Green Electricity: It's in the Eye of the Beholder

Fortnightly Magazine - February 15 1998

SOME PEOPLE WANT TO KNOW WHAT "GREEN POWER" means (em and, by extension, "environmentally friendly." Does that mean low emissions, including nuclear energy? Is renewable energy automatically green? Should the simple fact of compliance with all standards imposed by the Environmental Protection Agency afford the right to advertise power generation as green?

Consumers, agencies and state and federal officials want truth in advertising. Proponents of alternative generation claim consumers are willing to pay more for cleaner, greener energy. Residential customers of Detroit Edison, for instance, pay more than $6.50 additional per month to support solar energy. In Colorado, the Governor's Office of Energy Conservation is using special funds to help offset the additional cost it takes to power the governors' home with wind. Only clear industry guidelines can ensure that everyone is actually getting what they're paying for.

Green power certification is proceeding on several different fronts. Commissions and legislatures are mandating resource disclosure of generation sources. Legislation at both the state and federal level are investigating the use of renewable portfolio standards. The Federal Trade Commission is considering establishing voluntary guidelines for electricity advertising like those already established for other retail products in the FTC's 1992 "Guides for the Use of Environmental Marketing Claims" (16 C.F.R. 260).

Guiding Advertisers

In December, at the DOE/NARUC electricity forum in Washington, D.C., attendees pressed panel experts for a definition of green power. From the audience rose Will Paul, representing the International Brotherhood of Electrical Workers, declaring that he would prefer to see a ban on the word "green" in all electricity advertising campaigns, since the word can easily mislead consumers.

Elaine Kolish, associate director at the Federal Trade Commission's division of enforcement, who was also at the forum, acknowledged a lack of guidelines. She cautioned potential advertisers to think carefully about what message (em direct or implied (em that consumers will take away from product advertising.

The Conservation Law Foundation is circulating its proposed "Green Guides for Electricity" among the electricity industry and legislators. The document (em the third edition is dated Dec. 3, 1997 (em borrows language and format from the 1992 FTC guidelines for environmental marketing. It aims to be a "starting point to make the generic FTC guidelines industry-specific," says Lewis Milford, director of energy programs at the CLF's Vermont office.

The draft proposes guidelines for claims about the attributes of electricity or services connected with the generation, distribution or sale of electricity, "as they may appear in labeling, advertising, promotional materials, and all other forms of marketing, whether asserted directly or by implication, through words, symbols, emblems, logos, labels, certifications, depictions, company names, product brand names, or through any other means."

The bottom line? Product claims would be based on "competent and reliable evidence," just as the FTC requires in its environmental guidelines. That test will prove a challenge for companies vying to sell electricity, however. For, as the CLF draft guidelines point out, most customers would not maintain any direct wire connection to their power supplier in a world of retail direct access. It would be difficult, if not impossible, to "claim that electricity used by a given customer came directly and exclusively from that customer's supplier."

Many electricity industry players are so new, Milford says, "they may not know the rules." He hopes that CLF will get something approved on at least an interim basis before March 1 (em the date retail access is scheduled to begin in Massachusetts (em because of the concern that since companies are already advertising, "misleading or confusing advertisements might lead to cynicism and confusion among customers, and that could harm green power."

Janice Frankel, a lawyer with the FTC's enforcement division, stresses, however, that the FTC is a reactive body; it won't draw up any new guidelines until the need is shown. "This is still a very new industry," she says.

Disclosure Standards

Hand-in-hand with the push for advertising guidelines is the movement to require disclosure of generation sources. In 1996, the National Association of Regulatory Utility Commissioners passed a resolution calling for uniform disclosure standards of price, resource mix and the "environmental characteristics of¼ electricity purchases."

In his industry restructuring bill, HR 1960, Rep. Edward J. Markey (D-Mass.) would require the FTC, in consultation with the EPA and the Department of Energy, to issue disclosure rules by Jan. 1, 1999 that would cover generating source data, air and water emissions data, reliability data and price information. In S. 687, Sen. James M. Jeffords (R-Vt.) proposes to bring the Food and Drug Administration and the Federal Energy Regulatory Commission into the decision-making process, as well.

States are getting into the disclosure business, too.

