North Carolina Green Pricing Plan Seen as Potential National Model

NORTH CAROLINA GREEN PRICING PLAN SEEN AS POTENTIAL NATIONAL MODEL

Green pricing advocates are closely watching a statewide marketing initiative in North Carolina in the hope that it will become a national model for winning over ratepayers to premium-priced green power. At the least, they say, the program is another example of how green power efforts are increasing in regulated and deregulated markets alike.

Typically, green programs are run by the utilities themselves, which can lead to dramatically different results depending on how committed the utility is to the idea. Customer sign-up rates range anywhere from 1 percent to 7 percent, with most falling on the low end of the scale. Part of the problem, advocates say, is that it takes a strong marketing program to get ratepayers excited about paying higher bills, and utilities, particularly the ones that operate in regulated markets, aren't used to designing effective campaigns.

A source at the National Renewable Energy Laboratory, which is part of the Department of Energy, called the program a "new model," because the utilities will be participating in one statewide program.

"If it helps build a statewide awareness of green power, that can be very beneficial," the source said. "The key to green marketing is to show customers that there is a real problem out there."

Proponents of North Carolina's program are hopeful that a third party manager, Advanced Energy, a non-profit group formed by the North Carolina Utilities Commission in 1980, will help bring focus to the initiative.

"We think we will have high participation because of good publicity," said a source with the North Carolina Utilities Commission. In marketing parlance, North Carolina's effort should have strong "branding," supporters say, meaning ratepayers should easily identify the program and its potential benefit.

Starting as early as this fall, ratepayers will be able to buy 100 kilowatt/hour blocks of green energy at a 4 cent per kilowatt/hour premium. Basic rates fall between 7.5 and 8 cents a kilowatt/hour. Utilities are set to announce their final green power tariffs for review by Advanced Energy and the state in coming weeks.

When the program is up and running, the utilities will collect the premiums and pass them along to Advanced Energy. New generators will then bid to that entity to provide the power.

While supporters are optimistic about the unique structure, even they raise several concerns about both the state's and utilities' commitment to the program. Money remains an issue, according to a source at Advanced Energy. Estimates place the cost of an effective start-up marketing campaign at $2 million, but it isn't clear where that money will come from.

And new generators the program is designed to attract might have difficulty getting investors to back their projects without some higher state financial commitment, the Advanced Energy source said.

The fact the program exists at all is in part a testament to the political power of the state's small hydro producers, said the commission source. These generators will provide the initial green power until other new generators come online, and North Carolina lawmakers see the program as a way to financially support these struggling companies.

Like other green pricing programs, advocates worry about what the mix of renewables will be, a key element to any effective marketing campaign. A source with the Southern Alliance for Clean Energy, a non-profit group that has been heavily involved with the program's development, said ratepayers may not be excited about paying more for energy produced by plants that burn hog waste or wood.

"This is not something that if you build it, they will come . . . You have to be very careful you have the right mix [of renewables]," the Southern Alliance source said.

Despite concerns, however, the North Carolina program remains another example of how green pricing programs are taking off even in regulated markets. Four regulated states have told utilities that they have to offer green power: Iowa, Minnesota, Montana and Washington, according to the NREL source. As of February 89 utilities across the country had green pricing programs, with the best programs scattered from Tennessee, to Moorhead, MN, to Sacramento and Los Angeles.

"They are popping up like mushrooms," said the Southern Alliance source.

In the Southeast, customers a few years ago had no chance to pay more for green power. Now, 3.9 million account payers in North Carolina will have that opportunity. An effort is underway by Southern Company to offer Atlanta ratepayers a similar choice, and Florida is working on its own proposal. Taken with a Tennessee Valley Authority effort, up to 13 million ratepayers in the Southeast will have the chance to pay for green power in the next 24 months, the Southern Alliance source estimated.

"That is quite a phenomenal change," he said.