Cost of Green Communities Act criticized by AG on Beacon Hill

Despite helping to stimulate job growth in the clean energy sector and reduce carbon emissions, the state’s 2008 Green Communities Act has come at a cost to consumers, which is expected to grow by up to $4 billion over the next four years, according to Attorney General Martha Coakley.

Coakley said Wednesday the cost of implementing the program over the next four years will cause delivery costs for electricity to rise 7 percent by 2015. Business leaders also sharply criticized the law, blaming the state for encouraging the use of costly renewable energy at the expense of companies and consumers while making a negligible impact on the problem of pollution in the United States.

Energy and Environmental Affairs Secretary Richard Sullivan credited the law with helping to create a “vibrant clean energy economy” in Massachusetts that has grown to include more than 4,900 companies and 64,000 clean energy workers, composing 1.5 percent of the state workforce.

Sullivan also said that $2.1 billion in energy efficiency investments by utilities over three years approved in 2010 by the Department of Public Utilities would save $6 billion for electric and natural gas ratepayers.

Coakley said it’s safe to assume electricity costs here — already some of the nation’s highest — will continue to rise over the next decade, warranting a review of some of the law’s provisions that encourage investment in expensive technologies and give utility companies “overly generous” incentives to hit efficiency targets set by the law.

Coakley, the state’s highest ranking consumer advocate, also recommended that long-term renewable energy contracts be competitively bid, a position at odds with the Patrick administration and the state’s top utility regulator, who said competitive bidding could discourage offshore wind and solar power development.

The attorney general’s cost estimates suggested a growth in the cost of implementing the programs created by the Green Communities Act that would outpace the first three years of the law’s existence, though she acknowledged not factoring in potential savings from energy efficiency.

Department of Public Utilities Chairwoman Ann Berwick told lawmakers that the Green Communities Act has had a “modest impact” on rates over the past three years, rising about 2.7 percent, or $1 to $3 per month, for the average residential customer. Those increases were largely driven by energy efficiency programs and investments, which Berwick said would ultimately lead to reduced energy costs over time.

Berwick said $1.4 billion in energy efficiency investments in the most recent three-year plan would net a savings of about $4 billion. Massachusetts spends over $22 billion on energy every year.

The testimony came during a well-attended hearing in the Gardner Auditorium held by the Joint Committee on Telecommunications, Utilities and Energy to dissect the impacts of the 2008 law that set goals and provided incentives for clean energy production and consumption.

The Green Communities Act, which became a signature achievement during former House Speaker Salvatore DiMasi’s tenure, set ambitious goals for Massachusetts, including the installation of 250 megawatts of solar energy by 2017, 2,000 megawatts of wind power by 2020, and significant reductions in greenhouse gas emissions.

Berwick said that while competitive bidding could have an immediate impact to reduce electricity costs, it would not necessarily serve the long-term goal of encouraging offshore wind and solar developments that can’t compete on price with onshore power sources.

“There are compelling reasons to support the development of offshore wind and solar projects, but requiring them to compete with onshore wind on the basis of price would undermine this development,” Berwick said.

Should lawmakers decide to revisit this section of the law, a change could have ramifications for the future of Cape Wind, which has negotiated to sell half its power to National Grid, but is still seeking other purchasers. The National Grid contract with Cape Wind allows for the highest-priced electricity ever in the Commonwealth.

“Although the benefits of competitive solicitation are fairly obvious, competition does not necessarily ensure transparency,” Berwick said, noting that National Grid’s pricing contract with Cape Wind was public, while NSTAR, Western Massachusetts Electric, and Unitil have all requested their bids on long-term wind and hydro power contracts be kept confidential.

The hearing featured testimony from top administration officials as well as utility companies, environmental advocates, and energy organizations, many of whom praised the environmental and job creation benefits of the law.

Coakley said her office has found a number of benefits from the act, including increased energy-efficiency programs that have allowed businesses to save money, and consequently jobs. She used the example of Fitchburg wind blade manufacture Simonds, which recently installed 3,600-megawatt natural gas generators that helped save $500,000 a year.

Coakley, however, said utility companies are offered “overly generous incentives” through the act to meet energy-efficiency goals required by the law in addition to a guarantee of 4 percent profit from long-term renewable energy contracts.

“These standards need to be reevaluated and changes should be made to protect the interests of ratepayers,” Coakley said.

Though Coakley said she was concerned that the GCA favored more costly clean-energy technologies, she cited the energy efficiency incentives in the law for helping to propel Massachusetts past California as the most-energy efficient state in the country, according to a report released last month by the American Council for an Energy-Efficient Economy.

Robert Rio, senior vice president at Associated Industries of Massachusetts, criticized the laws for failing to capture the cost reductions available to consumers from the drop in natural gas prices because of the required investments in Green Communities programs.

Rio said that Massachusetts is responsible for just 1 percent of carbon dioxide emissions from power plants in the country, and New England.

“Businesses in Massachusetts are frustrated — frustrated because they feel they are being held responsible for reducing greenhouse gases far in excess of any other state and paying the brunt of the bill in a state that already is one of the top in the nation for clean air. This is combined with a perception that here in Massachusetts we will continually strive to outdo others no matter what the cost,” Rio wrote in a blog post before giving his testimony.

As lawmakers sought to get a handle on where the law could be tweaked, Berwick said she would support a slight increase, or the removing a statutory cap on net metering, which allows consumers to run their meters backwards to reduce electric costs based on the amount of renewable energy being produced on site. She acknowledged that raising that cap would encourage more renewable energy projects, but could come at some cost to ratepayers.

Cynthia Arcate, president of PowerOptions, Inc., a consortium that purchases power for nonprofits and government agencies, ripped the Green Communities Act for creating a “mishmash” of rates that “make no sense from a regulatory standpoint and results in increased costs to consumers.

“What we’re doing currently from a rate perspective has turned everything on its head,” she said.