Last November, The Regulatory Assistance Project in Maine presented its findings on "Uniform Consumer Disclosure Standards for New England," to the New England utility commissions, which jointly had requested the study. The report recommends, based on customer research, that companies should use an "informative, succinct, easily understood and widely available" label that would convey four key pieces of information: price, contract terms, fuel mix and air emissions. Not only would such information be helpful to consumers, the report notes, but a disclosure policy "will also protect suppliers from unfair trade practice claims by setting clear rules of the road." The report also noted that disclosure might offer a secondary benefit: "Depending on the level of customer demand, it can result in cleaner resources and less pollution."

Janet Gail Besser, acting chairwoman of the Massachusetts Department of Telecommunications and Energy (the former Department of Public Utilities), was closely involved in the RAP's disclosure project. It's probably no coincidence, then, that the Massachusetts restructuring law, HB 5117, which Gov. Paul Cellucci (R) signed on Nov. 25, orders the DTE to publicize uniform labeling regulations that will apply to all electricity suppliers in the state.

The Illinois restructuring law signed by Gov. Jim Edgar (R) in December, HB 362, requires quarterly disclosure of fuel mix and air emissions as of Jan. 1, 1999. The law specifically calls for a breakdown by percentage in "pie-chart" format.

In Pennsylvania, the public utility commission proposed a rule requiring that suppliers provide the most recent annual average percentage of electricity supplied, per fuel, or the anticipated mix, when a customer requests the information, when a supplier first enters an agreement with a customer, and "as soon as possible when a significant change occurs in energy sources." Suppliers would not be allowed to use the term "green" or make claims that energy sources benefit the environment; instead, suppliers would make a reference to "renewable resources," as defined in 66 C.S.Pa.Code 2803. John Frasier, a PUC spokesman, says the proposal was forwarded to the Attorney General and budget offices in early December.

(Note: In interim rules, issued July 10, 1997, the Pennsylvania PUC had listed six conditions for any power marketing claims of "green" or "environmentally friendly" power, also expressing a preference for the term "renewable energy. At that time it had required a specific breakdown by resource (em e.g., wind, biomass, etc. See, m-00960890, 180 PUR4th 61.)

A California Case Study

Electricity customers in California will have several resources to turn to that can help them make sense of the disclosure and "green" puzzles.

SB 1305, which Gov. Pete Wilson (R) signed on Oct. 8, requires generators to report consumption by fuel type to the independent system operator on a quarterly basis. The ISO then will make that information available to the California Energy Commission to verify and to certify a generator's mix as renewable. The CEC is authorized to access similar data for out-of-state generators. Working with the state's Air Resources Board, the CEC also will report on air emission effects of electric restructuring by June 1, 1999.

Retail suppliers must disclose to both potential and actual customers whether their power is "net system power" or whether it comes from other sources. Interestingly, this disclosure provision does not apply to "advertisements and notices in general circulation media." (SB 1305, Sec. 398.4(b).)

John Schaefer, president of one new market entrant, Clean Power Works, admits, though, that when he explains to potential customers that since electrons can't be tagged the customer has to rely on the contractual promise of generators, "You bet there's some doubt about that. People are skeptical."

California consumers can also look for companies that display the Green-e logo, a part of the Green-e Renewable Electricity Branding Program, created by the San Francisco-based Center for Resource Solutions (see Public Utilities Fortnightly, Nov. 15, 1997, p. 14). Besides requiring at least a 50-percent renewable energy supply for qualification, this voluntary certification program also requires marketers to disclose resources, says program manager Kirk Brown. The program uses the definition of "renewables" that is reflected in Public Utilities Regulatory Policies Act, Brown says (i.e., sources such as solar, wind, geothermal, biomass, and hydroelectricity that is less than or equal to 30 megawatts).

Edison International's EarthSource product is one of the Green-e participants listed in a new Internet site unveiled last month by the Environmental Defense Fund (www.edf.org). The site notes that EDF endorses the concept of electricity labeling and one section shows a probable state-by-state breakdown of electricity sources and pollutant emissions, based on monthly electricity costs.

Brown stresses, however, that Green-e certifies a product, not a company name. So there's nothing to stop a company from calling itself, for example, Renewable Energy Source Inc., while actually generating or reselling more traditionally generated electricity.

In fact, despite its name, energy service provider number 13 on the California PUC's list, Renew Power LLC, will "try to stress renewable sources," once it begins providing power to customers, according to manager Robert J. Kendrick, but the name won't necessarily stop the company from going "in other directions."

