Newton (MA) saves money by going green. Sort of. Not really.

A recent press release from Massachusetts Governor Patrick's office joined the unanimous praise for the City of Newton, a suburb of Boston with a population of 84,000:

Last week, Mayor [Seti] Warren signed a contract requiring 100 percent of municipal and school department electricity needs - equal to 70 million kilowatt hours over the next three years - come from renewable sources starting on July 1, 2012. The initiative will save the city over $300,000 over the next three years...Newton's decision to power 100 percent of its electricity needs with 'green' and renewable power ...provides a model for other Massachusetts communities to emulate...Another feather in Newton's cap.

Going green and saving $300,000.  Who could oppose a win-win deal like this?  A little research reveals, however, that the story is inaccurate on two essential points:

Firstly, the headlines make it appear that Newton saved money because their green energy was cheaper.  This clearly does not pass the smell test; even environmentalists admit that the cost of renewable energy is higher than that of coal and natural gas, although they might argue that it's worth spending a few pennies to save the planet.  Green electricity, however, costs more than a few pennies.  As I reported in a recent AT article, residential consumers in Massachusetts who elect the "NStar Green Option" (100% of their electricity from renewable sources) pay an 87% premium of 6.4¢ per kilowatt-hour on top of the 7.9¢/kwh base rate.  Under this plan, Newton's 70 million kilowatts (23,333,333 per year) ought to entail a $1.27 million annual surcharge on top of the base rate of $1.6 million.  A far cry from saving $100,000 a year.

Newton officials indicate that they got a good deal because they negotiated with power companies through a reverse auction, and, as is the case for all large customers, prices are lower when you buy in bulk.  It was revealed, however, in a little-reported statement from Newton's Chief Financial Officer Maureen Lemieux that the green prices were actually $150,000 higher than "brown" electricity; Newton's claim of $300,000 in savings could have been announced as an additional cost of $50,000 per year.

What's more, Newton's price savings amount to 3.33% on their $3-million electric bill, but since the price of natural gas is half what it was a year ago, everyone is saving money on electric bills.  Massachusetts utilities NStar and National Grid recently announced that they are voluntarily cutting electricity rates by 16%, from 7.9¢ to 6.6¢/kwh for residential customers.  (The Green Option premium was recently raised in March, and no announcement was made that it will be cut; a 6.4¢ premium on a base rate of 6.6¢ will represent a 97% surcharge.)

And yet Newton reports that it negotiated a rate of 6.6¢/kwh with Reliant Energy, a Texas energy company.  It's hard to reconcile this with Nstar's 14.3¢ green rate.  If we do the math, Newton reports using 23,333,333 kwh per year for a cost of roughly $3 million, which works out to 12.9¢/kwh.  It turns out that according to CFO Lemieux, "about half of [the $3 million], or $1.5 million, is for generating electricity."  Electric bills are divided into two roughly equal charges: generating electricity and delivering electricity.  Newton therefore has reported a kwh rate that reflects only the generation charges.  It's sort of like quoting a house price and neglecting to mention that you have to pay for the land as well.  A more accurate rate would be to double the 6.6¢ to 13.2¢.  Subtracting the lower rate for streetlight usage brings it to the neighborhood of the 12.9¢ estimate above.

A second inaccuracy in the story: it's not clear that Newton's electricity is really that green.  Lemieux is quoted in the Newton Tab, saying, "Newton's energy will come from 100 percent wind power."  Even if this were true, wind power generates only 2.3% of the nation's electricity (2010); converting to wind power therefore is hardly a model that every community can emulate.  Furthermore, the electrons supplied to Newton will not come from an actual wind farm; the Newton Tab reports that Texas company Reliant Energy, the supplier, will purchase "renewable energy credits."  (Reliant, by the way, was indicted on criminal charges in the 2000 California brownout fiasco and along with Enron was among George W. Bush's biggest campaign contributors.  How things change when you cloak yourself in green.)  New England produces almost no green energy -- and, in fact, the story dominating the front pages last week was the ruling of the Massachusetts Department of Environmental Protection responding to noise complaints ordering windmills to shut down.  Reliant therefore has to work out an exchange on paper with a wind farm in Texas.

