Under revamped GreenChoice, customers no longer tied to wind prices

When Austin Energy launched its GreenChoice program in 2000, it quickly earned accolades for the innovative way it allowed customers to help pay for investments in wind energy.

Customers who wanted to help support Austin Energy's then-new West Texas wind contracts could sign up for 10-year contracts that tied their rate to what the utility was paying for wind.

Businesses especially liked the program because they could lock in the same rate over that 10-year period, helping them avoid times when coal, oil and natural gas prices might spike and lead to rate increases.

But earlier this year, with little fanfare, Austin Energy dramatically overhauled GreenChoice. No more long-term contracts. Instead of a price tied to wind contracts, GreenChoice customers now pay a set electricity rate that is higher than the standard rate. But they gain the satisfaction of supporting green energy.

These changes are drawing criticism from some renewable energy industry experts who say the award-winning program has become little more than an expensive marketing ploy, with no direct link to the city's renewable energy goals.

"It doesn't really provide the value to the customer it once did," said Mike Sloan, president of Virtus Energy, a renewable energy consulting firm.

But Austin Energy says the changes have been popular, pointing to the 2,379 subscribers who signed up for the "new" GreenChoice in the first five months of 2014.

"We've seen tremendous interest," said Debbie Kimberly, the vice president of customer energy solutions for Austin Energy. "We saw record sign-ups for this most recent batch of GreenChoice from our residential customers."

From popular to pricey

The homes and businesses enrolling in GreenChoice aren't necessarily getting green-generated energy. That's because Austin Energy sends the energy it generates to a statewide energy grid from which all state-based utilities purchase their power. There is no way to determine which energy source is powering any particular Austin home or business.

Still, by joining GreenChoice, members were helping the utility reach its goal of generating 35 percent of its energy from renewable sources by 2020. Without the GreenChoice money, the utility says, pursuing these aggressive goals would have been difficult because it would have spread the cost across all ratepayers.

What made GreenChoice innovative was that it connected subscribers to the actual cost of wind energy -- giving them the opportunity to pay less than the standard electric rate, depending on what happened with other fuel prices. The first batches were very popular, selling out in weeks. Businesses saw it as a hedge against price increases.

Each new batch was tied to a new wind contract, so a home or business could enroll only when a new batch was being offered. (The utility doesn't include solar power in GreenChoice, only wind.)

"Every time we added a new wind farm, we had a new price," said Mark Kapner, a renewable energy consultant who helped launch and run GreenChoice for Austin Energy.

After five years, GreenChoice had swelled to more than 11,000 residential subscribers and nearly 1,500 business customers. Major employers had embraced the program, such as Dell Inc., the Austin Independent School District and Samsung. Businesses became a majority of the program's revenue.

But by 2009, the program was suddenly on life support. The utility was having a hard time selling new contracts, with 99 percent of its contracts unsold after seven months on the market.

The problem was price. A GreenChoice batch spiked to more than three times the standard electricity rate.

Austin Energy officials blamed the jump in prices on a more robust West Texas wind market and clogged transmission lines that made transporting wind energy more challenging. Roger Duncan, the former general manager of Austin Energy, said it was time to consider abolishing the program.

A new direction

Instead of phasing it out, Austin Energy cut the duration of contracts back in 2009 to five years. Then in January of this year, it overhauled the program.

Under the new pricing system, GreenChoice members pay a 1-cent-per-kilowatt charge above the fuel charge that all customers pay. The longest contract a business subscriber can get is three years. The city spent $78,000 marketing the "new" GreenChoice.

Austin Energy says it had to retool the program because under the old system it had gotten too expensive and subscribers had complained about being locked into expensive long-term contracts.

"We said, 'You can go off GreenChoice any time you like to, there's not a penalty,' " Kimberly said.

Businesses, who make up more than 90 percent of GreenChoice revenue, are re-evaluating whether GreenChoice is worth it. Some companies, like California-based chipmaker Spansion, which has significant manufacturing operations in Austin, were early cheerleaders of GreenChoice. But Spansion is no longer a subscriber.

Others, like Samsung, have remained with the program. Samsung spokeswoman Catherine Morse said they are "presently evaluating how this rate structure will affect us."

For the average homeowner using 1,000 kilowatts a month, GreenChoice adds about $10 to the bill, Kimberly said, a premium that makes sense because renewable sources, on average, are still more expensive than coal and natural gas. "It's less than two Starbucks," she said. "And you are contributing to a clean, sustainable environment."

Austin Energy says GreenChoice revenues just go to pay for wind power. The program earned nearly $39 million in the last fiscal year. Without this money, the cost of renewable energy would be spread across all ratepayers, driving up everyone's bills.

"Whatever we get from GreenChoice revenues benefits all customers because it brings the (fuel charge) down," Kimberly said.

Giving customers a choice

Earlier this year, the city put together a task force dedicated to coming up with new renewable energy goals for Austin Energy. Because the utility is now set to reach its 35-percent goal early, this group of energy industry experts or consumer advocates was asked to set the bar even higher.

Its final report, which was finished last week, the group suggested revamping GreenChoice yet again so there is a greater incentive for people to join.

"The fundamental principle, if a customer is paying extra, is it should result in something extra either for the environment or for the customer," Sloan said. "Right now, it doesn't do that. ... It's people that want to give money to Austin Energy in the hopes that it will support renewables. There's no direct connection."

Austin Energy is mindful of the price of GreenChoice. In its next budget year, it plans to cut the 1-cent-per-kilowatt-fee down by a quarter of a cent, and it predicts its revenue will jump to $53 million, anticipating a surge of interest in the program with its lower price.

Not everyone wants to support the more costly renewable energy, Kimberly said.

"I believe in giving customers a choice," she said.