NOV. 9TH GAZETTE CCA ARTICLE INACCURACIES & MORE

The following letter appear in today's Gazette from Paul Steinberg. It is re-printed here with permission.

To the Editor:

Despite several years of public discussion, some politicians in Croton continue to make false and misleading statements about residential electricity purchasing and “green” energy.

Most recently, the article in the Nov 9 Gazette made statements regarding “Community Choice Aggregation” (“CCA”) and electric usage which are not entirely correct.

CCA is a type of “Energy Service Company” (“ESCO”).

These have existed for 20 years in NY State, and any consumer (except those on low-income energy assistance programs) may choose an ESCO. Con Ed itself shed the generation side of the business and is now an energy network operator.

CCA is a sub-group of the ESCO universe. The distinction is that unlike a normal ESCO where you affirmatively choose to have a particular company supply your electricity, the government forces you into the CCA unless you affirmatively take action in writing to use a different company.

The Gazette quote about the savings from CCA being “speculative” is correct insofar as the projections from Sustainable Westchester (“SW”, whose electricity affiliate is now known as Westchester Power) were purely guesswork back in 2015.

But it is also true that the calendar year 2016 “savings” of $26 now being claimed by Westchester Power is misleading insofar as WP compares a market-rate product (kWh purchased from Con Ed) to a tax-preferenced product (kWh purchased from an ESCO). 

Any ESCO should be cheaper for a consumer than the regular Con Ed rate. This is due to the fact that ESCOs are subsidized pursuant to NY Tax Law 1105-C.

That law was passed in 2000 to override a 1999 ruling from the NYS Dept of Taxation and Finance which taxed ESCOs the same way as Con Ed. Legislators wanted to stimulate electric choice.

The 1105-C tax subsidy has grown from $30M in 2001 to $118M today, without evidence that the subsidy has resulted in increased competition, reduced retail price, or reduced carbon output.

That $118M is going to grow exponentially as the entire customer base is pushed into CCAs, and it already results in a regressive tax burden as consumers living in large private houses benefit most from the tax exemption.

In addition there is empirical research showing that the tax exemption is resulting in higher prices to consumers, since ESCOs can sell for a higher price and still undercut Con Ed since ESCOs don’t charge sales tax.

As a result, there is now a bill pending in the NY Senate which would eliminate the tax exemption.

The thought is that the ESCOs are getting windfall profits (Westchester Power netted  $223k on $393k gross in just the first 8 months of operation) by not passing along the tax breaks to their consumers, and that repeal of 1105-C will result in lower cost to electricity consumers.

Whether this is objectively true is a separate issue, but the perception (and politicians salivating over getting an additional $118M in revenue) is driving introduction of repeal legislation in Albany.

No doubt Westchester Power and other beneficiaries of the tax subsidy will be lobbying heavily to stay on the gravy train, but as CCAs start to see the millions roll in they are going to become increasingly attractive targets to legislators.

Most of the “savings” claimed by CCA advocates don’t actually come from any bulk buying power, the “savings” come from use of a tax subsidy which any consumer can get by selecting an ESCO. In fact, it is sometimes cheaper for a Croton resident to get electricity directly thru an ESCO than thru the SW (now Westchester Power) CCA program.

The SW program used Con Edison’s ESCO subsidiary. Due to collapsing margins in the wholesale market, Con Ed sold that subsidiary to what is now called Constellation (The wholesale electric market entails significant pricing risk which can be offset by hedging on the futures markets, but it is not clear as to the exposure of SW/WP nor any risk mitigation efforts in place).

For much of 2017, you could sign up with Constellation at a price slightly above SW’s rate but you also got a $50 cash back card which meant that for most households the individual ESCO price was slightly better than the “bulk buying” SW price.

The original SW CCA price was 7.38 cents for regular and 7.68 cents for “green”. As of May 2017 those rates increased by 0.32 cents due to state-mandated taxes to subsidize nuclear power plants and infrastructure development.

The current Constellation rate to lock in for 36 months is 7.59 cents. The Con Ed non-contract rate for October was 8.30 cents with an adjusted rate of 8.80 cents.

In short, it is misleading to say that savings are “speculative” because an apples-to-apples comparison is always going to result in an ESCO being cheaper than remaining on Con Ed. That has nothing to do with any savvy negotiating by the CCA but rather due to a built-in tax break resulting from a statutory override of otherwise-applicable NYS law.

Parenthetically, lower electric cost can result in increased environmental damage. A study in the current issue of Science Advances documents a global surge in electricity use and light pollution as LED lighting has made it less costly to light outdoor areas.

I also object to the Gazette statement that SW offers residents “the opportunity to buy their power from 100 percent renewable resources.” Apart from the fact that individual residents can sign up right now to get energy from the same provider as SW, there is the inaccurate assertion of fact regarding “100 percent renewable” electricity.

