By TIM FAULKNER/ecoRI News staff
Ratepayers are getting a stream of offers to switch from National Grid to another electric supplier. Is it worth it? North American Power’s TV and mail campaign is clearly saying “Yes.” The selling point is price. The Norwalk, Conn.-based power producer sent out some 500,000 letters to Rhode Islanders since National Grid announced a 12.1 percent rate hike in December.
North American Power says it saves money by buying electricity at wholesale prices and simply selling it to ratepayers for less than National Grid. The practice of buying electricity from a non-regulated power producer (NPP) like North American Power has been happening since 1998. Large power users such as manufacturers and school districts typically shop around for contracts to get the best deal on its electricity by buying from third parties.
Residential customers have the option as well. For example, the East Greenwich company First Point Power has offered this service for several years. North American Power, however, is the first to step out with a huge marketing campaign. Thomas Kogut, chief of information for the Rhode Island Division of Public Utilities and Carriers (PUC), called the scope of the company's mail and TV campaign “unprecedented.”
Kogut said the solicitation from North American Power is much like a credit-card offer with a teaser rate. The rate offered by North American Power or other NPPs is only fixed for a few months before it readjusts. The price can go up or down after the initial term ends based on the contract an NPP gets with a wholesale seller of electricity. The PUC keeps a list of providers where ratepayers can shop for the best price. Not all offer residential service, however, so it requires time and research to shop around.
“You have to be a knowledgeable consumer,” Kogut said.
Based on the current offer from North American Power, residential customers who switch would save $8 a month through June, when the rate ends.
The standard program with North American Power offers 25 percent renewable energy; National Grid's standard electricity service contains 8.5 percent renewable energy.
National Grid, however, lets customers buy additional renewable energy through approved third-party providers. The average residential customer pays about $14 more a month for a 100 percent renewable-energy program through a third-party provider. North American Power offers similar pricing for its 100 percent green-energy plan, which is about $2 less a month than a National Grid-approved program.
One of National Grid's renewable-energy providers, People’s Power & Light (PP&L), is advising customers not to make the switch. Ratepayers can't continue with PP&L's renewable-energy program if they leave National Grid, and PP&L says the renewable energy from North American Power and other NPPs doesn't come from or support local renewable-energy programs.
Priscilla De La Cruz of PP&L said the financial incentive isn't enough to make the switch. “The solicitations might look appealing on paper, but we don't think the savings add up to much — and definitely not enough that they should stop you from supporting local renewable energy.”
Larry Chretien, executive director of the Energy Consumers Alliance of New England, the parent organization of PP&L, explained that the quality of green energy relates to renewable-energy certificates (RECs). RECs are bought by PP&L, North American Power and National Grid to obtain credit for offering green energy. The RECs are bought wholesale directly from a power source such as a solar, wind or hydropower project or through a REC broker. The main goal of RECs is to help promote new renewable energy projects, because they provide capital for developers, Chretien said.
There are good RECs and inferior RECs, he said. RECs coming from renewable-power producers built before 1998 are deemed less supportive of the current green-energy movement because they are issued from older, somewhat-outdated facilities such as a hydropower or a landfill-gas-to-energy operation. Regulators deem post-1997 RECs eligible to help state’s meet their renewable energy goals if the electricity they generate serves New England. Rhode Island has a goal of 16 percent renewable energy by 2019. National Grid, now at 8 percent of the goal, buys the “good” — post-1997 and serving New England — RECs to reach the benchmark.
RECs from outside New England or from facilities built prior to 1998 are inferior because they don't add to the amount of green power placed onto the grid, according to Chretien. They are in abundance and much cheaper than RECs that meet the state standard, but they don't have the same impact, he said.
Therefore, electricity customers who pay for green energy on their bills may not be supporting the latest wind, solar or other new renewable project if their NPP is buying inferior RECs.
“It’s one thing to claim you are selling green power but a seller should provide a product that makes a difference, which is what the consumer is expecting,” Chretien said.
A spokeswoman for North American Power said the company doesn't make a distinction between the two classes of RECs. All the RECs the company buys for its green-energy programs are certified by ISO-New England, the regional manager of the electricity markets, she said.
However, ISO-New England said they don't specifically certify RECs but categorize them for certain programs.
New England Power Pool, which tracks RECs, confirmed that the two classes of RECs exist and noted that their prices differ considerably. The pre-1997 RECs cost $1 or less, while RECs eligible for state renewable energy standards portfolio cost $300.
Thus, the quality of RECs has a considerable impact on the pricing offered to ratepayers for green energy programs.
Kogut said National Grid likely isn’t losing sleep if ratepayers switch to acquire electricity from another source. “The don’t make money on that," he said. "They make their money on the wires and meter system."
So, if saving money is the main focus, than actively shopping for providers will likely save ratepayers a few dollars, he said. “The answer maybe yes, but you still have to do your homework."
For example, in 2011, the Maryland Public Service Commission levied a $100,000 fine against North American Power for violating state law and the commission’s regulations with 19 “deceptive practices." Also, 147 complaints against the Connecticut company have been filed with the Better Business Bureau in the past three years.