Published in La Tribune, on April 28 2026
On April 15, 2026, the Federal Energy Regulatory Commission (FERC) imposed a penalty on American Efficient (AE), a company specializing in “energy efficiency,” on the grounds that a large portion of its profits were derived from defrauding legitimate beneficiaries. For the fraud, estimated at $500 million over a 10-year period, AE must pay $722 million in fines and return $410 million in ill-gotten profits, plus interest. The case is far from over, as the accused company has mobilized its lawyers, who are asking the White House to overturn the FERC’s decision.
The business of demand response
In an electric grid, if a consumer draws less power than they are entitled to, they help balance the system by avoiding the need to bring on additional generation, thereby saving the cost of that generation. This argument justifies compensating for demand response. The principle is simple, but its application is much less so. At what unit price and for what volume should this compensation be calculated? The potential for load shedding is easy to assess and implement for large electricity consumers who have customized contracts. This is obviously not the case for small consumers, particularly households, where the potential savings from load shedding do not cover the cost of the equipment needed to measure it. Companies, known as aggregators, have entered this market segment to remotely control and manage small-scale load shedding.
With the selling point “The cleanest and least expensive energy is the energy you never have to use,” American Efficient positions itself as “one of the largest energy efficiency aggregators in the United States. We operate projects in collaboration with major manufacturers, distributors, and retailers to facilitate the adoption of energy efficient products and aggregate, measure, verify and deliver their energy savings for wholesale energy markets”. By aggregating demand response achieved by small consumers—whether occasionally or on a sustained basis following their purchase of more energy-efficient equipment—the aggregator needs only position itself as a 'seller of savings' to obtain financial compensation on the capacity market or, in the absence of such a market, from the transmission system operator. Consumers whose homes are subject to energy-saving measures are generally not compensated, except for the satisfaction of seeing their consumption reduced.
American Efficient in the dock
This activity is perfectly legal in most countries, and in the U.S., it is encouraged by the FERC in its Order No. 2222. So, what can be held against a company as seemingly virtuous as AE? That it defrauded for many years regarding its actual role in determining the volumes of demand response sold on capacity markets—that is, markets that compensate generation facilities and electricity-saving equipment (see here the example of the French market).
According to the FERC, the method is as follows:
- AE enters into agreements with retailers, distributors, and manufacturers of energy-efficient products under which it pays them a few cents in exchange for data on their sales of energy-efficient products to end consumers. FERC gives the example of a consumer purchasing a high-performance refrigerator for several thousand dollars from an appliance retailer, with the retailer providing the technical specifications to AE for 15 cents.
- AE aggregates the data collected in this way to sell the expected energy-saving capacity of these products and collect the corresponding payments. FERC estimates that 1 billion items have been involved in such transactions over the past decade, enabling AE to sell more than 20 gigawatts of demand response.
In these transactions, American Efficient plays no role in promoting the sale of energy-efficient appliances; it does not ask the appliance retailer to use the few cents paid to offer a discount on the sale price of its appliances or to advertise them. AE has no relationship with the buyer of the refrigerator whose expenses enable the reduction in electricity consumption for which AE is compensated; in particular, it does not inform the buyer that it will claim the right to capture and monetize the value of the capacity that should be returned to it. And let’s not forget that the refrigerator buyer will pay, on their electricity bill, a portion of AE’s compensation for energy savings resulting from their own efforts—not AE’s.
In short, FERC does not dispute the energy savings claimed through the purchase of high-efficiency equipment but considers that the resulting financial gains did not go to the right pocket—that of the consumers who purchased the energy-efficient equipment.
American Efficient’s Counterattack
The case is still in its early stages and is taking on constitutional dimensions as AE challenges the very authority of the FERC, calling for the transfer of energy regulatory power to the U.S. president. The legitimacy of the FERC risks being undermined, as does that of other federal agencies targeted by the White House. Without waiting for the outcome of the lengthy legal battle that will make a fortune for law firms, PJM, the country’s largest electricity grid operator, has taken steps to tighten the conditions under which energy efficiency aggregators can access capacity markets. Two other grid operators, ISO-NE and MISO, have already excluded AE from their markets.
Photo de Sasun Bughdaryansur Unsplash
