Red Light, Green Light

Craig Gerhard was driving back to Houston from a camping trip at Lake Somerville two weekends ago when a billboard along U.S. Highway 290 caught his eye. It pictured a field of white wind turbines and a Web site address: GreenMountain.com.

Once home, he logged on and learned that Green Mountain Energy is the nation's leading alternative power company and for Texas would be offering its cleanest product: 100 percent wind-powered electricity. Electric deregulation in Texas would give Gerhard the chance to choose a provider offering less pollution than traditional utilities.

Gerhard, who works in information technology, grew up as a nature lover, always camping, hiking and backpacking. But only in recent years has he started to think in more environmental terms about issues like air pollution and energy consumption. He lives in a recycling household with two other people and shops at Whole Foods because "it's better for me and I enjoy knowing that I'm contributing to the best practices in terms of living on this planet."

And he thinks Green Mountain Energy might be one more good thing for him to do to help put the brakes on pollution.

Green Mountain Energy began in Vermont four years ago with the goal to provide environmentally friendly electricity and the advertising slogan "no coal, no nukes, no kidding." Since then, it has jumped into the deregulated electricity markets in six states, serving more than half a million people. Last year it relocated to Austin, in preparation for the newest market, Texas, which is slated to open retail competition in January 2002.

With captive consumers gone as deregulation hits each state, power companies face a marketing challenge in differentiating themselves from one another. After all, there is no difference between one electron and the next. But Green Mountain has found a niche. Among the six companies participating in the state's pilot program starting July 6, Green Mountain is the only one pushing alternative energy.

In this, Green Mountain likes to think of itself as educating the customer. Point one, says Gillan Taddune, a vice president at the company, is letting people know that they can choose an electric provider. Point two is asking, "Did you know that making electricity causes more air pollution than any other industry?" And point three is "to make the connection between that and then linking the two and saying Green Mountain Energy is part of this solution," she says. One hundred percent wind power means 100 percent pollution-free power.

At first glance, the company seems sincere in its promise of eco-electricity. It prints its letterhead and brochures on recycled, chlorine-free, unbleached paper with soy-based inks. Carpet containing recycled materials lines the office hallways. Light fixtures sport energy-efficient bulbs and timers in case someone forgets to turn them off. Windows grace cubicle walls to let natural light filter in.

The young company has the innovative feel of a start-up. Employees work in "teams," not departments. When the company moved into its new offices, employees painted murals in each of the many conference rooms. And like every good start-up in Austin, Green Mountain has a corporate playroom stocked with a pool table and other toys.

Yet the urban lime-green and rust-orange hallways of the company offices belie the heritage of a corporation that began as an arm of one of the biggest utilities in Vermont, drawing mixed reactions from environmentalists. Some are pleased to simply see someone offering a greener choice to consumers. But others question whether Green Mountain truly makes a difference to the environment. They also question the motivations of its investors, which include BP Amoco and Sam Wyly, a Republican donor and Texas billionaire who made much of his fortune in oil.

In March 2000, during the Republican primaries, a mysterious group called Republicans for Clean Air began playing $2.5 million worth of TV ads criticizing Senator John McCain's environmental record and praising the record of George W. Bush. Broadcast in New York, California and Ohio, the ads featured a photo of Bush superimposed over a meadow while McCain's picture appeared over belching smokestacks. "Governor Bush: Leading so each day dawns brighter," a voice-over proclaimed.

Bush claimed he knew nothing about the ads. The Sierra Club denounced them as "littered with half-truths." And the source of the ads remained a mystery, for no one had heard of the Republicans for Clean Air before. Not until the next day, when McCain asked the Federal Communications Commission to investigate whether the commercials adequately disclosed who paid for them, did Sam Wyly, a brassy Dallas businessman, fess up. He and his family had paid for the ads to highlight air pollution, he said.

"We have had a lot to do with building the Republican Party in Texas and nationally, and we'd appreciate it if the elected Republicans would look at our cause," he said at the time.

The brothers Wyly, Sam and Charles, have backed the Bush family since former president Bush served as a congressman in the 1960s. They have contributed more than $210,000 to George W. Bush's gubernatorial races and have given thousands to more than a dozen members of Congress (who have regularly voted against environmental bills), including U.S. senators Phil Gramm and Kay Bailey Hutchison.

