Florida Green Power Dispute Puts Spotlight on Marketing Costs
A dispute over the costs of a green power program offered by Florida Power & Light Company (FPL) has drawn attention to the costs associated with managing and promoting such programs. In late July, the Florida Public Service Commission (PSC) terminated FPL's Sunshine Energy Program after an audit revealed that only 20% of the $11.4 million collected from customers was applied to developing renewable energy facilities, with the remainder allegedly going toward marketing and administrative costs. Established in December 2003, the program was run by Green Mountain Energy Company and collected voluntary contributions of $9.75 per month from more than 38,000 customers to promote the development of renewable energy. See the Florida PSC press release.
In late August, Green Mountain defended itself, claiming that half of the program revenue was spent on renewable energy projects, while marketing costs were less than $1.50 per FPL customer (although they did consume about half of the funds provided to Green Mountain). Green Mountain says it created customer demand for more than 1.2 billion kilowatt-hours of renewable energy and also built 450 kilowatts of new solar energy projects, all at less than half the national average price per kilowatt-hour for green power programs and at a lower cost than other Florida green power programs. As noted by Green Mountain, the program's success has placed it in the "top ten" lists for utility green pricing programs for the past four years. DOE's National Renewable Energy Laboratory ranked the program fourth in the nation for total sales and sixth for total number of participants in 2007, and the program has landed in the top-ten rankings for at least one of those two categories since 2004. See the press release (PDF 106 KB), discussion paper (PDF 194 KB), and presentation (PDF 356 KB) from Green Mountain Energy Company, as well as the NREL top-ten rankings. Download Adobe Reader.
So what is an appropriate amount of money to spend on marketing of such programs? A report issued by NREL last year, "Trends in Utility Green Pricing Programs," found significant variability in the costs reported by the largest utilities. The report notes that the top performers generally devoted more funds toward marketing, spending an average of 24% of program premiums on marketing and administration, which is about half that of the FPL program. In terms of expenses per utility customer, however, the average marketing costs were about 28 cents per year. Multiplied by five years, that yields $1.40 per customer, which is in line with Green Mountain's spending. The report also notes that many utilities absorb their green power marketing costs into their general marketing budget. All of which should provide plenty to talk about at the 2008 National Renewable Energy Marketing Conference, which comes to Denver, Colorado, on October 26-29. See pages 18-22 (PDF pages 27-31) of the NREL report (PDF 786 KB) and visit the conference Web site.