How Green Should a Utility Be?

I'm really not sure how I feel about utilities in Maryland trying to appear environmentally conscious. Sounds weird, I know. Don't get me wrong. I'm all for anything that decreases our addiction to fossil fuels and helps fight climate change. But I don't know if it's good that Maryland utilities promote their "green" agenda, when it seems that most of the "green" they are doing is simply complying with state law and is on the ratepayers dime. Let me elaborate.

The utilities in Maryland are a strange beast. They are neither a government entity, nor a truly private company in the standard sense of the word. Unlike other private companies, their maximum profits are determined by a government agency (the Public Service Commission), but in exchange they do not have to worry about losing money. They do not acquire customers like a normal for-profit business. They are assigned a given territory. If you live or your office is in that territory, you automatically become their customer. If they want to make an investment in infrastructure, to improve operations or better serve their "customers," they need to get approval from the PSC, the government board. They have certain programs (ie. efficiency) they must run because of state law, yet they get to recoup every dollar they spend from every ratepayer in their territory. Despite all this, they are considered "for profit," and actually have shareholders/investors.

Thus, the utilities have jumped on the green bandwagon and are extolling their commitment to a greener world. If you don't think their green image is important to them, just check out this report by Pepco Holdings, owner of one of the state's utilities.

Why is it important for them to brag to investors and others about being green? Because it increases the value of the brand, and thus increases the company value for shareholders.

This is where it gets weird. When a utility in Maryland offers energy efficiency incentives, is that something they should get credit for, or get to brag about as a "green measure?" When they simply comply with the law passed by the state of Maryland, is that a "green" initiative? It's not so clear. A normal company would be using its own money to pay for a program it offers, and thus get to take credit for it, but really it should be something that is above and beyond the minimum requirement of the law, no? But if a utility in Maryland is using ratepayer money to fund the program, what exactly is that utility doing to go above and beyond business as usual?

For example, if Pepco spends money to sponsor something like Bethesda Green, does that money come from their profit or does it come from the Pepco ratepayers? It's really hard to tell. Bethesda Green is a worthy group to sponsor, don't get me wrong. Clean Currents is a proud sponsor. But we don't get to automatically recoup the money we spend on the sponsorship from a captured audience. When a utility does sponsor a worthy cause, should it be allowed to put its logo on the promotional material and get the PR benefit? I don't know. If the utility is using ratepayer money to fund the donation, I think the answer should be "no."

Pepco recently put a link to a carbon calculator on its web site. Ok. Not sure what the point is, but I sort of get it. A calculator only makes sense if it leads to direct action to reduce carbon. The question is, however, did the ratepayers pay to put that calculator up or did it come from Pepco's profits? I don't know the answer.

I don't pretend to know all the ins and outs of how the utilities operate. But I think that's sort of the point. There is such a huge gray, undefined area of what a utility can do as this strange beast somewhere between private and public. The best thing to do is to follow the model in DC and Delaware, where the state and district set up a separate Sustainable Energy Utility (SEU). The SEU gets to run all the green programs, using the ratepayers money instead of the utilities doing it. This way, you don't have the ratepayers funding the increased brand value of a private company. You don't have the ratepayers funding the creation of a "green" brand to compete with companies that are in fact truly green.

Public policy, or the public good, is best served by having a neutral party disseminate public funds with an equal playing field for everyone. Putting a semi-for profit company, with an agenda to increase shareholder value in charge of disbursing public funds is not the best way to approach things. If the utilities want to be green, that would be great. But they should do it on their own dime, and they should take actions that go well above and beyond the basic requirements of the law.