FirstEnergy: The Grinch Who Stole from Ratepayers

firstenergy grinch

Image courtesy of @darth, who is a freaking national treasure.

In this season of giving, FirstEnergy seems intent to give its customers the finger.

Based on Ohio law – SB221, which was passed nearly unanimously in 2008, to be exact – the state’s investor-owned utilities must provide a portion of their electricity from advanced energy sources. By 2025, when the state’s renewable portfolio standard is set to expire, the utilities are required to source at least one-quarter of their electricity from such sources; of this amount, at least half of this total must come from renewable energy sources, like solar and wind.

But recognizing the constraints of quickly ramping up green energy production in a state where it was largely nonexistent before 2009 – along with a wise desire to take advantage of economies of scale – SB221 allowed utilities to buy renewable energy from other providers or to purchase renewable energy credits (RECs) from those providers when sufficient energy is not available. These RECs are an essential component of any renewable energy program.

Unfortunately, FirstEnergy, which rejects the value of energy efficiency/renewable energy and continues to fight aggressively against the mandates, has consistently failed to meet its obligations under the law. Environment Ohio, which grades each of the state’s four major utilities based on how well they abide by the mandates, gave FirstEnergy an F in year 1 and a D- in year 2. FE has come into compliance with the mandates since this point.

But as FE continued to fight the law with one hand and tread water with the other, it decided to purchase a number of RECs to meet its renewable energy mandates. In doing so, however, it drastically manipulated the REC market, allowing it to extract millions of dollars in excessive charges from ratepayers. As Plain Dealer energy reporter John Funk writes:

In a kind of reverse Robin Hood maneuver, FirstEnergy managed to pay the highest known rates for the credits when it bought them in those early years, including some from its affiliate, FirstEnergy Solutions…

[A] management audit by Exeter Associates of Columbia, Md.,found that FES paid up to 15 times more for credits than the Illuminating Co., Ohio Edison and Toledo Edison would have spent had they just paid the fines for not buying the credits.

In fact, the cost of those renewable energy credits was higher than RECs bought anywhere in the country, before or since, the audit noted.

A consultant to the Public Utilities Commission of Ohio (PUCO) calculated that FE’s actions allowed it overcharge customers by at least $100 million. NRDC looked at the numbers and came up with $130 million in overcharges. In August, the PUCO called out FE’s malfeasance and required it to return $43.4 million to ratepayers for its manipulation of the REC market.

But rather than acknowledge its wrong doing, FE has decided it won’t go down without a fight. Instead of returning the money back to its customers, the company has filed an appeal of the PUCO’s ruling to the Ohio Supreme Court. It apparently thinks that, as long as you have the money, two wrongs make a right.

So as we approach Christmas, let’s hear it for FirstEnergy, Ohio’s largest private utility and The Grinch Who Stole $100 Million from Ratepayers.

Please pardon my awful parody of Dr. Seuss:

While all Ohioans seemed to like renewable energy a lot, FirstEnergy, who lives above downtown Akron, does not.

The company hated green energy, everything in the sector. It had no good reasons, just some straw men and specters. It could be that it was concerned about costs. It could be, perhaps, that it feared about jobs being lost. But I think that the most like reason for its tantrums and fits may have been that the policy didn’t fit its ideological interests.

Happy holidays.

Bill Seitz has sure changed his tune on Ohio’s Advanced Energy Portfolio Standard

sb 221 energy efficiency benchmarks

On May 1, 2008, then-Governor Ted Strickland signed Substitute Senate Bill 221 (SB 221), making Ohio one of 29 states (plus DC) in the country to establish energy efficiency resource standards (EERS).

The bill mandates that the state’s investor-owned utilities (IOUs) reduce their energy consumption by 22.2% by 2025. This mandate is broken down into yearly increments – each utility is supposed to meet each annual goal on the path to the overall reduction. For 2013, IOUs must reduce the annual electricity consumption of their customers by 0.9%.

Annual energy efficiency benchmarks for Ohio's investor-owned utilities, as specified by SB221 (courtesy of Mark Rabkin).

Annual energy efficiency benchmarks for Ohio’s investor-owned utilities, as specified by SB221 (courtesy of Mark Rabkin).

The bill also required IOUs to generate at least 25% of their electricity from advanced energy sources by 2026. Of these “advanced energy sources,” at least half must come from true renewable energy sources, like wind and geothermal (the bill includes a 0.5% carve out for solar energy). The other half can come from alternative sources, including “clean coal” (carbon capture and sequestration) and, as of Fall 2011, combined heat and power.

To date, the bill has largely delivered on its promises. According to Environment Ohio, the standards have saved enough energy (negawatts) to power 267,000 houses for a year. Additionally, the renewable portfolio standard (RPS) has sparked the installation of enough solar and wind generation capacity to power 95,000 houses for a year. Furthermore, the bill has contributed to the growth the renewable energy industry in Ohio, making good on the promises of job creation from its proponents. In 2011, Ohio ranked 5th in the country for green jobs, with 137,143. This industry – which had the highest growth rate of any sector in the US economy from 2010-2011 – has contributed significantly to Ohio’s economic recovery. Green jobs account for 2.8% of Ohio’s total workforce, higher the national average (2.6%).