On the other hand, there's no contradiction in the name Cleen 'n Green, program manager Timothy Mayhew says, because the company will purchase clean energy. "No coal, nuclear or natural gas (em basically it's hydropower," he says, although their source is "confidential." They will be using the California Public Utilities Commission definition of green and expect to be certified as such by the Green-e program, he adds.

Janice Frankel, with the FTC's enforcement division, agrees that there's nothing inherently wrong with calling a company Green Energy Source Inc., or something similar. But consumers need to be aware of how else a company is promoting itself. "We have broad consumer protection authority under section five of the FTC Act," she says, and in the past, the FTC has prohibited "inherently deceptive names." F

Lori M. Rodgers is associate editor with Public Utilities Fortnightly.

Federal Standards for Renewable Energy

HR 655 would phase in a portfolio standard over 10 years requiring minimum percentage of generation resources supplied by renewable energy, calculated by supplier: 2 percent in 2001, 3 percent starting in 2005 and 4 percent by 2010.

Hydro resources are not taken into account in calculating total generation. "Waste" includes organic waste and dedicated energy crops.

S 687 would phase in a portfolio standard over 10 years through a system of renewable energy credits (one credit per megawatt sold) administered by FERC, requiring minimum percentage of generation resources, state by state, supplied by renewable energy: 2.5 percent in 2000, rising ratably to 5 percent in 2005, 6 percent in 2006 and 7 percent by 2007.

Hydro resources are not taken into account in calculating total generation. "Waste" includes organic waste, but excludes incinerated municipal solid waste.

S 237 would phase in a portfolio standard over 10 years through a system of tradable renewable energy credits administered by FERC, requiring minimum percentage of generation resources supplied by renewable energy, calculated by supplier: 5 percent in 2003, 9 percent by 2008 and 12 percent by 2013.

Hydro resources earn credits at rate of 0.5 per unit of energy. Credits earned at a rate of 1 and 2 per unit, respectively, for qualifying nonhydro resources constructed (a) prior to the act and (b) after enactment.

"Waste" excludes municipal solid waste but does not include or exclude organic waste.

HR 1960 would phase in a portfolio standard over 12 years, requiring minimum percentage of generation resources supplied by renewable energy, calculated by supplier: 3 percent in 1998, with percentage rising along a sliding scale set by the Secretary of Energy to 10 percent by 2010. Allows states to impose additional requirements.

"Biomass" excludes burning of municipal solid waste.

 

ARIZONA. By Jan. 1, 1999, at least 0.5 percent of power must come from new photovoltaic or solar thermal source. The requirement will increase to 1 percent on Jan. 1, 2002.

CALIFORNIA. SB 90 creates a trust fund to support in-state renewable sources from 1998-2002; four accounts support new technologies and rebates for consumers.

ILLINOIS. The act establishes a Renewable Energy Resources Program to foster investment in the development and use of renewable resources.

MASSACHUSETTS. By 2003, 1 percent of electricity sales will come from new renewable generating sources, rising 0.5 percent each year through 2009 and increasing 1 percent each year thereafter. The law also establishes a Renewable Energy Trust Fund.

MARYLAND. The state had not defined the term "renewable" by early January. However, the staff report does mention the promotion and utilization of electricity from cogeneration and waste. The commission chose not to adopt renewable portfolio standards or a charge to fund renewable energy objectives: "We¼ find there are questions of the limits of our authority and of the desirability of [such a proposal] that persuade us not to adopt them at this time."

MAINE. A minimum of 30 percent of supply portfolio of retail sales must come through renewable resources.

MONTANA. The act establishes universal system benefits programs to ensure continued funding of renewable resource projects.

NEVADA. By Jan. 1, 2001, 0.2 percent of the total amount of electricity consumed annually must come from renewable sources. This amount will increase biannually until the standard reaches 1 percent. Portfolio standards also must be derived from not less than 50 percent renewable energy resources, be derived from not less than 50 percent solar energy systems and be based on renewable energy credits, if applicable.

RHODE ISLAND. For five years beginning Jan. 1, 1997, customers will be charged 2.3 mills per kilowatt-hour delivered to fund renewable energy resources and demand-side management programs.

VERMONT. Renewable portfolio standards increase each year beginning in 1998 until 2007, when at least 4 percent of all retail electricity consumed in the state must come from renewable sources. Tradable credits are also established.

 

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