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[whitespace] Windmill Tilting Toward WindmillsAlternative-energy sources are slowly starting to compete with conventional power companies.

Photograph by Christopher Gardner

Spinning Green Power

Before switching to a 'green' provider, consumers might want to check out where that power is really coming from--and where their green cash is going

By Jenna Conner

JUST BEFORE SEVERAL state primaries last month there appeared a political commercial paid for by a group calling itself Republicans For Clean Air. With U.S. Sen. John McCain's mug plastered over a background of dark clouds spewing from a polluting smokestack, the ad's voice-over intoned: "Last year, John McCain voted against solar and renewable energy. That means more use of coal-burning plants that pollute our air. New York Republicans care about clean air. So does Governor Bush. He led one of the first states in America to clamp down on coal-burning electric power plants. Bush clean-air laws will reduce air pollution more than a quarter million tons a year. That's like taking five million cars off the road. Governor Bush: Leading so each day dawns brighter."

Just one problem: The person actually responsible for the legislation referenced in the commercial was Texas state representative Steve Wolen, a Democrat. Bush merely signed the bill.

Furthermore, Republicans For Clean Air turned out to be a $2.5 million political tool of Dallas billionaire Sam Wyly, a frequent contributor to conservative politicians with questionable environmental records. And Wyly's brother, Charles? He's one of the Bush campaign's top fundraisers.

But probably few of the thousands of eco-conscious Santa Cruz consumers who've switched from PG&E to GreenMountain.com, a Vermont-based "green" electricity marketer that sells power generated from renewable energy sources, are aware that the Wyly family owns 99 percent of GreenMountain.com.

GreenMountain.com is one of several companies to which Santa Cruz consumers can switch for power, thanks to deregulation of California's electricity market in 1996. To lure customers, the company donated money to local causes like Save Our Shores and the Homeless Garden Project. The company also announced last week a plan to market solar power to be produced by a new 100-kilowatt plant in Berkeley.

GreenMountain.com isn't the only example of a green electricity marketer with troubling connections. A close look at the different "green" providers uncovers a complex marketplace with its share of misrepresentation and shady businessmen.

Despite the supposed ecological and economic benefits promised by deregulation, switching providers hasn't proven to be all that popular, judging by the small number--just 2 percent of households statewide--who have switched. Santa Cruz residents have gone green at about the twice the state rate, but even GreenMountain.com, the leading alternative provider in Santa Cruz, has wooed only 6,000 customers--compared with PG&E's county customer base of more than 110,000.

"To expect the average person to understand what is being sold in the market is very unrealistic," says Nancy Rader, a Berkeley-based environmental consultant who has extensively analyzed the green power market for Ralph Nader's consumer advocacy group, Public Citizen. "It's difficult for the average person to understand whether the green product they're buying is worth paying for."

What Switching Really Means

COMBINED WITH automobiles, power plants that rely on dirty fuel sources such as coal contribute 90 percent of the pollution found in the air. When a consumer signs up for a green provider, power arriving at the home comes directly from the grid, the vast network of transmission and distribution wires that carry power from many different contributing companies.

Therefore, switching electricity providers doesn't guarantee the delivery of 100 percent clean power to your home. Choosing an alternative to PG&E only ensures that green providers become one of the many companies contributing to the power supply. Until all traditional generation facilities are replaced with "green" plants, the power a consumer buys will inevitably contain "brown" electricity.

To protect consumers from being misled by "green" claims, California law requires all electric-service providers to reveal the source of their power using a format created by the California Energy Commission called a "power content label," which details the combination of natural gas, biomass and waste, geothermal, hydropower, solar and wind fuel used to generate the electricity being sold. Though most green providers have websites, not all provide this information on their websites or in their advertising. Consumers may need to call the company in order to get the power content label. The CEC also requires companies to verify their claims annually by attesting to their power source and submitting to a private audit.

But how effective are these procedures for ensuring that the money you spend is being used to purchase green energy? According to Nancy Rader, claims cannot be verified with absolute certainty because there is no region-wide tracking system. There is, however, one watchdog organization keeping an eye on the new green market.

The San Francisco-based nonprofit Center for Resource Solutions, an organization that strives to promote consumer confidence in green-electricity marketers, began a program called Green-e certification in 1997. To display the Green-e logo in their advertising, companies must demonstrate that 50 percent of their power comes from renewable sources, that 10 percent comes from new generating facilities (built after 1998) and that their advertising does not contain fraudulent claims. Moreover, companies must agree to open up their books for an annual audit by the center to ensure that customers' money is being used to purchase power from renewable generating facilities.

"Our real concern is to make sure the environmental consumer protections are achieved," says Kirk Brown, assistant director for the center.

Consumers should be aware, however, that participating companies must pay $5,000 as part of the application process, a practice that some contend is equivalent to buying certification.

Brown disagrees, arguing that the fee is needed to support the center's activities. "Ten percent [of the annual budget] is supported by the marketers' fee, 60 percent comes from private foundations, and 30 percent comes from government sources," Brown explains.

But Rader isn't convinced that Green-e has the best interests of consumers at heart.

"Green-e certified the products of Keystone Energy Services despite two pending class-action stockholder suits alleging that Keystone intentionally misrepresented facts and made false and misleading statements in order to artificially inflate the company's stock price," Rader points out. "In addition, Keystone is working with the multilevel marketing firm FutureNet, which has been convicted in various illegal pyramid schemes, fraudulent marketing schemes and other crimes relating to consumer fraud in various states."

Misleading Mantras

INDEED, THE ADVERTISING of green power is one of the more questionable aspects of the market. With grandiose claims of environmental salvation, the selling job is designed to convince consumers that switching providers will effect a significant change in the marketplace that will lead to a revolution in how power is produced.