In addition to Republicans, Sam Wyly's many charitable interests include his alma mater. (In 1997 he donated $10 million toward the cost of a new building at the University of Michigan.) But environmental causes have never been among them.

Wyly entered the Green Mountain Energy picture in 1997 shortly after the company began in South Burlington as an offshoot of Green Mountain Power. GMP, the second-largest utility in Vermont, is not exactly known for its earth-friendliness. The utility gets more than a third of its power from the Vermont Yankee, a nuclear plant with a troubled history. Another main source is the controversial Hydro-Quebec plant, responsible for flooding vast tracts of Indian land in Canada.

Of the 40 original Green Mountain Energy employees, 28 were plucked from GMP, including lawyer Douglas Hyde, who resigned as CEO of GMP to head Green Mountain Energy. The company stocked its environmental advisory board with members from the Environmental Defense Fund and the Natural Resources Defense Council, two national groups that have drawn mixed reviews from other environmentalists.

In August 1997 Green Mountain Energy signed a deal with Wyly, whose $30 million infusion gave him 67 percent ownership of the company.

"We're combining three elements that can't fail," he said. "The Vermont environmental ethic, Texas capital and old-fashioned American entrepreneurs' frontier spirit."

GMP retained 33 percent equity interest in return for development work, but the cash-strapped utility sold its stake in 1998 for a mere $1 million, which left Sam Wyly at the helm.

While Wyly's bio on the company Web site mentions his forays into computers (the Wyly brothers sold their software and e-commerce companies for $7.9 billion right before the pro-Bush ads ran), arts and crafts, and telecommunications, it doesn't mention that he made his first fortune in mining and crude oil refineries.

In the 1960s Sam and Charles Wyly invested in Earth Resources Company, which constructed the first refinery in northern Alaska. Since then the family has built a substantial empire from an array of publicly traded companies including Sterling Software, Sterling Commerce, Michaels arts and crafts stores, Datran and Maverick Capital, a hedge fund. But the road to riches has been mired in controversy.

In 1979 the Securities and Exchange Commission accused Wyly of an illegal financing scheme in which he made undisclosed payments to a top creditor to buy up company bonds in order to stave off bankruptcy. Wyly settled without acknowledging any wrongdoing. In 1998 the California Public Employee Retirement System, one of the nation's largest pension funds, criticized the board of directors of Michaels Stores (chaired by Wyly) for giving themselves overly lucrative compensation packages and repricing their stock options to benefit themselves. Media outlets also scrutinized the Wylys' connection with the Bush family when Maverick Capital won a state contract to invest $96 million of the University of Texas's endowment.

To date, the Wyly family has invested some $100 million in Green Mountain. SEC filings show that Sam Wyly, family members and several of his corporations are all stakeholders in Green Mountain, making for some cozy business relationships. Current and past board members, dubbed "strategic visionaries" on the company's Web site, include a variety of Wyly relatives and executives from other Wyly projects, including Wyly's son, Evan Wyly, and H. Lee S. Hobson, a partner in Maverick Capital. Last year Seven Days, a Vermont newspaper, reported that Green Mountain paid nearly $6 million to Sterling Software in 1998 and 1999 to install a data transmission network.

In March 1999 Green Mountain slapped a ".com" at the end of its name and tried to go public as a Web portal to green products. The company even trademarked the term "g*commerce." But Wall Street didn't buy the story or the stock, and the company pulled its initial public offering at the last minute. The company would have been valued at $3 billion, with Wyly's stake worth $1 billion.

When asked about Wyly's business practices and ties to politicians, Gillan Taddune says little. "All I can say about that is we're not a political organization. We appreciate the investment that we've been given."

Those who know Wyly defend him as truly concerned about pollution. Austinite Tom "Smitty" Smith of Public Citizen, a national consumer and environmental watchdog group started by Ralph Nader, says the savvy businessman helped environmentalists win passage of a 1999 Texas legislature bill that mandated reductions in air pollution from coal-burning power plants.

