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Originally asked as a follow up question, and lost in the controversy of Why would it matter whether a front-loading washer is upstairs? (They will only give me a free FRONT-loader if it's on the first or basement floors...)

Why they would only offer it in this way has been speculated about; how it is economically viable for the power company to do this at all, isn't.

The power and gas companies in my area have offered similar rebates and incentives that I would think to be counter-intuitive to their business. Why would the power company offer an incentive for having equipment that would use less power?

My less than educated guess is that it's a 'government thing' or they're somehow trying to deal with demand spikes. But the latter wouldn't explain why the gas company would give you a rebate for upgrading to a HE furnace or a programmable thermostat.

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Mazura
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  • This question appears to be off-topic because it is about business practices of utility companies, not do-it-yourself home improvement. – Tester101 Nov 11 '14 at 12:49

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The utility company wants to reduce PEAK demand -- it is much cheaper to ensure that power demand never goes above X than to build a new power plant. Furthermore, balancing the peaks and valleys of demand means that they can generally use cheaper power sources (nuclear/hydro) and avoid the expensive gas/oil fired plants.

A washing machine has a giant heater in it, and a front-loader uses less water and thus less heat to heat it up. Hence the utility no longer has to plan for so much more peak demand...

gbronner
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    Agreed, the utility wants to avoid spending money i.e. avoiding the cost of large infrastructure investments outweighs the lost revenue. There is, however, a limit. Many utilities in the sunny Southwest are now actively working through political channels to have net metering for solar installations killed since they get less revenue without avoiding an offsetting infrastructure investment. Said another way, just follow the money. On the plus side, utilities will likely be one of the biggest proponents of electric cars going forward. – bobfandango Nov 07 '14 at 23:41
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    That would certainly seem reasonable as a basis for encouraging people to upgrade air conditioners (which often use the most electricity during peak-load times), but I would think washing machines would generally used more during off-peak times than peak times [obviously not everyone has the same schedule]. – supercat Nov 08 '14 at 15:23
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Very simply, because otherwise they may be forced to do things they like even less -- make a huge investment in infrastructure, for example, to provide enough power to serve all the customers.

There are also government incentives (carbon credits and so on) and PR benefits.

Put those together, and it's worth the relatively small amount of money they're investing. Especially when they're in competition with the other energy sources (gas vs. oil vs. electric) and want to encourage you to continue, for example, heating with gas rather than switching to oil.

keshlam
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In many areas, electric utilities are strictly regulated, and may be subject to political forces as much as they are to market forces. Subsidies to customers to promote the purchase of energy-efficient equipment might win the favor of politicians responsible for setting tax policies, environmental regulations, electric rates, etc., and the value of such favor to shareholders may in some cases exceed the money spent.

Although efficiency improvements with things like air conditioners may help a company to reduce its peak power demands, some subsidized appliances would be used largely during off-peak hours. On the other hand, if an electric company wants to build a new plant, apparent efforts to reduce demand and improve the environment may help it clear the regulatory hurdles necessary to do so.

supercat
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  • What about small utilities that mostly buy power from larger utilities? Do they generally have to pay an overage surcharge after a certain point? – sdaffa23fdsf Apr 21 '16 at 02:27
  • @sdaffa23fdsf: That would be determined by the contracts they have, but by my understanding it would be typical for contracts to have a baseline cost plus varying price per marginal usage (which might be zero below a certain level if the baseline price includes the cost of N MW of electricity which must be paid for whether or not it's actually used). A lot of the incentive programs I've seen are for residential lights, though, which are used largely during off-peak hours. – supercat Apr 21 '16 at 14:16