The Grassroots are Greener:
A Community-Based Approach to Marketing Green Power
by Rudd Mayer, Eric Blank, and Blair Swezey²

Part I: The Genesis of Colorado's Community-Based Marketing Campaign

The Grassroots Campaign for Wind Power in Colorado grew out of rocky ground. In early 1996, Public Service Company of Colorado (PSCo), the state's largest utility, withdrew from an effort to develop a wind project in Wyoming in collaboration with several other utilities in the region. This project would have provided 10.5 megawatts (MW) of wind energy for all PSCo customers, fulfilling a commitment the utility made in its 1996 integrated resource plan (IRP). Later that year, in the context of a merger proceeding involving PSCo, supporters of renewable energy (see Box 1) again sought, but were unable to obtain, a regulatory mandate from the Colorado Public Utilities Commission that would have required PSCo to add roughly 10 MW of renewable resources to its existing capacity.³

By fall 1996 there was no viable path for developing regulatory policies to support renewable resources in Colorado. The only way to promote such resources involved a PSCo proposal to create a separate, optional renewable energy tariff — a green pricing program — under which customers could voluntarily pay more on their electricity bills to purchase some or all of their electricity requirements from a new wind power project to be developed by PSCo in north-eastern Colorado. When this program was proposed by PSCo as part of the merger case settlement,⁴ it was opposed by the renewable resource advocacy community as being a poor substitute for regulatory requirements funded by all customers.

But once the merger case was resolved, the advocacy community — and in particular the Land and Water Fund of the Rockies (the LAW Fund) — decided to move away from a strictly adversarial role and to work with PSCo to develop the best green pricing program possible. Three considerations led to this decision. First, advocates had exhausted the available avenues to develop regulatory policies in support of renewable resources. Second, the green pricing case provided an opportunity to rebuild relationships that had been strained by the merger litigation and other environmental disputes. And third, the LAW Fund was intrigued by the potential for developing techniques in Colorado for building green customer demand that would be useful in the retail competition markets emerging in California and New England.

PSCo was motivated to pursue green pricing for several different reasons: market research indicated that many of its customers wanted a renewable energy option; senior executives believed that the development of renewable resources should be market-driven, not mandated; and PSCo wanted to diversify its resource base and gain experience with a new technology.⁵ The LAW Fund and other advocates believed that, in addition, PSCo appreciated the public relations value of offering a clean energy option to its customers, saw an opportunity to help brand itself as a green power provider in anticipation of competition, and wanted experience introducing and marketing a new electricity product.

By late 1996, the utility and key renewable energy advocates began working together to develop a green pricing program. Despite the parties' desire to cooperate, some aspects of the PSCo proposal caused concern. The utility initially suggested letting the market set the price. Market research had established a range of prices that customers would be willing to pay. Renewable energy advocates considered it inappropriate for a regulated utility operating in a cost-of-service environment to base the product pricing on whatever the market would bear rather than on traditional cost-based, rate-making principles.

In addition, the advocates were concerned that the utility's marketing plan was vague and would be ineffective. Experience to date with utility green pricing programs had shown that a utility, operating alone, might not be able to market clean energy cost-effectively in amounts large enough to make a significant environmental and economic difference.⁶ Because a key aspect of promoting renewable energy is its public interest nature, the advocates argued that it was critical for the utility to form alliances with community-based organizations, particularly nonprofit entities with a track record of promoting long-term public interests. These organizations seek to educate the public on environmental issues and therefore have mechanisms in place for widespread and ongoing consumer outreach and education on the benefits of renewable energy. And because environmental groups have credibility with consumers on these issues, there is a real opportunity to enhance a product's image by jointly promoting it with an environmental group.

In the green pricing case settlement eventually reached among the parties, the price of the wind power product (called Windsource) was negotiated. PSCo agreed to a premium of 2.5¢ per kilowatt hour (kWh),⁷ which was the lowest point of the market-based price range proposed by PSCo and the upper range of what the advocates considered fair and reasonable based on their cost-based analysis. Essentially, the parties agreed on a specific number and remained silent on the methodology used to reach the number. PSCo also made a commitment to involve environmental and community organizations in its marketing and sales promotion activities.

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