² These utilities are the Sacramento Municipal Utility District, Traverse City Light and Power, Public Service Company of Colorado, Gainesville Regional Utilities, Niagara Mohawk Power Corporation (program currently on hold), Detroit Edison, Wisconsin Public Service, Wisconsin Electric Power, Northern States Power, Fort Collins Light & Power, Gulf Power, Hawaiian Electric, Holy Cross Electric Association, Aspen Municipal Electric Department, Austin Electric Utility Department, Cooperative Power, and Portland General Electric. TU Electric, Florida Power and Light, Tallahassee Electric Utility and Central and Southwest Utilities have filed or announced plans to offer green pricing but the details are still being developed. About twenty other utilities are conducting market research, planning or considering such programs. For a description of some of these programs, see Edward A. Holt, Green Pricing Resource Guide (Gardiner, ME: The Regulatory Assistance Project, Feb. 1997) available from RAP at 207-582-1135 or rapmaine@aol.com; and Edward A. Holt, "Green Pricing Experience and Lessons Learned," in Proceedings of the 1996 ACEEE Summer Study on Energy Efficiency in Buildings 9 (Washington, DC: American Council for an Energy-Efficient Economy, 1996), 133-140.
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³ The marketing of electricity from existing renewable energy plants as green power is a subject of great concern to environmental and renewable energy advocates because it does not increase environmental quality. If the demand for green power is strong, however, it may lead to investment in new renewable projects with consequent environmental benefits. See Edward A. Holt, Disclosure and Certification: Truth and Labeling for Electric Power (College Park, MD: Renewable Energy Policy Project, Jan. 1997). This brief can be ordered free of charge from REPP at (301) 405-4550.
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⁴ "Green Pricing Experience and Lessons Learned," 133-140.
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⁵ Brian Byrnes et al., "Green Pricing: The Bigger Picture," Public Utilities Fortnightly 134 (Aug. 1996): 18-20.
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⁶ TCL&P makes capacity payments to the MPPA of about $6 per peak kW per month, plus an annual peak fee. The capacity that TCL&P pays for is reduced by the capacity of the Bayside plant—simply because of its availability. For the same reason, TCL&P can also buy energy at the economy rate rather than the firm rate.
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⁷ Charles Fricke, Traverse City Light & Power General Manager, telephone conversation with author, 9 Aug. 1996. Mr. Fricke can be reached at (616) 922-4470.
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⁸ Conversation with Fricke, 9 Aug. 1996.
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⁹ Steven B. Smiley, "Implementation of a Green Pricing Wind Energy Project" (Paper presented at the Center for Clean Air Policy Offsets Forum, Washington, DC, 26 Oct. 1995).
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¹⁰ However, the actual benefit may be little to none because fuel cost adjustments are usually zero to +/-$.002 per kWh. Generally, rate volatility is probably not an issue since TCL&P rates have been nearly flat for the past ten years; with excess capacity available, there has been no talk of near-term rate increases.
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¹¹ Of course, TCL&P could have chosen to halve the premium and double the number of customers needed to pay the difference in cost, or some other combination. This would produce the same revenue but the turbine output would not be enough to provide all the electricity used by the larger number of participants. Participants would then be forced to use a mix of wind and coal. Project planners thought that wind customers would want all of their electricity to come from wind.
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¹² The windmill is connected to the utility's 13.8 kVA distribution lines. TCL&P has few higher voltage lines in the city. The transmission charge avoided is approximately five mills per kWh, but the charge might have been higher due to the intermittent wind resource and lower capacity factor.
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¹³ Twenty-nine businesses have signed up in total, but two of these have moved, and one had a special heating and air-conditioning rate which could not be modified to accommodate the green rate. As some participating customers move or cannot participate, other customers are added from the waiting list.
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¹⁴ Data presented in this paragraph and in Table 1 are based on annual bills converted to average monthly bills. Average figures are the mean of all participants. Typical figures are the mean after excluding two outliers, based on electricity use: the largest customer which is four times as large as the next largest, and the smallest customer which is one-fifth the size of the next smallest customer.
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¹⁵ Consideration of taxes was not a factor worth mentioning for these businesses. Increasing electricity cost without increasing revenues will reduce gross profit and therefore the amount on which the business must pay taxes. While increasing electricity cost reduces the taxes owed, it also reduces net profit. However, if the business receives public recognition and generates additional business and revenue, the business may become more profitable. Only if a business were earning profits just over the threshold that put it into a higher tax bracket might an increase in cost offer the advantage of dropping it into a lower tax bracket. There are many easier ways to accomplish this end than agreeing to pay more for an ongoing and necessary service; they include making tax-deductible donations or incurring a one-time discretionary expense at the end of the tax year.
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¹⁶ For example, The Detroit Free Press, The New York Times, an Associated Press story carried nationally, and the local press have all covered the wind project.
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¹⁷ The interviewees mentioned two motivating factors that we had not anticipated and therefore did not ask about in a structured question: reducing risk by diversifying energy resources and business leadership.
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¹⁸ The obstacle to this recommendation for a small utility like Traverse City is the expense of market research, both in terms of cost and staff. Yet, if a program is to grow, sponsors need to invest in success.
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¹⁹ Cooperative Power, a generation and transmission utility in Eden Prairie, MN, and many of its seventeen-member retail cooperatives (including the largest, Dakota Electric) recently embarked on a jointly-supported wind project.
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²⁰ Barbara C. Farhar, Energy and the Environment: The Public View (College Park, MD: Renewable Energy Policy Project, Oct. 1996), 6. This brief can be ordered free of charge from REPP at (301) 405-4550.
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²¹ This is Portland General Electric's approach, which recently proposed an experimental renewable energy tariff for its 200-500 largest customers. PGE's large account representatives communicate frequently with these customers, making it cost effective to market the green rate to them.
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²² By emphasizing the role of customer preference, we do not mean to imply that giving customers a choice is the only step necessary to stimulate the development of renewables. However, customer choice will be a part of the solution and its importance will grow. Other parts of the solution include incorporating environmental externalities from all generating resources into the cost of those resources (pollution taxes or brown pricing); crediting renewables with avoided environmental costs; recognition by transmission and distribution companies of the benefits of localized, distributed small-scale renewables on the utility system; regulatory policies supportive of renewable technologies (such as a renewable portfolio standard or a system benefits charge) during the transition to competition; and federal R&D budgets and policies to help identify and commercialize technology improvements.
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