Governor Bush favored voluntary compliance, so Smith asked Wyly to intercede. Bush eventually agreed to mandatory reductions after a Democrat-controlled committee threatened to kill the bill if the reductions requirement wasn't included. The move on Wyly's part was contrary to Green Mountain's interests, Smith points out.

"Very dirty power plants make his product look better. It hurt the differentiation between his product and other power plants."

But Wyly also has a bad side, Smith says, which revealed itself when the inaccurate pro-Bush ads ran.

"He is a Republican first and an environmentalist second," Smith says. "His record shows he will lean toward the side of the Republicans and not to the protection of the environment."

The phone rang at Mike Ewall's house. It was August 1998, and the friendly female voice on the other end of the phone introduced herself as a former employee of the Natural Resources Defense Council. She now consulted for Green Mountain, she said, a new energy company that had the same environmental concerns as a grassroots activist like himself. So why didn't they work together? she suggested. Members of his organization, the Pennsylvania Environmental Network, who signed up with Green Mountain would receive the first month of service free. Plus, Green Mountain would renew their PEN membership and donate money to PEN. In return, she asked PEN to endorse the company in the group's newsletter, provide Green Mountain with the PEN mailing list and cooperate in advertising.

Ewall didn't know much about Green Mountain then, but NRDC set off alarms in his head. The mainstream organization, in his opinion, often sold out to corporate interests and compromised its environmental integrity.

"It didn't surprise me too much," Ewall recalls. "Corporations are very savvy at buying their way into environmental groups. I see it all the time."

So Ewall began looking into Green Mountain. What he found spurred him to launch a boycott against the company. On the Boycott Green Mountain Web site, Ewall posts his four-part report on the company with links to documents and news articles, accusing the company of selling deceptive products that for all its environmental claims do more harm than good.

He's not the only one. The Environmental Working Group, a national organization, announced a boycott of Green Mountain over Wyly's pro-Bush ads but withdrew the boycott after Wyly said he would stop buying political ads. Public Citizen also has criticized Green Mountain for charging boutique prices for power that was already being generated anyway.

Wenonah Hauter, who heads the Critical Mass Energy and Environment Program at Public Citizen, says not much has changed in California since Public Citizen released its report "Green Buyers Beware" in October 1998.

"It's kind of like gourmet marketing," she says. "You feel good about what you're doing, but you have no way of insurance to check on it and see if it's benefiting or just paying a premium for feeling better."

Renewable energy expert Nancy Rader, who wrote the report, looked into green electricity products in California, the first state to deregulate. Green Mountain sold several blends in California that claimed to be 100 percent renewable, with the promise of 25 percent "new renewables" for its most expensive brand, called "Wind for the Future." (Renewables are any energy source that naturally replenishes itself over time. New renewables refer to energy generated from newly built plants, not existing ones.)

Rader found that most green products on the market had no positive impact on the environment, and in some cases, such as Green Mountain, a consumer's purchase of a green product inadvertently caused pollution.

Green Mountain does not generate any of its own power but contracts with producers. For its California products, it bought energy from biomass and hydro plants owned by PacifiCorp, a utility based in Portland, Oregon. But Rader learned that the plants were already operating at full capacity and would operate regardless of any sale to Green Mountain. Therefore, the premium that consumers were paying supported not at-risk renewable plants or new renewables but PacifiCorp. Since PacifiCorp owns mostly coal-fired plants, the customers were potentially extending the use of dirty power plants.

Rader also criticized companies for charging in advance for products to be delivered later. Green Mountain's "Wind for the Future" pledged 10 percent new wind content by November 1999.

In response to Public Citizen's report, Green Mountain said it could not change electric generation overnight and that "by signing up customers, we prove that green demand exists, thereby helping to support the construction of new renewable generation." Green Mountain did keep its promise and built three 700-kilowatt wind turbines in Southern California in July 1999.

Ideally, the company should have built the turbines first, Rader says.

