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We Got Green?

<p>Not hardly. And now the FTC would leave consumers in the dark on some environmental claims.</p>

Fortnightly Magazine - October 1 1999

exchange for the states east of the Mississippi. Here, Hanger, Rohrbach and Adels argue convincingly that the lack of a central commodity market for trading wholesale green power has hindered growth of renewable energy.

Without a commodity exchange for green power, they say, developers of new renewable facilities have difficulty financing the projects. The developers need large-volume, long-term commitments from buyers to purchase the output of the new plants, but must forge their own portfolios one buyer at a time. Hanger, Rohrbach and Adels add that in most cases, when would-be buyers attempt to identify wholesale renewable resources available for sale, they discover that the supply has been sold to others. "Rarely," they note, "does a buyer ever learn how much supply was available or at what price it has been committed or sold."

But with a green power exchange, they say, "a retail marketer could purchase blended resources directly, without having to create its own portfolio of resources."All of this sounds perfectly reasonable. But I say it proves my point -  the green power mind-set is locked in the wholesale world, clueless about what it takes to perfect real consumer products.

BY DECEMBER 1999, THE ENVIRONMENTAL MARKETING SUBCOMMITTEE of the Energy Deregulation Working Group of the National Association of State Attorneys General plans to issue a final proposed set of guidelines for environmental marketing of electricity. Meanwhile, however, the subcommittee issued a preliminary draft that discusses how marketers should substantiate environmental claims. That draft drew a surprisingly laissez-faire response from the U.S. Federal Trade Commission in comments released Aug. 12.

The NAAG anticipates marketers might rely on a system of tradeable certificates or tags to substantiate green claims, since it is physically impossible to trace the source of electrons. Under a tagging system, the generator sells the premium associated with the preferred generation source - separate from the power itself. Thus, a supplier that advertises 50 percent hydro and 50 percent natural gas might actually sell nuclear power. But it could claim a green product because it had purchased tags from hydro gas generators, which, presumably, would not sell the tags a second time. Will consumers get it? NAAG is not sure:

"This raises questions about what tagging-based claims mean to consumers and necessitates, as an antidote to deception, disclosure of the use of a tagging system to them."

The FTC disagrees, suggesting that regulators should leave consumers in the dark about grid constraints, parallel paths and tagging schemes:

"Although tags may seem more complicated than contracts and may raise the suspicions of some consumers ¼ staff does not believe that benefits to consumers of NAAG's proposed required disclosure ¼ would outweigh its burdens. Research conducted by the National Council on Competition and the Electric Industry indicates that consumers have less confidence in environmental claims about power when they are told that a tagging system is used to support them."

By the way, the FTC also urges caution when requiring marketers to disclose environmental consequences measured on a full life-cycle basis. It recommends further study on the question of allowable tolerances