What are your insights on the philosophy of structuring green rates relative to regular rates for a monopoly utility ?

Jennifer Martin, CRS

Jennifer Martin, Deputy Director, Center for Resource Solutions in San Francisco, California. Green rate programs give electric utility customers the option to purchase a greater percentage of renewable energy than is included in the system mix provided to all customers. Generally speaking, the program’s surcharge should reflect its true cost, and customers who are receiving the greener mix should be the ones paying for it, as they are also the only ones who can make the claim to this additional generation of renewable energy. This in no way means that utilities with green power programs should not also include renewables in their general system mix—many of them currently provide renewable energy to all their customers while also offering an additional green rate program. In states/utilities with mandated renewable energy purchasing goals or renewable portfolio standards (RPSs), utilities often find the voluntary and compliance programs complementary because they both contribute to demand for new renewable generation and allow aggregated purchasing. Many successful green power programs that continue to offer customers the option to go further with their renewable energy commitment are located in states with aggressive RPSs.

Ed Holt, consultant

Ed Holt, Consultant. The whole concept of green rates (or green pricing as it has been called) is based on offering customers the choice of paying for more renewable energy than the utility would otherwise have built or contracted for. If the generation is cost-effective relative to the utility’s avoided costs, the utility should incur the expense and it should be paid for by all customers in rates. If the generation is not cost-effective, on the other hand, then it should not be charged to all customers, but customers who are willing to support it should be given the opportunity. This is not just my opinion—it’s the definition of green pricing going back to the seminal proposal in 1992. It continues as the basis of most utility programs today.