"If a green marketer put up some wind turbines and said, 'We want to sell to green consumers,' that would be great….The marketer would take the risk for those couple of turbines," she says. "What they did in California was say, 'Gee, we're not willing to take that risk. First we want to sell a bogus product and see if they'll buy it. If we're sure they do, then we'll put up a wind turbine.' "

A marketer doesn't even have to build new plants to provide a meaningful product, Rader says. It could sign a long-term contract with an at-risk wind farm, ensuring its long-term generation. Money would go directly to keeping that plant open. Instead, Rader found that most of the premiums charged for green power went to marketing and advertising costs, not to renewable energy content. Of the average $10 a month extra that consumers paid, some $7.50 to $9.50 went to overhead and marketing costs, the Public Citizen report says.

When Pennsylvania opened its electricity market in January 1999, Mike Ewall found Green Mountain playing the same games in his state. Green Mountain's three Pennsylvania products consist predominately of energy from natural gas generators and large-scale hydropower, with a small percentage of renewables from landfill gas. (Natural gas, though cleaner than coal, is not renewable energy.)

Ewall contacted several of the plants that Green Mountain contracted with and found that they were already operating at full capacity before doing business with Green Mountain.

"They were making zero difference for the environment….They sell stuff that is already out there. They just repackage it," Ewall says.

Although Green Mountain erected a 10.4-megawatt wind farm -- the largest in the state -- in Garrett, Pennsylvania, in May 2000, part of the company's renewables comes from biomass. Biomass is generally described as organic waste incineration. Think of a pile of corn husks. The idea is that as the corn husks decompose, they release methane into the atmosphere. Why not harness that methane instead of letting it into the air, and burn it to create electricity?

But a lot of nasty things have been burned in the name of green energy, Ewall says, including landfill gas, municipal solid waste, sewage sludge, animal factory waste, and industrial wood wastes from paper and lumber mills. Burning equals pollution, he says, and incinerators still have smokestacks.

"It's still putting out greenhouse gasses," he says.

In addition to methane, those wastes contain pesticides, household chemicals, and chlorine and other halogens, that would create toxic dioxins when burned. Ewall has protested the building of incinerators in several eastern states. Many of the planned locations were in minority communities. As long as Green Mountain continues to use biomass in its products, generating a market for incineration, Ewall will boycott the company. In its product descriptions, he points out, Green Mountain hardly mentions biomass among the windmills pictured on its advertisements and brochures.

Rules governing incineration are weak or nonexistent, he says. Who knows if companies even attempt to filter out contaminants. Both Ewall and Hauter of Public Citizen say that consumers don't have many resources to protect themselves from getting ripped off when it comes to green energy. Words like "green" and "environmentally friendly" have no standard definition and are thrown around in marketing materials. The EPA has no role in policing companies, leaving states to create different rules. While some states ask marketers to reveal the makeup of their mix (i.e., 25 percent renewable, 50 percent natural gas), not one requires them to disclose which facilities provide the energy, making it hard to verify how much of a difference companies make to the environment.

One private certification program, Green-E, run by the San Francisco-based Center for Resource Solutions, has tried to fill that void by auditing companies and reviewing their advertising materials for accuracy. A Green-E label on a product means that at least 50 percent of the electricity supply comes from a renewable source, including biomass. It also requires products to have 5 percent new renewables in the second year after deregulation restructuring and 10 percent in the third year.

Although Green-E is a nonprofit, it still charges the companies a certification fee. "There's a symbiotic relationship," Ewall says. "They can only be so strict."

Rader also dismissed the program, saying it makes no distinction between renewable energy that is merely resold and renewables that are at risk in the market. She noted in her report that only one California green marketer, San Jose-based cleen 'n green energy, purchased power exclusively from renewable energy producers that were not owned or already under contract to a utility. Yet the company was not endorsed by Green-E because it chose not to pay the certification fee.

Meanwhile, Green Mountain, which meets Green-E standards for some of its products, weathers the ups and down of deregulation. It recently scaled back its California operations, turning 50,000 of its 58,000 customers in the state back to their local utilities, a casualty of the state's deregulation failure. Emergency legislation allowed the state to buy long-term contracts from troubled incumbent utilities, sounding a death knell for alternative-power retailers.

Shortly after that, in March, it signed a six-year agreement with Northeast Ohio Energy Council to provide natural-gas- powered electricity to more than 400,000 customers across eight Ohio counties, the country's largest energy aggregation contract. And in April it announced 100 percent wind-powered energy for Texans.

