The State Corporation Commission has approved a proposal allowing Appalachian Power Company (APCo) customers to purchase electricity generated 100% from renewable energy. An average residential customer using 1,000 kilowatt hours of electricity would pay a premium of $4.25 a month.
The Commission had rejected two previous APCo proposals for a 100% renewable energy tariff. In an order issued Monday, however, the Commission found that under the latest iteration of the plan (1) the participating customer is receiving 100% renewable energy, (2) the tariff includes safeguards that do not offload costs to customers who do not participate, and (3) the rate is reasonable for the purposes of the renewable energy product being supplied.
In its application APCo stated that the renewable energy would come from nine hydro and five wind facilities.
Electrons generated by renewable energy sources are impossible to distinguish from electrons generated from conventional sources, and electrons from all sources mix indiscriminately when they enter the grid. Furthermore, output from renewable sources rarely aligns exactly with customer load: While APCO may exercise some control over when it generates power from hydro sources, it cannot control when the wind blows. Thus, a question arises of how to justify the assertion that a given customer is receiving 100% renewable energy. The SCC determined that for purposes of supply 100% energy under Virginia’s statute, it suffices to match renewable generation with the participating customer’s load on a monthly basis.
APCo and the Commission encountered another challenge: how to set the tariff. The renewable service does not neatly fit the dominant regulatory scheme in which the SCC calculates aggregate revenues from the service, deducts aggregate costs, and allows for a fair profit margin. Also complicating the issue, states the SCC order:
Unlike market prices for undifferentiated electricity or natural gas, there currently are no standard, publicly available market prices for a “100 percent renewable energy” product (as fashioned by the Virginia statute) for the Commission to use for purposes of comparison. Nor are there other retail tariffs or market products directly equivalent to the Company’s proposed 100 percent renewable energy product to use for comparison purposes.
The Commission identified three proxies for price: the rate charged by the only CSP (competitive service provider) providing 100% renewable energy in Appalachian’s service territory, the market price of renewable energy certificates, and premiums paid by customers nationally in “green pricing” programs.
By providing a 100% green tariff, APCo fends off the possibility, allowed under Virginia law, for a competitor to enter a service territory if the incumbent utility fails to offer one.
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