Our state owes my Vermont Law School (VLS) colleagues and their co-conspirators hearty thanks for the publicity stunt they staged this week.
Although the complaint they filed with the Federal Trade Commission accuses Green Mountain Power of deceptive trade practices, it is the contradiction at the heart of our state's energy policy that they have laid bare.
The essence of the complaint, filed by the VLS environmental law clinic on behalf of VLS professor Kevin Jones as well as former congressional aide Bruce Post and former state legislator Curt McCormack, is that Vermonters and their utilities have no right to claim they are using renewable energy even though they are buying energy from places like the wind turbines on Lowell Mountain, on Georgia Mountain, in Sheffield, and in Searsburg.
Vermonters, it should be noted, pay not just through their electricity bills but, for some, at the cost of ditching their vision of a pastoral Vermont for a landscape dotted with what they deride as “industrial wind” turbines, many more than 400 feet tall.
They pay, it must also be noted, even though Vermont is the only New England state that lacks a Renewable Portfolio Standard (RPS) - a requirement that their electric utilities use a specified percentage of electricity produced from renewable resources as opposed to the old-fashioned methods of burning coal and emitting carbon, combusting natural gas and emitting somewhat less carbon, or splitting atoms and creating radioactive waste.
When Connecticut, Maine, Massachusetts, New Hampshire, and Rhode Island created their RPSs, they heard the pleas of their utilities that it would be impractical and expensive to put renewable-generation facilities - wind turbines, solar panels, boilers that use low-grade wood from the forestry industry, machines that burn the methane emitted by the trash we dump in landfills - in the right places so that the utilities could guarantee to regulators and customers alike that they are truly using that specified percentage of renewable energy.
So, along with other states that adopted RPSs, they invented an imaginary thing called a REC - the renewable energy credit.
Here is how REC works in simplified terms: A wind farm in, say, western Massachusetts can help a utility serving Cape Cod meet its RPS obligations even though it is highly unlikely - perhaps even impossible - that the energy from the wind farm would find its way to Provincetown or anywhere close to it.
That's because, for every megawatt generated by the wind farm in the Berkshires and actually used by customers in Northampton and Springfield, the wind farm can sell the Cape Cod utility one REC, which the utility can then (in RPS parlance) “retire.”
RECs, when retired, allow the utility to meet its RPS obligations and, by the way, to assure its retail customers that they are using renewable energy.
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Each of the five New England states with an RPS would have loved to limit this trading in RECs to parties within their individual borders. That would assure each state would get its fair share of renewable energy facilities and the jobs and tax revenue they produce.
Alas, that would be unconstitutional. The U.S. Supreme Court has declared that because of the Commerce Clause of the Constitution, no individual state may take protectionist steps to limit interstate economic activity.
This is known as the “dormant Commerce Clause” doctrine because the Commerce Clause does not actually say anything about what states can and cannot do - it simply says that regulating interstate commerce is the job of the federal government. The framers wanted one big national economy, because economic balkanization is the main reason the Articles of Confederation, predecessor to the Constitution, were a fiasco.
Because the Articles of Confederation failed, renewable energy producers in Vermont can sell their energy locally and export the RECs to Massachusetts and Connecticut (the New England states with the most people and thus the most need for RECs). The utilities and electric customers in those states thereby get to say they are using renewable energy.
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What can Vermonters and their utilities say? What can customers of GMP, and members of the Vermont Electric Cooperative say, about the wind energy produced on Lowell Mountain when the RECs are flowing out of state?
How about the citizens of Burlington, whose municipal electric utility is buying both the electricity and the RECs produced by the owners of the Georgia Mountain wind farm, but which then turns around and engages in fancy REC arbitrage made possible by the existence of two classes of RECs under some RPSs?
And what of the members of the Washington Electric Cooperative, which so memorably threw out its nuclear-loving directors in favor of leaders who would commit their co-op to obtaining the bulk of their power from the landfill-gas-burning facility they built in Cavendish?
According to Jones, Post, and McCormack, all the Vermont utilities and their customers are allowed to say is that they are using “brown” energy - and that any claim to using green energy violates the federal law that protects people from false and deceptive trade practices.