I doubt that this is even possible with current technology, and I don’t see any support for this statement with regard to Westchester Power.

SW/WP is touted with the implication that you can leave your house lights burning bright and still reduce your carbon footprint because you are using “green” power. That may be true, but the SW proponents don’t tell us how that is possible.

In fact, it appears from Westchester Power statements that they are not using 100% renewable power but rather are buying Renewable Energy Credits (“RECs”) and that is a vastly different concept.

RECs may have zero impact on carbon reduction and in fact may result in an increase in carbon output. It is for this reason that many environmental progressives oppose the current REC marketing hype.

This lack of efficacy is because of how most RECs work; not all RECs are created equal. Most people don’t know the difference between types of RECs.

Mr. Pugh has experience with the energy markets (as noted in the Gazette article) and Ms. Horowitz has advocated extensively for Sustainable Westchester since 2015. It is all the more troubling when politicians who have researched the issue (and SW/WP) try to mislead the residents of Croton.

An REC is the modern version of buying an indulgence to expunge the sin of carbon gluttony, and it is customarily every bit as worthless as a medieval indulgence. There are RECs that have a meaningful impact, but they are very expensive and hence rarely purchased by “green” power ESCOs.

The typical consumer with “green” power pays a premium, but her lightbulb is powered by the same “dirty” legacy power generation as her neighbor who uses Con Ed.

The only difference is that the “green” consumer pays extra to a company which takes some of that premium to purchase an REC. So the company might go to the operator of a wind turbine in the California desert and pay the turbine operator for putting a megawatt into the electric grid.

In theory, this will “offset” the Croton resident’s use of a dirty kilowatt. Common sense has led economists and environmentalists to therefore question whether “green” power which merely buys RECs is a waste of money.

The typical rebuttal is that while purchase of an REC doesn’t actually reduce current carbon output, it incentivizes development of new renewable resources.

However, most RECs are very cheap (Colorado even had negative price RECs a few years ago!) and therefore are not a factor in new projects: government subsidies, tax incentives, and regulatory mandates are the dispositive factors.

In 2013, peer-reviewed journal Sustainable Energy noted that voluntary-market RECs are discounted to zero by wind power developers unless they are reliable and for a duration of more than 3 years. This suggests a productive solution: only buy RECs that make a difference.

Some types of RECs work, commonly in cases where the REC parameters are set by regulators as part of a statewide goal of reducing carbon output.

Such “compliance” RECs are mandated by state Renewable Portfolio Standard (“RPS”) regulations. Those are structured in such a way as to effectuate reduction in carbon output.

But RECs that actually make a difference are expensive. That is why you see “green” ESCOs such as Westchester Power telling you how many RECs they have purchased but providing no details on the type or cost of those RECs.

Publicity releases putting stress on the raw number of RECs purchased rather than the nature of the RECs purchased is a big red flag when someone tries to get you to pay a premium price for “green” energy. 

CCA “green” energy is pitched as a painless, cost-free way to save the planet. The truth is that it is at best virtue-signaling and at worst it damages the planet: When we think that being energy-efficient has no environmental benefit since we are 100% “green” there is no incentive to reduce kWh usage. 

I have a house which is pushing the century mark. It has taken years of work to replace old appliances with Energy Star models, install new lights, and weatherize the windows and attic. It is not cost-free and it requires work.

But I have made great progress in reducing monthly kWh usage, and while the gas usage is more difficult given Croton winters I have managed to make some headway on that and found that a modest investment in sweaters and attic insulation is quite carbon-friendly.

Beware when people in Croton (especially politicians) speak in vague generalities about how CCA will save the planet while saving you bucketloads of money.

When you hear the talk about how brilliant the folks at SW are in using “bulk” purchasing power to save money, ask about 1105-C and what happens if taxpayers are not compelled to subsidize ESCOs anymore.

When you hear about saving the planet, ask them to tell you in detail about what type of RECs they are going to buy, at what price, and how the RECs will actually reduce carbon output rather than be a giveaway to existing generator companies.

Most importantly, when politicians tell you that your home is going to run on 100% renewable energy, understand that with current technology this is almost certainly an outright lie.

Eventually “100% renewable” may be possible (such as with the massive lithium ion battery being tested in South Australia), but we live in 2017 and need to be honest with ourselves about the current state of science.

Fossil fuel usage is a critical environmental concern. As with most intractable problems, resolution requires hard choices and sacrifice.

If Croton politicians or Croton residents actually wish to reduce carbon output, they can demand that their CCA purchases fund new renewable energy (“forward” RECs) or at minimum that they are paying for RECs that actually reduce carbon output (RECs that are “additional”).

Demand details, and don’t fall for a sales pitch long on environmental platitudes but short on specifics.

Sanctimonious politically-correct virtue signaling makes us feel superior and noble, but it does not solve the very real problem our planet is facing.

--Paul Steinberg

Croton-on-Hudson