"The power is in your hands--the power to help turn around the course of history and protect the planet by changing the way electricity is made," coos one GreenMountain.com ad.

The reality, however, is that the majority of so-called green marketers are not changing the way power is created because they are relying on facilities that existed prior to deregulation.

"Companies are selling green energy that was already part of California's energy mix," asserts Michael Welch, Home Power magazine columnist and energy activist. "The result is no net gain."

The amount of green power currently in the grid is nearly the same now as it was prior to deregulation. So far, Rader says, new green-power subscribers have done little more than help pay for power generation that was already in place.

Nor are green marketers replacing brown utilities. Many are buying their power from renewable facilities owned by or under contract to PG&E and other major utilities. "The utilities resell the power to marketers who sell to customers in California's deregulated market," Rader contends.

Behind the Corporate Mask

BECAUSE MOST green-electricity providers are privately owned, getting information about their business practices can be difficult. Green consumers have to choose wisely about where they put their money. An example is Commonwealth Energy Inc., the second-largest provider of green energy in Santa Cruz County, with 640 subscribers.

Almost 200 consumer complaints about Commonwealth's billing procedures persuaded the California Public Utilities Commission to launch an investigation in June 1999. The CPUC discovered that Commonwealth had tacked additional charges on consumers' bills for power for which they'd previously paid. The CPUC ruled that Commonwealth had no authority to charge additional fees because it hadn't notified customers of this possibility when they signed up.

CPUC investigator Richard Chan also alleged that company President Fred Bloom had failed to report how he was the subject of "administrative action" by five states in Commonwealth's Energy Service Provider registration with California.

The CPUC proposed a settlement that would require Commonwealth to refund money to thousands of customers, contribute $100,000 toward a consumer-education fund and prohibit Bloom from taking part in "business practices, management or operations of Commonwealth in California for at least two years."

The proposed settlement was recently halted after the CPUC announced this month that further investigation was warranted.

Another example is Keystone Energy services. Keystone had a marketing contract with FutureNet Inc., which proceeded to market and illegally sell electricity in California without registering for an Electric Service Providers license. The Consumer Services Division of the California Public Utilities Commission investigated FutureNet and said the company "had made claims of savings of up to 40 percent in monthly consumer electric bills with no substantiated evidence in attempts to mislead prospective consumers." Last June, the CPUC fined FutureNet $2 million for selling electricity without registering with the CPUC and ordered it to cease conducting business in California.

In defending its use of FutureNet, Keystone General Counsel Tom Darton was quoted in the industry trade publication California Energy Markets saying: "We think that because of this experience, they are going to be helpful and will uphold very high standards."

A Greener Future?

HAS SUPPORTING GREEN marketers accomplished anything?

"There are new renewable facilities, but it's not because of the green marketers. It's because of the subsidy programs at the California Energy Commission to provide energy incentives to [build] new renewable power plants," explains Matt Freedman, a staff attorney for the Utility Reform Network, a San Francisco nonprofit organization. "The commission had an auction in the summer of 1998 where they gave five years' worth of incentives to build new plants."

By 1999, $160 million in subsidies had been awarded to 28 companies and municipalities whose approved bids spawned 55 projects totaling more than 500 megawatts of new renewable resources. The Santa Cruz County Department of Public Works was one of the bidders and received $767,600 in funds to help construct the Buena Vista Landfill Gas Power Project, which will be built on three adjacent county-owned parcels of land.

"It's not in construction yet," says Patrick Matthews, solid waste and recycling manager for Santa Cruz County. "We're still in negotiation with developers to come in and build and operate the plant. I'm hoping we will have a decision and final offer with some developer by the end of the summer."

But with the use of renewable energy stagnating, questions remain about whether the production of green power can survive in a post-subsidy marketplace. In 1994, 12 percent of energy production in California came from renewable sources. Today, only 11 percent of electricity in California comes from renewable sources.

"The bottom line is that the competitive market will be an extraordinarily tough one for renewable energy project developers to participate in, green market or not, because investors are looking for the lowest cost and the lowest risk possible," Rader says.

Renewable-based generation facilities will face competition from other gas, coal and nuclear plants whose capital construction costs have already been absorbed by rate payers, making electricity from them cheaper than green electricity.

Though green marketers could be threatened by open competition when electric restructuring allows California utilities to sell their renewable power in 2002, consumers can play an important part in ensuring their survival.

"These are big companies we are talking about," Welch explains. "No investor, or manager beholden to investors, in their right mind is going to go out and build megawatts of expensive renewable energy power sources without at least thinking there is a place to sell it. Therefore, it is up to us to encourage folks to rise up to demonstrate this demand. People should switch, and they should switch in such a way that encourages their friends and neighbors to switch."

But consumer participation in green programs may not be enough to change the marketplace.

"The first critical fact in understanding the potential for green marketing is that residential consumers, who constitute just one-third of total electrical demand, are the primary target for green marketers," Rader says. "Two-thirds of electricity sales will be virtually unaffected by green marketing."

In order to change the electric market, this remaining two-thirds--businesses, industry, government and agriculture--must also switch from traditional sources of power to green energy.

So what can consumers do to ensure that the rest of the market also transitions to cleaner sources of fuel?

"It's going to take strong public policy to make a big difference," Rader concludes. "The most important thing that consumers as citizens can do to reduce the environmental impact of the electricity industry is to follow electric industry restructuring legislation at the state and federal level, and inform their elected representatives that any legislation which does not ensure that the industry becomes significantly cleaner over the next decade is unacceptable."

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From the April 19-26, 2000 issue of Metro Santa Cruz.

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