In the Texas capitol cafeteria, Tom "Smitty" Smith sits at a table without any food, rubbing his hands all over his nose, mouth and eyes as if his head were made of clay and his hands were shaping his own face. Deeply creased lines cross his forehead and tufts of gray hair escape from the sides of his straw hat. His hair looks windswept, or maybe just stubborn by nature.

When the Texas legislature is in session, so is Smith. He starts roaming the capitol offices at 7 a.m., chatting with politicians, attending meetings all day, breaking at lunch to join a rally on the capitol steps, rushing off to meet reporters and poring over proposed bills through the night. In this way, Smith and other lobbyists try to safeguard environmental interests.

Those efforts paid off when it came to deregulation laws, which include a mandate for renewables. At first many utilities resisted the change, Smith says, but now many of them have invested in renewable energy. Deregulation helped jump-start the renewable industry.

Formerly, in a regulated market, an electric company operated within its geographical region, under the watch of the Public Utilities Commission. Customers had no choice of provider. In Texas, three companies provided most of the electricity in the state: Reliant Energy in the Houston area, TXU in the Dallas area, and American Electric and Power, which owns West Texas Utilities, Southwestern Electric Power and Central Power and Light. Vertically integrated, the utilities operated at every level of the business: They owned the plants that produced the power, distributed the power over transmission lines, and interacted with customers. Deregulation splits these three functions into separate entities.

In 1995 Texas deregulated wholesale competition, so power companies no longer had to generate their own energy and could buy from someone else. Although the bulk of utilities continued to make their own power, 27 new plants, all gas-fired, have come on-line since 1995. Another 27 plants are under construction and an additional 31 have been announced.

Senate Bill 7, the Electric Restructuring Act, passed in 1999, introducing retail competition. In January 2002 all Texans will choose their own retail electric provider, or REP, the entity that provides customer service. Since distributing electricity requires only one set of wires, that part of the business will remain a local monopoly. That's why if you switch to a new electric company, you still call the local utility in the event of any problems. (That's also why claims of reliability in advertisements are misleading.)

Under SB7, all companies must comply with a renewable portfolio standard (RPS) to help Texas reach its goal of installing an additional 2,000 megawatts of renewable power by January 1, 2009. (One megawatt powers roughly 1,000 homes.) Texas law defines renewable technology as solar, wind, hydro, geothermal, tidal energy and biomass. The law also allows Texas natural gas to count as "green."

Although all of these technologies are available, "when you're talking about renewables in Texas, you're talking about wind," says R.W. Rushing, CEO of National Green Power, an REP that plans to offer 100 percent renewable power. That's because solar power is still expensive, the amount of landfill gas is small, and any river that can be dammed already has been. (Of the 880 megawatts of existing renewable energy in Texas, most of it is hydro.)

As it turns out, West Texas is the Saudi Arabia of wind power. Rushing, who has visited McCamey (an epicenter for wind energy located an hour south of Midland) paints a picture of west Texas as a big, windy desert with large plateaus.

"The wind comes across the desert and gets scooped up inside of the plateau," he says. "When it hits the corner of the plateaus, it's at a high velocity."

And that's the perfect spot to plant a windmill. Wind technology has advanced so much that with the recent spike in gas prices, it is competitive with natural gas, and cheaper than nuclear (everything is) though still more costly than coal. When wind turbines first went up in California more than 20 years ago, they generated only 25 to 50 kilowatts. Now a wind turbine stands 100 meters from the ground to the tip (the higher you go, the more the wind blows), its three sleek blades measure 70 meters in diameter, and it can generate 1.3 to 1.6 megawatts. (A megawatt powers roughly 1,000 homes.) It remains pricey to build (roughly $1 million per megawatt), but fuel costs nothing, it creates no pollution, and the process of building a wind turbine, from planning to permitting to construction, takes roughly 18 months, quick for the energy world.

According to the American Wind Energy Association, wind accounts for only 1 percent of the nation's energy, but 2001 will see a 60 percent increase in existing capital. About a third of that will come from Texas, says AWEA spokesperson Christine Real de Azua. Texas ranks second in the nation for wind potential; North Dakota is first. By the end of the year, Texas will have the second-largest capacity, behind California.

