Oberlin Municipal Light & Power System’s use of pollution offsets known as Renewable Energy Credits allowed the utility to profit from its commitment to fossil-free energy production by 2050.
As part of a complicated cap-and-trade program meant to incentivize reducing pollution without punishing polluters, OMLPS bought the credits when purchasing renewable energy, primarily landfill gas. It sold them at a profit to utilities in Delaware, Maryland, Pennsylvania, and New Jersey, allowing them to meet stricter pollution standards without reducing pollution.
But use of the credits, the utility’s carbon-free commitment, and the amount of credit money rebated to customers by city council members, has caused controversy.
Steve Dupee, OMLPS electric director, said between 2012 and year’s end, customers will have paid $2.6 million extra for clean energy — rather than coal and natural gas- generated electricity — through use of the credits.
Council on June 20 approved rebating $2.2 million, or 85 percent to customers. The remainder goes into the utility’s sustainable reserve fund for energy conservation and efficiency programs.
The split was criticized by supporters of reinvesting most of the money into energy conservation and energy efficiency initiatives. But Dupee praised it.
“Council’s action will allow us to true-up our wholesale power costs on a dollar-for-dollar basis, nearly, since they aren’t returning 100 percent of these proceeds back to electric customers,” he said.
Councilman Bryan Burgess disputes Dupee’s contention that ratepayers were overcharged for landfill gas. He said rates were within 10 percent of coal costs when the commitment was made to buy landfill gas several years ago.
“It was very important to council at the time that if we were going to make this jump into renewable energy, that it was going to be done at costs comparable to coal.” he said. “We were not going to pay a massive premium to go with renewable energy.”
Burgess said Dupee told council in a memo that the gas contracts were a “good deal” regardless of whether they resulted in credit trades.
“That’s why he recommended we buy into them,” he said. “We thought the contract for the electricity was good in and of itself.”
As part of Oberlin’s commitment to be carbon free by 2050, the utility will increase clean energy purchases. However, Dupee said it will no longer profit from credits used in transactions for hydroelectric power and landfill gas.
“We’ve sold away those rights and claims,” he said. “We have to be very careful about making claims on our renewable power portfolio when we enter into these REC transactions.”
Dupee said stricter federal Environmental Protection Agency clean air standards for coal plants, depleted coal mines, states requiring more clean energy production, and lower solar and wind costs have made trading credits less profitable.
New restrictions on out-of-state credit trading have also been a factor.
Dupee, who had sought a 100 percent rebate for customers, said the 85 percent rebate will cushion an estimated 27 percent rate hike between 2013 and 2017.
He attributed the increase primarily to high borrowing costs for the hydroelectric projects done by companies the utility is purchasing the power from.
In 2006, estimates were $67 per megawatt hour for hydroelectric. They increased to $122 per megawatt hour in 2011 and are now $140 per megawatt hour.
Evan Goodenow can be reached at 440-775-1611 or @GoodenowNews on Twitter.
Evan Goodenow | Oberlin News-Tribune Oberlin Municipal Light & Power System headquarters at 289 South Professor St. How to spend money the utility earned from pollution offsets known as Renewable Energy Credits has divided residents and city council members.