Trouble on Green Mountain

In June, Austin-based Green Mountain Energy Company – self-described as "one of the nation's largest retail providers of cleaner electricity products," generated from sources such as wind, solar, water, biomass, and natural gas – announced the crosstown relocation of its headquarters from aquifer-sensitive west Austin to an award-winning green office tower downtown, in anticipation of growth and expansion. By the time the move was complete, however, the energy provider had discontinued servicing about 480,000 customers in Ohio and Pennsylvania, laid off 15% of its workforce, and found itself facing suit in federal court. Green Mountain blames regulatory and market obstacles for its woes, but its critics cite an over-reliance on natural gas and a lack of investment in the very clean energy sources the company has made its trademark.

At the heart of Green Mountain's ongoing trouble is its October decision to pull out of a 2001 contract with the Northeast Ohio Public Electric Council aggregation program, which negotiates bulk deals for 450,000 customers in Ohio's deregulated energy market. Green Mountain cites "adverse regulatory events" as the reason it "exercised its right to terminate the agreement." NOPEC argues that Green Mountain violated its contract when it announced the pullout prior to any negotiation, according to the Cleveland Plain Dealer. The dispute moved from a County Court of Common Pleas to Federal court after the lower court ordered Green Mountain to increase its security deposit by $1 million.

While the regulatory events Green Mountain identified, involving transmission and purchasing fees, likely affected their bottom line, Consumers Union policy analyst Tim Morstad suggested that it was Green Mountain's use of 98% natural gas-generated energy in Ohio, in light of astronomical jumps in cost over the last few years, that led to the company's departure. Tom "Smitty" Smith, director of Public Citizen's Texas office and a renewable energy advocate, said, "Instead of developing an adequate supply of renewables, Green Mountain was purchasing energy on the spot market to meet customers' needs. When gas went up, their prices went up as well," yet they were locked into NOPEC rates.

Green Mountain spokeswoman Molly Hanlon said, "Wherever we do business, we need to be profitable," adding that the gas used in Ohio was 70% cleaner-burning than widely used coal. While serving NOPEC, Green Mountain saved its customers an estimated $50 million and avoided about 306,000 tons of carbon dioxide emissions, according to a press statement. Hanlon says Green Mountain contracts helped spur the growth of the state's first utility-scale wind farm, as well as a new solar-panel array. "Green Mountain has similarly helped develop 13 wind and solar facilities across the country," she said. President and CEO Paul Thomas said, "We certainly look forward to the day that regulatory barriers don't impede competitive progress."

Bill Spradley, Director of Columbus-based Green Energy Ohio, said he's sad to see Green Mountain go. He credited the company with being the only provider to help bring renewables to a state with huge barriers to green power, including plentiful, cheap coal power and an indifferent legislature that is unwilling to mandate that a certain amount of the state's energy come from renewables.

Other changes afoot at Green Mountain include cancelling electricity-generating services for 30,000 Pennsylvania customers and going instead to subscription-based renewable energy certificates or credits – sold in addition to the customer's traditional utility service – which ensure that 500 kilowatt-hours of electricity per month from 100% wind resources are delivered to the national power grid, but not necessarily to the actual customer's home. Thomas said "current regulatory and market conditions have led to this evolution of our Pennsylvania business." Meanwhile, diminished services in the Northeast and Green Mountain's decision to outsource billing and IT functions led to the layoff of 15% of its overall workforce, including 35 employees in the Austin area.

Green Mountain has come under criticism for its Texas dealings as well. Morstad noted that even though Green Mountain offers two products that include wind power, the cost of which has remained stable as gas skyrocketed, the company's rates have increased in lockstep with fossil-fuel-dependent utilities such as Reliant and TXU. Instead of charging a premium for wind, said Carol Biedrzycki of the Texas Ratepayers' Organization to Save Energy, Green Mountain could be making wind power much more competitive with fossil-based energy sources. Public Citizen's Smith pointed out that Green Mountain was absent from the choir of clean-power advocates demanding a beefed-up state renewable energy portfolio standard, or RPS, during the recent session. Hanlon replied that while Green Mountain didn't actively participate in the RPS-boosting efforts, "we supported the legislation that would increase the RPS." Biedrzycki said the company also spearheaded the recent weakening of Texas consumer-protection rules. The Public Utility Commission, in February, ordered Green Mountain to pay an $11,500 penalty for "failing to respond timely to customer complaints," citing 33 customer complaints at least 22 days old.