By 2003 Texas needs to have 400 of the 2,000 megawatts installed. At first industry representatives reacted with skepticism that Texas could meet that goal, says Russel Smith, executive director of the Texas Renewable Energy Industries Association. But TREIA data show that ten projects totaling 893.32 megawatts already have been announced, putting Texas well ahead of schedule.

Smith, Rushing and other industry experts say renewables would not be as viable as they are today without that governmental push from SB7.

"Historically, renewables have been a government-mandated supply-side thing, and the electric utilities wanted to put up wind turbines so they could put the picture on their brochures and distribute press releases and that's it," Rushing says. His company takes a demand-side approach to show that consumers demand wind power, he says.

Although the 2,000 megawatts required by the RPS will account for only 3 percent of Texas energy, the state's regulations have been widely praised as the best so far in the country for its fairness.

"It's the best -- not because of amount, which is not a huge amount," Real de Azua says, "but because of the way in which it's being required."

To verify compliance, the PUC created a system called the renewable energy credits trading program. For each megawatt of new renewable energy produced, an REC is also generated. A company must have RECs to prove it bought new renewables. For example, if a company contracts for 100 megawatts of wind energy, it must have 100 RECs at the end of the year. Since wind is an intermittent source (you can't flip a switch and just turn it on), the company could end up with more or less than it planned for. The plant might produce only 90 megawatts, or it might produce 110. At the end of the year, companies match their megawatts with RECs. Companies with extra RECs can sell them -- bankable for three years -- to companies that haven't met their requirement.

The REC system enables a provider to guarantee a 100 percent wind product even though the wind doesn't always blow. It also metes out punishment in cases of noncompliance, something that not all states do, says Real de Azua. The penalty is $50 per credit or twice the market rate, whichever is less.

But do the rules protect consumers from being swindled? After all, when consumers purchase green energy power from a specific wind plant, it does not necessarily end up at consumers' homes, but enters the overall Texas mix, making it cleaner.

"Putting electricity into the grid is like putting water into a bathtub," Tom "Smitty" Smith explains. "When you contract to buy renewables, you're probably not going to get the green electron to your house, but you are putting more green power in the grid, or the tub. Because of your purchase, there's more green color in the brown tub."

The PUC requires REPs to provide an electricity facts label for each product. Organized much like a food label, it lists costs, terms, the amount of emissions produced and the supply mix. For these last two, the label includes a Texas average for comparison. (The average Texas mix is 45 percent coal and lignite, 39 percent natural gas, 15 percent nuclear, and 1 percent renewable and other, says PUC economist Richard Greffe.)

To prove renewable content (for all renewables, not just new renewables), REPs must provide bilateral contracts or certificates (which work the same way as RECs), says PUC economist Eric Schubert. Regulations also prohibit repackaging, to a certain extent. For example, the rules ban companies from piling their RPS mandate into one product, labeling it green and charging a premium for what essentially was required by law.

However, the labels don't require companies to break renewables into further categories such as wind or solar, to disclose actual plant sources or to distinguish between existing renewables and new renewables. Customers interested in green energy still must shop carefully.

In general, though, Texans won't have to worry about a replay of California events. For one, Texas is unique in that its power grid, the Electric Reliability Council of Texas (ERCOT), is isolated. ERCOT covers roughly 85 percent of the state, so even if states nearby have problems, they won't affect Texas.

California's rules also limited true free-market principals, says PUC commissioner Brett Perlman. REPs were not allowed to sign long-term contracts and lock into rates, yet retail prices were capped, leading to bankruptcy when wholesale prices rose, he says. But most importantly, Texas has a surplus supply. The state's power plants total 75,000 megawatts. But on the hottest hour of the hottest day in ERCOT, Texans use roughly 57,000 megawatts. This year in ERCOT, capacity is projected to be 19 to 21 percent above peak demand expected during the summer.

"The problem with California is that the supply and demand got really close and made it very expensive and very unreliable," Perlman says.

In fact, Texas has such an electricity surplus that people even talk about exporting to other states.