Reliant's website, however, clearly states that they do not purchase RECs; rather, they use "carbon offsets," which support "a variety of projects that are certified to keep greenhouse gases from entering the atmosphere."  Projects include sustainable forestry and methane capture at landfills and "livestock biogas" (capturing cow flatulence).

Reliant's green energy contract also includes a donation to worthy organizations through their "EcoShare" program.  EcoShare partners include the Texas Parks and Wildlife Foundation, Children's Environmental Health Institute, and the Galveston Bay Foundation.  This last foundation, according to its IRS 990, spends half its $2-million budget on the the following activities: the Get Hip to Habitat Program for middle-schoolers; the Boater Waste Education Campaign, with education booths at boat and fishing shows; the Family-Focused Bay Day Festival; and the Bike Around the Bay two day cycling event.

These may be worthwhile events, but we've gone a long way from the 100% wind power claim.  According to Reliant, though, it's all very scientific:

Reliant purchases and retires carbon offsets approved by respected certification agencies such as the Climate Action Reserve...The emissions reductions are quantified by scientifically sound best practices.

When you look at the Climate Action Reserve site, a disturbing number of entries read something like this:

 -The Climate Action Reserve has determined that until standardized guidance for accounting of optional carbon pools is developed, we are unable to give credit for preserving or enhancing any optional carbon pool as part of any forest carbon project. [So much for planting trees.]

-The Reserve has decided to cease development of the Cropland Management Project Protocol and instead explore the feasibility of developing a protocol related to preserving or enhancing soil carbon in grasslands.

To sum it up: Newton has locked in a rate for three years that's twice what I'm paying as a residential customer, levying a hidden tax through the electric bill to purchase cow farts and to fund a middle-school Hip to Habitat program.  I have no doubt that many other cities will seek to emulate Newton, Massachusetts, so they too can be showered with green accolades.  Let the buyer beware.

A recent press release from Massachusetts Governor Patrick's office joined the unanimous praise for the City of Newton, a suburb of Boston with a population of 84,000:

Last week, Mayor [Seti] Warren signed a contract requiring 100 percent of municipal and school department electricity needs - equal to 70 million kilowatt hours over the next three years - come from renewable sources starting on July 1, 2012. The initiative will save the city over $300,000 over the next three years...Newton's decision to power 100 percent of its electricity needs with 'green' and renewable power ...provides a model for other Massachusetts communities to emulate...Another feather in Newton's cap.

Going green and saving $300,000.  Who could oppose a win-win deal like this?  A little research reveals, however, that the story is inaccurate on two essential points:

Firstly, the headlines make it appear that Newton saved money because their green energy was cheaper.  This clearly does not pass the smell test; even environmentalists admit that the cost of renewable energy is higher than that of coal and natural gas, although they might argue that it's worth spending a few pennies to save the planet.  Green electricity, however, costs more than a few pennies.  As I reported in a recent AT article, residential consumers in Massachusetts who elect the "NStar Green Option" (100% of their electricity from renewable sources) pay an 87% premium of 6.4¢ per kilowatt-hour on top of the 7.9¢/kwh base rate.  Under this plan, Newton's 70 million kilowatts (23,333,333 per year) ought to entail a $1.27 million annual surcharge on top of the base rate of $1.6 million.  A far cry from saving $100,000 a year.

Newton officials indicate that they got a good deal because they negotiated with power companies through a reverse auction, and, as is the case for all large customers, prices are lower when you buy in bulk.  It was revealed, however, in a little-reported statement from Newton's Chief Financial Officer Maureen Lemieux that the green prices were actually $150,000 higher than "brown" electricity; Newton's claim of $300,000 in savings could have been announced as an additional cost of $50,000 per year.

