Green energy soon to cost more green

City of Lacey to lose some discount it had enjoyed from the Green Direct Program

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In 2017, Lacey enrolled in the Green Direct Program with a promise of having cost-effective ways of purchasing renewable energy. However, four years later, a pending rate case settlement means that the city might lose its savings from a six percent increase in utility rates.

What is the Green Direct Program?

Puget Sound Energy (PSE) Manager for Customer Clean Energy Solutions Heather Mulligan shared the news during the city council work session on Thu., Aug. 12. Mulligan explained that Green Direct “is a renewable energy program that allows the PSE’s largest governmental customers to subscribe to an output of a specified renewable energy source.”

Background

In a 21-year commitment, the city contracted for renewable energy from two sources, the Skookumchuck Wind Project and the Lund Hill Solar Project. Since Lacey was one of the first cities that signed-up for the Green Direct Program, they were able to gain benefits.

PSE staff Janet Kim explained that customers who are participating in the Green Direct Program had an added benefit from locked-in energy rate for the term of their contracts. In addition, they also gain credit which is being applied to their bill, for the standard energy-related power costs they were replacing with renewable energy.”

Mulligan added that the Skookumchuck Wind Project is especially beneficial in increasing the city’s energy savings. Located between Thurston and Lewis County, the wind project was initially scheduled to become fully operational in 2019. However, because of some delays the project opened a year later.

As a result, PSE was able to collect liquidated damages from the developer which were passed to their initial beneficiaries. This gave Lacey  two advantages: first, it allowed the city to purchase renewable energy credit and second, it gave the city lower rate charges. All factors considered, Lacey officialsexpected to make huge savings from the program. 

Rate Case Settlement with Green Direct Credit

 However, things changed in December 2020, when PSE filed a Power Cost Only Rate Case (PCORC) with the Washington Utilities and Transportation Commission (UTC). The case was meant to deal with the cost for PSE’s general electric services. The PSE staff clarified at the council meeting that Green Direct was not intended to be a major part of the case.

Unfortunately, the Green Direct Credit calculation became a problem during a closed meeting discussion with the parties involved the case. They raised the issue that the calculation for the Green Direct credit unfairly shifts the costs to other ratepayers. With this, the parties wanted PSE to present a new way in calculating the credit.

Eventually, they were able to reach a temporary agreement. Mulligan noted that this new calculation would have a significant impact on the value of green direct credit. The value of the energy credit went down from $0.044883/kWh to only $0.039618/kWh or equivalent to an 11.7 percent reduction. 

Because of the decrease in the value of the energy credit, it increases the city’s utility bills by up to six percent.                                          

Kim noted, “That credit was always a variable rate. Due to unforeseen regulatory outcomes, the credit has fluctuated greater than our customers and PSE expected, which means the added financial benefit will be less.”

“We all know that customers are caught off guard by this,” Mulligan said. She assured that PSE is taking steps to resolve the issue and had already held meetings with Green Direct customers. She noted that PSE is planning to hold their first collaborative discussion around mid-September to allow customer groups to prepare. Mulligan shared that PSE wanted to reach a consensus that would allow a long-term durable credit.

Lacey Finance Director Troy Woo shared, “it is kinda hard to predict in a 20 year period, but there is a significant difference...in terms of what we are looking at last year...and what was projected for.” Woo claimed that there would be no out-of-pocket cost and clarified that the loss is only in terms of their savings.

Mayor Andy Ryder also shared that while there are changes to the rates, Lacey will continue to be involved in the Green Direct Program because of its commitment to the environment. “It is true that Lacey was the first one… to go green-powered. At the time, that was an additional cost to the city but Lacey was the pioneer of that, and we are very proud of that.”

He continued, “When this opportunity came along, we jumped at it, and most of us jumped at it not only because it was the right thing to do, but we did see that there’s some long-term savings to it. I still think we did the right thing by supporting the project… it's just there’s so many moving parts.”

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