Despite the success of this legislation, the bill has come under attack recently by a group of conservative lawmakers and industry interests. As a part of its broader effort to fight renewable energy at the state level, ALEC has placed SB 221 squarely in its sights. Two conservative state senators – Sen. Kris Jordan and Bill Seitz – are leading this charge. This effort is also the latest assault on energy efficiency and renewable energy in Ohio from FirstEnergy, the electric utility whose incompetence brought you the 2003 East Coast blackout.*

FirstEnergy's failure to properly maintain its Davis-Besse nuclear power plant in Northwest Ohio led to the development of a football-sized hole in the reactor lid. According to a review, the reactor could have been 60 days away from a meltdown (courtesy of The Plain Dealer).

FirstEnergy’s failure to properly maintain its Davis-Besse nuclear power plant in Northwest Ohio led to the development of a football-sized hole in the reactor lid. According to a review, the reactor could have been 60 days away from a meltdown (courtesy of The Plain Dealer).

Last week, Sen. Seitz told the Wall Street Journal that that mandates in SB 221 reminded him of “Joseph Stalin’s five-year plan.” Setting aside the absurdity of this statement, it represents a remarkable shift for Seitz on the bill in just 4 years (he initially proposed to scrap the EERS & RPS entirely in 2011; that bill never made it out of committee). Seitz has conveniently failed to mention that he voted for SB 221 in 2008. In fact, the bill sailed through the Ohio State Senate unanimously. And it passed through the Ohio House by a 93-1 vote. During the debate on the bill, Seitz never offered any opposition to it on the record, nor did he try to amend it in any substantial way.

This is an awfully big change from a legislator who tried to paint himself as a reasonable moderate during the contentious debate over SB 5. Yet, I guess it’s not surprising from a man who has served on the Board of Directors for ALEC and has received nearly $63,000  in campaign contributions since 2000 from industries ALEC represents, including oil and gas.

 

*FirstEnergy has been pushing to kill SB 221, even as it promotes its own rebate programs for energy efficiency made possible by the legislation. Hillariously, as I was writing this post, I received an email from the company promoting their new round of rebates for energy efficient appliances.

The benefits of going green for small businesses

The following is a post that I wrote as a guest blogger for greenmarketing.tv in July 2010.

Cross-posted from greenmarketing.tv:

For the majority of small businesses, the business case for sustainable and energy efficiency just isn’t strong enough to make any real investments. Most articles and analysis discuss how going green can help a business reduce its energy costs and improve its brand recognition and popularity. However, it can be difficult for small and medium enterprises (SMEs) to sign off on projects that have projected payback periods of three years when they are concerned about having cash on hand three months now.

If one focuses entirely on these more obvious benefits of sustainability, it can make it difficult to believe that we will reach a tipping point on small business sustainability anytime soon. However, there are a number of added benefits to sustainability and energy efficiency that are often overlooked but that can help SMEs reap tangible, short-term dividends on their investments. These include improved productivity, a decrease in lost time to sick days, and being better equipped to recruit talented employees.

Several studies have shown that energy efficient upgrades and sustainable building practices can improve employee productivity significantly. According to a 2003 study from the Center for Building Performance and Diagnostics at Carnegie Mellon, taking steps to improve indoor air quality and installing energy efficient lighting both have strong positive effects on productivity. Enabling workers to control air temperature at their workstations increased their productivity anywhere from 3.5-36.6%. By installing high-efficiency lighting fixtures, businesses can experience a 3-13.2% increase in worker productivity. Taking advantage of natural light also has its benefits. The report notes that utilizing daylighting can improve productivity 3-18% and even increase sales by as much as 40%. Taken together, these numbers can represent a considerable advantage for any small business, especially considering that the EPA estimates that even a 1% increase in the productivity of office workers is enough to offset the costs of such upgrades.

A second major benefit of sustainability and energy efficiency comes from the added value of countering what is commonly known as Sick Building Syndrome.” Many businesses work in facilities that were not built in a sustainable manner. They have poor ventilation, lack access to natural light, and contain equipment and materials that release large amounts of volatile organic compound (VOCs). All of this can take a serious toll on the health and well being of employees, as indoor air quality leads to a number of health issues. Fortunately, green buildings go a long way towards mitigating these issues, providing businesses with considerable added value in the process. According to a 2009 article in the Journal of Sustainable Real Estate, green buildings produce an average financial benefit of $37-55 per square foot of facility space for businesses. This is due to the face that better indoor air quality improves productivity by 6-9% and reduces sick days by 2.88 days annually, per worker. The average value added to a business per worker is $6,432.

Third, sustainable businesses are better equipped to recruit the best employees. A recent study from Johnson Controls provides strong evidence that Generation Y is highly concerned about the environment and expects employers to become more sustainable. Ninety-six percent of Generation Y respondents said they want their employer to be environmentally friendly or at least environmentally aware, and large percentages — 47.4% and 47%, respectively — would like to see water saving features and solar panels on site. But it’s not just Gen Y workers who are increasing their commitment to sustainability in the workplace. The study noted that 98% of 26-35 year old respondents want their employers to be environmentally friendly or aware. This suggests that SMEs ignore sustainability at their own risk, particularly in this time of economic uncertainty.

I recognize that many SMEs still struggle to find a convincing argument to make the move towards sustainability. But going green is not some altruistic move that SMEs should make just because of personal beliefs or commitments — it is a smart business decision that will make them more competitive in the long run, one that they may not be able to afford to pass up.