Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

The Green Controversy

Who should have "green tag" ownership under power purchase agreements, the buyers or the sellers?
Fortnightly Magazine - November 1 2002

may be commonly understood to include green tags, green tags should be understood in today's energy market to be covered by the purchase price.

Certificate Programs

The recent enactment of fuel source disclosure and renewable portfolio standard laws, and the availability of green electricity at retail, have given rise to a number of green tag programs. Under those programs, the environmentally beneficial characteristics of certain generating units is captured in tradable certificate-tags. Those tags are used by retail suppliers to demonstrate the environmental attributes of the power they sell. The rules adopted for those programs do not, however, provide much additional clarity as to who owns the certificates.

One such green tag program is administered by the Center for Resource Solutions ("Green-e"). Green-e allows suppliers of electricity to certify green products based on existing power purchase arrangements. Based on applications by retail power providers, Green-e certifies renewable energy products that meet its environmental and consumer protection standards. 26 In order for a utility to have its energy certified, Green-e presupposes that the retail providers possess the green attributes; thus entities selling power to utilities cannot also possess these green benefits. Conversely, the Center for Resource Solutions also has begun a Tradable Renewable Certificate (TRC) program. Each TRC represents the bundle of attributes separated from the electrical energy, and Green-e recommends that, in the absence of specific legislation or of contract terms, ownership and the right to transfer TRCs should be deemed to belong to the renewable energy generator that generated the energy. 27 Thus, the owner of Green-e certified attributes can be largely dependent upon which program the attributes were certified under.

The New England Power Pool generation information system, which creates tradable certificates for the attributes of power to facilitate compliance with state emissions and renewable energy laws, 28 is no clearer about who owns the green attributes under power purchase agreements. Under the operating rules for this system, certificates initially are assigned to generators. Those rules, though, expressly state that that assignment is "without prejudice to which person or entity is the owner of such [c]ertificate for other purposes." 29 Thus, as with the Green-e program, the New England generation information system does not provide significant guidance on who owns the environmental characteristics of power sold under an existing power purchase agreement.

Comparison to Federal Tax Credits and Emissions Credits

Federal tax credit legislation supports the conclusion that green tags logically could be allocated to either the generator or the purchasing utility. The Internal Revenue Code (IRC) provides a renewable electricity production credit to generators that use wind, closed-loop biomass, or poultry waste. 30 The IRC also provides generators with a business investment credit for solar and geothermal equipment. 31 Proponents of keeping the environmental attributes with the generators would argue that both of these provisions reflect the understanding that the financial benefits resulting from environmentally beneficial generating technologies should be allocated to the entities that are actually using that technology, i.e., the generators. Those who support allocation to power purchasers would argue, however, that the IRC specifically provides that