Air-polluting emission rates and energy-efficiency ratings vary widely among power plants, depending on location, age and whether the power plant is repowered. Traditional regulations require installation of specified emission control equipment that varies among power plants. These regulations do not specify that utilities first dispatch the cleanest power plants as demand varies from peak to off-peak periods. This empirical analysis shows, for 2 years out of 20, that demand-side management (DSM) programs increase air pollution. One reason for this result is that regulations require installation of specific emission-control technology but do not provide the incentive to take actual emissions or their air quality impacts into account when operating the system. For certain types of air pollutants and in some regions, regulatory programs now include markets for tradable emission credits. Such programs may alter this incentive.