They singled out GMP - who doesn't love to pick on an investor-owned utility with foreign owners? - but, really, the subterfuge they lay bare covers more or less the entire state.
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One might wonder why Vermont, the greenest and grooviest state in the realm, the state with the U.S. senator who rails day after day against corporate hypocrisy and greed, would lack an RPS. The answer is simple: Elections matter.
For eight critical years, Vermont had a Republican governor who would not sign RPS legislation. So Democratic lawmakers cobbled together a renewable energy bill that GOP Gov. James Douglas would sign, creating a Rube Goldberg–style program known as SPEED (an acronym for “sustainably priced energy development”).
The SPEED program does indeed require Vermont utilities to buy renewable energy and, at premium wholesale rates, but it does not prevent the RECs associated with that renewable energy from flowing out of state to utilities that must comply with RPSs. Connecticut passed a bill attempting to stop this sort of thing last year, but it is not clear how much effect it is having because RECs, more or less, trade freely throughout New England.
Now, into the fray, steps three complainants as carefully chosen as Rosa Parks was when the NAACP needed someone to challenge segregation in the 1950s.
As confirmed in the FTC petition, Post has great Republican bona fides as someone who worked at various times for Sen. Robert Stafford, then-Congressman James Jeffords, and Gov. Richard Snelling.
McCormack isn't just a former state representative, he's the brother of Dick McCormack, the prominent Windsor County Democrat who now serves in the Vermont Senate. (Longtime Vermonters will remember the “wood-fired Victrola” Sen. McCormack claimed to use when spinning records for Vermont Public Radio, a gig from which he retired before such a phonograph could have generated any REC revenue.)
Jones is a former utility executive (having served as director of power market policy for the Long Island Power Authority), an outspoken fan of renewable energy (he drives an all-electric car and persuaded VLS to install charging stations) and, despite his law school affiliation, is trained as an economist rather than as a lawyer.
The FTC was likewise carefully chosen as the official forum for this argument. The FTC has five commissioners, one of whom is Julie Brill, who served as an assistant attorney general for consumer protection and antitrust for the state of Vermont for over 20 years. (She also later worked as chief of consumer protection and antitrust for North Carolina's attorney general.)
The thinking, presumably, is that the petition will tweak the consumer conscience of Commissioner Julie Brill in particular. Moreover, as the petition makes clear, the FTC has previously issued informal guidance, making clear it is concerned about the issues raised in the petition.
The reality, though, is that agencies like the FTC have considerable discretion. Given that at its heart, this complaint is really about state policy, it seems likely this is a battle the FTC will not pick.
Yes, the GMP marketing materials cited in the FTC petition are carefully worded. The FTC might plausibly conclude that their purpose is to make GMP customers think they are using green energy just because their utility owns renewable energy facilities.
Yes, GMP spokesperson Dottie Schnure defies the laws of physics with her claim to Vermont Public Radio that the electrons from GMP's renewable facilities stay in Vermont. Because the electricity grid covering the entire U.S. east of the Mississippi is one big interconnected machine, her assertion is the equivalent of pouring a glass of fresh spring water into Lake Champlain on the Burlington waterfront and then saying you are drinking fresh spring water by scooping up some lake water in Shelburne.
Yes, Commissioner Chris Recchia of the Vermont Department of Public Service has firmly placed the Shumlin administration on the side of the utilities here by telling VPR that if Vermont had an RPS electric rates would go up 6 percent.
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The statements of the Shumlin administration and GMP notwithstanding, resolving this controversy is not something for which the FTC is well-suited. People do not shop around for electricity the way they do for cars or computers.
The dispute over who gets credit for Vermont's renewable energy is less about trade practices and more about Vermont's soul. The Green Mountain State cultivates a reputation as an agrarian paradise of sustainability and self-sufficiency at the same time it has long depended on neighboring states and provinces for most of its electricity. We are, perhaps, shrewd for again turning to our neighbors, this time to buy our RECs. It is a Faustian bargain.
Pacts with the devil are not what the Federal Trade Commission is in business to stop. The complainants here, and the law school that is assisting them, follow a well-worn path that winds through courtrooms and similar forums but ends at the governor's desk. In Montpelier, at that desk is the pen with which our governor should sign a real renewable portfolio standard for Vermont into law.