Imagine if by law you need to bus people from A to B every hour, but they get to pick when the trip takes place, but you need to buy and maintain the bus. Your

Imagine if by law you need to bus people from A to B every hour, but they get to pick when the trip takes place, but you need to buy and maintain the bus. Your bus can accommodate 40 passengers. At 2-5 in the morning you get only 5 passengers, at peak hours you average might occasionally get 32. If you could induce passengers to shift their habits such that you could be a small bus with a capacity for 30 people your infrastructure costs would go down. So maybe you're charging $5 per trip on average, but $-5 off-peak, and $20 during the peak. Other comments here point out that some power plants can't be easily scaled down, that's also true, but the system is also intended to shift overall demand over the long term. So nobody's producing for negative prices, rather a peak hours consumer is directly subsidizing other customers, because the power company would like them to shift their consumption.