What's more, Newton's price savings amount to 3.33% on their $3-million electric bill, but since the price of natural gas is half what it was a year ago, everyone is saving money on electric bills.  Massachusetts utilities NStar and National Grid recently announced that they are voluntarily cutting electricity rates by 16%, from 7.9¢ to 6.6¢/kwh for residential customers.  (The Green Option premium was recently raised in March, and no announcement was made that it will be cut; a 6.4¢ premium on a base rate of 6.6¢ will represent a 97% surcharge.)

And yet Newton reports that it negotiated a rate of 6.6¢/kwh with Reliant Energy, a Texas energy company.  It's hard to reconcile this with Nstar's 14.3¢ green rate.  If we do the math, Newton reports using 23,333,333 kwh per year for a cost of roughly $3 million, which works out to 12.9¢/kwh.  It turns out that according to CFO Lemieux, "about half of [the $3 million], or $1.5 million, is for generating electricity."  Electric bills are divided into two roughly equal charges: generating electricity and delivering electricity.  Newton therefore has reported a kwh rate that reflects only the generation charges.  It's sort of like quoting a house price and neglecting to mention that you have to pay for the land as well.  A more accurate rate would be to double the 6.6¢ to 13.2¢.  Subtracting the lower rate for streetlight usage brings it to the neighborhood of the 12.9¢ estimate above.

A second inaccuracy in the story: it's not clear that Newton's electricity is really that green.  Lemieux is quoted in the Newton Tab, saying, "Newton's energy will come from 100 percent wind power."  Even if this were true, wind power generates only 2.3% of the nation's electricity (2010); converting to wind power therefore is hardly a model that every community can emulate.  Furthermore, the electrons supplied to Newton will not come from an actual wind farm; the Newton Tab reports that Texas company Reliant Energy, the supplier, will purchase "renewable energy credits."  (Reliant, by the way, was indicted on criminal charges in the 2000 California brownout fiasco and along with Enron was among George W. Bush's biggest campaign contributors.  How things change when you cloak yourself in green.)  New England produces almost no green energy -- and, in fact, the story dominating the front pages last week was the ruling of the Massachusetts Department of Environmental Protection responding to noise complaints ordering windmills to shut down.  Reliant therefore has to work out an exchange on paper with a wind farm in Texas.

Reliant's website, however, clearly states that they do not purchase RECs; rather, they use "carbon offsets," which support "a variety of projects that are certified to keep greenhouse gases from entering the atmosphere."  Projects include sustainable forestry and methane capture at landfills and "livestock biogas" (capturing cow flatulence).

Reliant's green energy contract also includes a donation to worthy organizations through their "EcoShare" program.  EcoShare partners include the Texas Parks and Wildlife Foundation, Children's Environmental Health Institute, and the Galveston Bay Foundation.  This last foundation, according to its IRS 990, spends half its $2-million budget on the the following activities: the Get Hip to Habitat Program for middle-schoolers; the Boater Waste Education Campaign, with education booths at boat and fishing shows; the Family-Focused Bay Day Festival; and the Bike Around the Bay two day cycling event.

These may be worthwhile events, but we've gone a long way from the 100% wind power claim.  According to Reliant, though, it's all very scientific:

Reliant purchases and retires carbon offsets approved by respected certification agencies such as the Climate Action Reserve...The emissions reductions are quantified by scientifically sound best practices.

When you look at the Climate Action Reserve site, a disturbing number of entries read something like this:

 -The Climate Action Reserve has determined that until standardized guidance for accounting of optional carbon pools is developed, we are unable to give credit for preserving or enhancing any optional carbon pool as part of any forest carbon project. [So much for planting trees.]

-The Reserve has decided to cease development of the Cropland Management Project Protocol and instead explore the feasibility of developing a protocol related to preserving or enhancing soil carbon in grasslands.

To sum it up: Newton has locked in a rate for three years that's twice what I'm paying as a residential customer, levying a hidden tax through the electric bill to purchase cow farts and to fund a middle-school Hip to Habitat program.  I have no doubt that many other cities will seek to emulate Newton, Massachusetts, so they too can be showered with green accolades.  Let the buyer beware.