MidAmerican and NV Energy agree to revisit Nevada green energy tariff in MidAmerican Energy Holdings – NV Energy Acquisition

In a side agreement with NCARE ending our opposition to the proposed acquisition, last Friday MidAmerican Energy Holdings and NV Energy agreed to propose new green energy tariffs for both Nevada Power Company and Sierra Pacific Power Company that will make the program more likely to encourage renewable energy development in the region. The side agreement becomes effective upon PUCN approval of the proposed acquisition, which is expected to occur in mid-December.

What is a green energy tariff?

According to a report by the National Renewable Energy Laboratory more than half of all US electricity customers have an option to purchase some kind of green power product in programs offered by more than 750 utilities. The purpose of these programs is to increase the demand for renewable energy, eventually leading to more renewable energy development.

The programs are voluntary, and customers who subscribe generally do so to meet their personal or corporate goals of environmental sustainability or green living. The utilities offering the programs purchase and retire renewable energy credits with the green energy premiums paid by customers who subscribe to the program. In some programs, premiums also are used to fund local, community-based renewable energy projects.

NCARE pointed out shortcomings in Nevada Green Energy Rider last spring

NV Energy proposed a green energy tariff for Sierra Pacific (northern Nevada) customers that was approved last spring by the Nevada Public Utilities Commission. The company began offering the program – called the Nevada Green Energy Rider, or NGR – to residential and small business customers this fall.

In cross examination before the PUC , NCARE questioned many aspects of the proposed NGR, pointing out that the program probably will not do what green pricing programs are supposed to do – that is, increase the development of renewable energy by increasing demand for it – for several reasons.

First, the utility has an overabundance of surplus renewable energy credits, so the NGR program would simply give the utility a way to retire the existing surplus credits , and not lead to a demand for new renewable energy until many years down the line.

Moreover, NCARE believes that high premiums and restrictive terms will limit the program. Comparable programs in other states cost less. For example, Rocky Mountain Power, which supplies electricity to Salt Lake City, has a program in which customers can buy a “block” (100 kilowatt hours) of renewable power for $1.95 per month – at $.019 per kilowatt hour: this is about half the price of the NGR program at $.042 per kilowatt hour.

NCARE concluded that the high premiums combined with a one-year minimum contract and a low cap on subscriptions would not attract enough customers to the program to significantly enhance demand for renewable energy.

MidAmerican – NV Energy acquisition offered NCARE an opportunity to seek improved green energy tariff

NCARE took the opportunity of the MidAmerican – NV Energy acquisition docket to make a case for a better green energy tariff in Nevada.

PacifiCorp, a utility owned by MidAmerican with operations in several western states, has a very successful green energy rider – “Blue Sky” – which ranks second in the country in total customers participating and third in total renewable energy sales. (link here) Funds received from participating customers are used to purchase renewable energy certificates from regional renewable energy facilities, and the credits purchased with customer premiums are above and beyond what the utility is required to purchase to meet a state’s renewable portfolio standard. Premiums also support the construction of new community-based projects that increase public education and awareness of renewable technologies.

In testimony filed in the merger docket, NCARE proposed that the PUCN require NV Energy to file green energy tariffs more like Blue Sky, and more likely to lead to more demand for renewable energy, not simply to serve as a vehicle for NV Energy to retire its surplus credits.

The agreement

MidAmerican, NV Energy and NCARE reached an agreement that within 6 months after closing of the merger, Nevada Power Company and Sierra Pacific Power Company will file with the PUCN voluntary green energy tariff programs offering customers a green energy option where renewable energy credits purchased with customer premiums would be in addition to credits already purchased by the companies, and not used to meet the renewable portfolio standard.

NCARE looks forward to participating in the PUCN’s review of the green energy tariffs. If the programs are approved by the PUCN and implemented, Nevada customers who sign up for the green energy rider can be sure that they will be helping to encourage renewable energy development in the region, rather than just giving NV Energy a way to burn up its excess renewable energy credits.

 What is a renewable energy credit anyway?

In a letter last week to the Sparks Tribune, a reader pointed out that it is impossible for NV Energy to say that it is delivering only “green” energy to a Green Energy Rider subscriber. He is right of course.

What green energy tariffs buy for subscribers is not the green electricity itself – as the Tribune reader pointed out, that isn’t possible in a grid through which electricity from all sources flows together. What the company is doing is buying renewable energy credits (RECs) on behalf of the customer.

When renewable energy is generated, two commodities are produced: electricity and RECs. The RECs represent the environmental attributes of the power produced from renewable energy . Here’s Wikipedia’s definition of a REC: “Renewable energy credits are tradable, non-tangible energy commodities in the United States that represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource.” ** The buyer of the REC gets a certificate that guarantees that 1 MWh of electricity was generated from the renewable source. The energy associated with the REC is sold separately as electricity.

In green tariff programs, the utility contracts to buy RECs on behalf of the customer equivalent to whatever percentage of the household’s total electricity use the customer signed up for. For example, if I use one megawatt hour of electricity per year in my household, and I opt to buy 100% “green” energy, the utility will use my Green Energy Rider premium to buy one REC on my behalf.

**  Nevada has a different measure for renewable energy credit than most other states. In Nevada, 1 PEC (Portfolio Energy Credit) = 1 KWH. But in the annual Renewable Portfolio Standards report to the PUC, all the figures are shown in thousands of PECs, or “kPECs”, so arguably Nevada would have been better off using 1 PEC = 1 MWH; moreover, this would be more consistent with the system used elsewhere.