your AC cooling cycle for 1-3 hours), but you can override the thermostat setting if you must (you just don't get the credit). Cheaper than firing up a single cycle gas peaker (super expensive, comparatively speaking to base load and renewables).

You don't have to allow the utility to control your consumption automatically, but then you'll be exposed to the real time price of power (not a regulated average as occurred in the past because of dumb meters).

[1] https://support.google.com/googlenest/answer/9244031?hl=en (Google Nest: Learn about Rush Hour Rewards)

I have this on my nest, and one interesting feature, is it turns down the AC to a lower temp a few hours before the 'energy rush hour' so that your house doesn't get as warm.

IE, I have it at 72 deg, a 'energy rush hour' is declared, the nest automatically turns my thermostat to 70 deg an hour or two before, then to 75 deg during the rush hour.

So then could I hook up a load to a Nest and have a regular, dumb thermostat control my house and get those credits without actually doing anything? That doesn't seem too hard to pull off.

Until the utility upgrades to the next version of demand response software, which notices that you were sent a control message, but your consumption didn't change, so you're no longer eligible for the credit.

Then your electricity will probably be more expensive than that of the people who will utilize the night's cheaper rates and will get rebates for installing a device that will turn some devices down on unexpected peaks.

If you still "really don't want the power company to control my thermostat" after seeing your potential savings, that is.