For the past two years, Idaho's largest utility has been stockpiling the green credits that it earns for each megawatt-hour of renewable energy it buys.
It could have sold those credits for millions and used the money to lower its customers' rates. Or it could have retired the credits, as environmental groups requested.
Instead, Idaho Power Co. held on to them, hoping to bank the credits to help meet any future federal requirement that utilities get a percentage of their power from renewable sources.
That credit-banking plan was scuttled last week after the state Public Utility Commission overturned an earlier ruling and ordered the utility to sell its 320,000 renewable energy credits, known as Green Tags.
Industrial Customers of Idaho Power (ICIP), a group formed in 1979 to represent about a dozen industrial ratepayers, says proceeds from the Green Tags belong to ratepayers. It asked the PUC to reconsider a Jan. 28 ruling that had allowed Idaho Power to retire its tags.
By retiring the tags, Idaho Power could have claimed that it was generating green power, which it is under pressure to do by environmental groups and even shareholders.
The PUC was fine with that. However, after that ruling, Idaho Power changed course and decided to "bank" all of its green tags instead of retiring them, the commission said in its May 20 order. By banking the tags, Idaho Power said it could possibly use the credits to meet federal or state renewable electricity standards.
The PUC determined the value of those credits should go to consumers instead.
The Value of RECs
Idaho Power purchases renewable energy from the Elkhorn Wind Project in Union County, Ore., and from the Raft River geothermal project in southern Idaho. In addition to using this power to provide customers with electricity, the utility receives one REC, or Green Tag, for each megawatt-hour of power purchased. In 2007 and 2008, Idaho Power purchased 320,000 MWh of renewable power, equal to 320,000 Green Tags.
RECs represent the environmental and social benefits of renewable energy, according to Evolution Markets, a REC brokerage firm.
The credits are useful in states with Renewable Electricity Standards (RES), also known as a Renewable Portfolio Standards (RPS), which require participants such as utilities to generate a certain percentage of power from renewable resources.
If the RES is 10% and a utility sells 10 million MWh of power, it would need to buy 1 million MWh of renewable power. If it can't buy power directly, it can buy RECs instead. States typically allow RECs to be bought and sold, even among companies in neighboring states. Idaho Power, for instance, can sell RECs in states in the Western Renewable Energy Generation Information System (WREGIS).
Idaho Power has a reason to consider holding on to those RECs itself. As part of comprehensive climate legislation, the U.S. House is considering a national RES that would require electric utilities to draw 20% of their retail power from renewable sources by 2020. Idaho Power also supplies a small area of eastern Oregon and will be subject to Oregon's RPS beginning in 2020.
"There is certainly a very likely adoption of a federal RES, and Idaho Power has looked at what they need to comply in their Integrated Resource Planning Process," says Suzanne Leta Liou, senior policy advocate at Renewable Northwest Project in Portland, Ore.
"The utility was doing what we thought was the right thing, and we were surprised, frankly, that the PUC made the decision that they did."
The PUC decided that banking tags on speculation they may be useful in the future wasn't a good enough reason to deny ratepayers the proceeds from the tags' sale, according to the order. The longer a Green Tag is banked, the less it is worth on the open market. In fact, the Idaho Power tags were valued at about $2 million in March, and by the May 20 ruling, they were worth about $1.3 million.
"Unless and until the federal government establishes renewable energy standards and corresponding guidelines, we find the most prudent disposition of these Green Tags at this time is their sale," the commission said.
Looking to the Future
The commission's ruling doesn't address Green Tags generated after March 2009, but the ICIP hopes Idaho Power will continue to sell them unless it is required to meet a federal RES.
That day is certainly coming.
"Everyone knows there will be a federal RES," says Jeff Swenerton, communications director at the Center for Resource Solutions, a national non-profit that certifies renewable energy credits in the voluntary market.
Swenerton says that banking RECs, as Idaho Power had hoped to do, helps companies when they need a buffer to comply with a new RES.
"At no point are they claiming the environmental benefits," he adds. "They are waiting to cash them in."
Stephanie McCurdy, a spokeswoman for Idaho Power, had no comment on the PUC's decision other than to say the utility is "still reviewing the order at this point."
The RES under consideration in the House climate bill would allow credits to be banked for three years. A banking provision of three- to five years is common in most states, says Jeff Deyette, energy analyst at The Union of Concerned Scientists. However, the bill only allows companies to begin banking RECs in 2012, so if the bill passed in its current form, Idaho Power could not have applied the RECs generated in 2007 and 2008, Deyette says.
Ironically, two days after the Green Tag order, Idaho Power shareholders passed a resolution requiring the utility to devise a plan by Sept. 30 for reducing its greenhouse gas emissions. Supporters hoped for a good showing, maybe 20% in favor of the resolution. Instead, the measure passed with 52% of the shareholder vote.
"We were all shocked," says Betsy Bridge, energy efficiency associate and attorney at the Idaho Conservation League, which supported Idaho Power's desire to hold on to its Green Tags.
In 2008, Idaho Power sourced 40% of its energy from coal, 38% of hydroelectric resources, and 1% from natural gas and diesel, according to its website . Another 7% comes from long-term power purchases, including wind, geothermal, hydroelectric, and biomass.
"Because there isn't an RPS in Idaho, they are acquiring far fewer megawatts of renewable energy than utilities in surrounding states, which all have RPS's," Bridge says.
According to the industrial customers group, the sale of 320,000 megawatt hours of Green Tags will bring down customer rates three-tenths of one percent.
While the amount is small, it's critical in a year when electric rates climbed 25 percent for industrial customers, says Peter J. Richardson, an attorney representing the industrial customers. He estimates the total value to ICIP members at about $400,000.
To Bridge, that money, if it had to be spent, should have been used to buy more renewable power:
"This is the worst of all worlds – they have to sell the Green Tags and the customers get a pretty insignificant reduction in their rates."