by Hannah McCartney
Company overpriced renewable energy credits purchased from affiliate company
On Wednesday the Public Utilities Commission of Ohio unanimously ruled that Akron, Ohio-based energy supplier FirstEnergy Corp. must credit its Ohio customers $43.3 million for overcharging for renewable energy credits (RECs) from 2009-2011 that it purchased from its affiliate, FirstEnergy Solutions. RECs are tradable, non-tangible energy credits that represent proof that one megawatt-hour (MWh) of electricity has been sourced from an eligible renewable energy resource. First Energy Solutions is an energy generator and supplier, while First Energy Corp. is an electricity distributor, which means that it sources its electricity from elsewhere, which requires them to issue bids seeking the most competitively priced energy from a supplier such as First Energy Solutions. According to the First Energy Corp. website, First Energy Solutions is the competitive subsidiary of FirstEnergy Corp. Both suppliers are based in Akron. An audit conducted by Exeter Associates Inc. revealed that FirstEnergy Corp. paid 15 times more than any other company in the country to purchase the RECs from FirstEnergy Solutions, and FirstEnergy Corp. passed that overcharge onto consumers. In a copy of the order issued yesterday by the PUC obtained by CityBeat, it states that, "The Companies contend that, given the nascent market, lack of market information available to the Companies, and uncertainty regarding future supply and prices, the Companies' decisions to purchase in-state RECs were reasonable and prudent." In summary, FirstEnergy contends that because it was scrambling to find a way to meet the state's Clean Energy Law requirements, it had to buy these RECs no matter the cost, and that there are no legal specifications within the Clean Energy Law that requires RECs be purchased or sold at market price; and that the costs issued to them, and subsequently, customers, weren't unreasonable. The Ohio Consumers Counsel, however, says that there were cheaper alternatives available and that FirstEnergy should have checked with the PUC prior to paying 15 times more for RECs than any other country had in the past. If they'd rejected the exorbitant bids, says OCC, and instead consulted with PUC and OCC, they could have come up with a solution to prevent from charging customers excessively high rates. In June 2012, FirstEnergy Solutions was the winning bidder in Cincinnati's energy aggregation program, which is supposed to allow us to receive lower "aggregate" rates for buying in bulk. At the time, FirstEnergy touted the merits of its "100 percent green" energy supply, sourced from wind, solar, biomass and other renewable resources. The bid was expected to save homeowners around $133 annually. What enabled FirstEnergy to provide the "clean" energy was its use of a system with non-tangible renewable energy credit (RECs) that each represent proof that one megawatt-hour (MWh) of electricity has been sources from a renewable energy resource. Purchasing the credits from its subsidiary allows FirstEnergy Corp. to meet the state's renewable energy standard, which requires that by 2025 all Ohio utility companies provide at least 25 percent of their energy from renewable resources. Because the lawsuit issued by the PUC examines only the amount paid for RECs during compliance periods between 2009 and 2011, Cincinnati customers who switched to FirstEnergy Solutions last June should not be affected, although the FirstEnergy arms' ambiguous behavior, says Dan Sawmiller, a Sierra Club member who manages Ohio's Beyond Coal campaign, is a likely indicator that the company may be engaging in other unethical practices related to consumer transparency. The company has not been devoid of controversy in the past. In March, CityBeat reported on state environmental groups' concerns with the movement to lower requirements for defining renewable energy and energy efficiency; FirstEnergy was part of the bloc working to weaken Ohio's Clean Energy Law in hopes of keeping corporation costs low. FirstEnergy was also chastised by the Public Utilities Commission of Ohio in 2009 for distributing and charging customers for energy-efficient light bulbs without receiving customers' authorization. Sawmiller commended the PUC for fining First Energy, although he suggests the fine is likely modest for the actual damages. He still expresses concern about the need for corporate separation between the two FirstEnergy arms. "The commission left much to be desired in terms of transparency, leaving customers in the dark about what types of renewables are being provided, where are they coming from and at what cost," says Sawmiller in Sierra Club's press release.
by Hannah McCartney
at 01:32 PM | Permalink
Decision makes Cincinnati first major U.S. city to offer 100 percent green electricity
spending several weeks reviewing requests for proposals (RFPs) from seven energy
providers as part of Cincinnati’s initiative to power homes using energy
aggregation, a decision has been made — and it’s a green one. Cincinnati
has selected First Energy Solutions (FES) as the city’s new electricity
provider, which will make it the first major city in the U.S. to use a 100
percent “green” electricity supply.
aggregation process works like this: All eligible individual customers “pool”
their buying power to form a larger unit, which holds more leverage to
negotiate lower prices on electricity. Cincinnati voters passed a ballot in November 2011 to approve the city's efforts to choose an energy aggregation provider. The designation of FES's energy supply as "green" energy doesn't mean that residents will see windmills and solar panels popping up across the city's landscape; rather, the energy will be designated "green" based on non-tangible renewable energy credits (RECs), which each represent proof that one megawatt-hour (MWh) of electricity has been sourced from a "renewable" energy resource. FES will provide the city with enough RECs to power all interested consumers' homes, meaning no home opted-in to the aggregation power will use electricity sourced from non-renewable resources such as coal. The city's possession of those RECs will represent the commitment to sourcing electricity in residents' homes from renewable, green resources. Some of the RECs provided to the city by FES will reportedly be sourced from local energy sources, including the University of Cincinnati's generating facility and the Cincinnati Zoo's Solar Canopy Project, although those sources will be a small component of the overall REC collection, according to Larry Falkin, Director for the Office of Environmental Quality. “Not
only will we be able to put real money back in people’s pockets, but
this establishes the city as a leader in supporting green energy
choices,” said Vice Mayor Roxanne Qualls, who spearheaded the push to provide consumers with an energy aggregation option nearly two years ago. Over the
next several weeks, Cincinnati will work to negotiate a contact with FES, and
residents will receive information about FES’s services.
Residents who aren't interested in participating in the city's green aggregation efforts will be required to opt-out before the services are implemented. FES will notify all eligible customers and those who don't want to participate must reply to be opted out. There will be no cost to enroll in the FES program.According
to the city’s press release, FES will save the average household about $133
each year on electricity bills. The switch could become effective by June.