THE ETHICAL EDGE by
California Green Energy Fiasco: Is 'Cleaner Energy' Worth
Is deregulation a classic win-win proposition for California homeowners
and businesses, as many green power marketers, mainstream environmentalists,
and utility companies claim?
"This is an opportunity to cast that vote [for clean energy]
without any lifestyle change," boasted an executive from Green Mountain
Energy Resources, which is trolling for customers in the newly-deregulated
California energy market. "It can be done from your couch."
If only cleaning up the environment were so easy. Hailed by major
utilities and some environmentalists as a pain-free way to increase the
availability of cleaner energy such as wind and solar power, energy deregulation
looks more like a get-rich-quick scheme for clever marketers. Since April
1, when California became the first state to introduce statewide competition
to the $230 billion electricity industry, the pitch for green energy has
not stirred many couch potatoes. Less than 10,000 customers--our
of 11 million--have switched to expensive green options. Demand is dismal.
Enron, the Texas-based natural gas company, which was supposed to be the
most aggressive renewable energy marketer, pulled out of
the residential market altogether citing lack of demand. And cost
considerations are also expected to be the critical factor for business, which uses two-thirds
of all electricity. Is deregulation a classic win-win proposition
for California homeowners and businesses, as many green power marketers,
mainstream environmentalists, and utility companies claim? Can we
really benefit the environment by buying energy products with politically-correct
names as Wind for the Future, Clean 'n Green, and Earth Source?
Can we as consumers use our collective buying power to nudge the country
toward renewable energy generation?
It is not often that Ralph Nader's Public Citizen aligns with conservative,
free-market advocates such as Citizens for a Sound Economy. What
has brought them together is a mutual disgust with how energy deregulation
is playing out around the country. And their ire is directed as
much at the country's highest-profile environmental groups as at the energy
In recent years, the established utilities have successfully lobbied legislatures
deregulating their electric industry for a bailout of as much as $250
billion in bad debt -- so-called stranded costs, investments in nuclear
plants and coal facilities that are not expected to be profitable in a
Remarkably, the bailout has the backing of the Environmental Defense Fund,
the Natural Resources Defense Council, and the Conservation Law Foundation,
among mainstream environmentalists. In exchange for their support,
California's big three shareholder-owned oligopolies agreed to pony up
some $2 billion in new
investments for energy efficiency, renewable energy, and low-income energy
But it's a Faustian deal. In effect, environmentalists had convinced
themselves that demand for green energy would soar after deregulation,
enticing energy generators, including big utilities, to increase renewable
energy output. So far, it's been a sorry bet.
"It's been a predictable failure from both a public policy and a
marketing perspective," says Nancy Rader, an energy policy consultant
who has advised the Wind Energy Association. "As its now designed,
the fig leaf of promised lower rates is being used cover up a bailout
of utilities who wasted taxpayer money on nuclear energy. That's
corporate welfare. And we're talking billions
As with natural gas competition, deregulated energy is moving towards
a multi-tiered system in which large corporations get the biggest cost
breaks. Although California mandated a 10 percent rate cut, under Assembly
Bill 1890 every power customer is forced to pay a special surcharge to
help the shareholder-owned energy giants pay off as much as $28 billion
in stranded costs. And that rate cut, as well as the money for energy
efficiency and renewable energy, will disappear in a few years.
"It's the greatest tax heist in California history," says consumer
advocate Harvey Rosenfield, who heads a group known as Californians Against
GREEN ENERGY "SHELLS"
Energy deregulation is more than just a failure of execution. Let's
be clear about what constitutes the 'green' in green energy, deregulation-style.
The handful of green power companies are "shells," marketers
linked to utility giants set up to create a green brand identity to generate
potentially huge profits. The 'greenest' offering is the "Wind
for the Future" option by Green Mountain Energy Resources.
Don't let the green in the corporate name fool you; GMER is affiliated
with Green Mountain Power, Vermont's monopoly-provider, which draws almost
50 percent of its energy from nuclear sources with most of the rest from
So what about GMER's "Wind for the Future" product, which idealistic
customers can get for a whopping 20 percent premium?
It contains only 10 percent wind energy from new sources. Twenty-five
percent of the mix includes energy from nuclear, coal, natural gas, oil
and large-scale hydro projects. The remaining 65 percent, marketed as
renewable energy, was already contracted to be generated.
"The vast majority of the green products on the market rely on reselling
cheap existing renewable power from neighboring utilities that are not
deregulated," notes Nancy Rader. This does nothing to expand
the generation of and demand for renewable energy."
Almost all of the green energy hyped by marketers is already in the pipeline.
For the most part, for every slice of electricity going to customers of
high-priced green energy, an identically browner slice goes to the rest
of the region. The net effect on the overall energy pie is zero.
Some activist groups stung by the deregulation fiasco have begun to fight
back, although it may be too little too late. Californians Against
Utility Taxes has gathered 700,000 signatures to force a November vote
to repeal the bailout. A similar vote is set for Massachusetts.
Not surprisingly, both the NRDC and EDF, who bet our environmental house
on their paper version of "green" energy, are actively opposing
the citizen initiatives.
Here's what concerned citizens can do. Don't let shifty corporate
environmentalists and green marketers bless a welfare bailout of the country's
most profitable polluters. Support the November initiatives in
California and Massachusetts. And if you have the opportunity in
your state, switch to a low-price provider. Then donate the savings
to renewable energy organizations that haven't fallen for the siren song
of green marketing.