The year 2000 was a busy one for Green Mountain. The company changed its name from GreenMountain.com to Green Mountain Energy and moved to Austin. Gillan Taddune says the company wanted to leave still-regulated Vermont for a deregulated market, and Texas had the best one. But news accounts at the time report that the company favored Austin's high-tech center and wished to be near its investors: Sam Wyly in Dallas and BP Amoco in Houston.

In May Green Mountain announced that BP Amoco and other unidentified investors had pledged up to $100 million to help it expand. Under a separate marketing agreement, Green Mountain teamed up with Internet media company Lycos to promote its energy products. Later in the year, NUON, the largest utility in the Netherlands, agreed to invest up to $53.5 million. With new investors, the board of directors grew and co-chairs (one from a BP Amoco subsidiary and another from NUON) replaced Sam Wyly as chairman of the board. Green Mountain spokesperson Eleanor Scott declined to say what percent of the company each investor now owns.

The company packed up and moved in September, but even that garnered controversy. Green Mountain promptly located in a limited development zone over the Edwards Aquifer, a sensitive water supply that provides drinking water for some 1.5 million people. At the time, office space in Austin was scarce and the company didn't have many choices, Scott says.

Tom "Smitty" Smith says he called Green Mountain and asked them to please not move there, but they told him they had already signed the lease.

The company paid the Hill Country Conservancy $20,000 in restitution for the blunder, enough money to erase twice its footprint, Taddune says. It installed solar panels on the building roof. Down on the first floor, an electronic counter, looking much like an alarm clock with its red digits set in the black lobby wall, tallies the pounds of carbon dioxide emissions that have been avoided. Green Mountain also sponsored an Earth Camp at the Save Barton Creek Association. In turn, the SBCA gave the company an award at its 21st annual meeting.

"It's not like we just gave them money," Scott says. "It allowed us to develop a close relationship with environmental groups here. We made a mistake, but we took steps to grow with it and be an important part of the culture here."

But when it came to supporting another environmental issue, Green Mountain remained silent. One of the biggest news stories in Austin recently has been the planned reopening of the 51-year-old Longhorn Pipeline, which once transported crude oil from the El Paso area to Houston. It has lain idle since 1995. Now a group of investors, including BP Amoco and ExxonMobil, wants to pump 9.45 million gallons of gasoline per day in the opposite direction.

A broad-based opposition including environmentalists, neighborhood organizations and three counties worry that the line could leak or explode, endangering lives and contaminating water. It crosses the Edwards Aquifer recharge zone and passes through six Austin neighborhoods, within 1,000 feet of thousands of homes and nearly a dozen schools. The city of Austin, the Lower Colorado River Authority and the Barton Springs/Edwards Aquifer Conservation District have sued over the pipeline in federal court.

When Mike Blizzard, an environmental consultant, discovered that BP Amoco owned part of Green Mountain, he asked Green Mountain to open lines of communication with BP. They turned him down, and now Blizzard is contemplating a Texas-wide boycott, although that won't affect Green Mountain's sales in Austin. As a municipality, Austin isn't required to deregulate.

"People need to understand that when they buy from Green Mountain, a portion of that goes right back into BP Amoco, and it's used to lobby for the opening of the Arctic refuge for oil exploration and to run gasoline through people's backyards and a sensitive aquifer," Blizzard says.

But Taddune says Green Mountain's investors are committed to its mission of changing the way energy is made.

"I think [BP Amoco's] investment in us is a positive thing. I think they were really responding to pressure put on them by environmental groups," she says.

Tom "Smitty" Smith also gives BP Amoco credit for trying to improve its image, and describes it as the most aggressive environmentally of the major corporations. It has invested heavily in solar and started calling itself Beyond Petroleum instead of British Petroleum.

"Fundamentally you have to give some credit to a company making the shift and putting their money where their mouth is," he says.

When Green Mountain looked for someone to head its Texas operations, its eyes fell on one energetic Gillan Taddune, formerly the chief economist at the PUC who helped develop the rules on renewables. Who could be more qualified to sell renewable energy than the person who wrote the regulations on deregulation?

Taddune insisted on a 100 percent wind-powered product for Texas because of the state's plentiful wind resources. The product, all new wind power, is the company's cleanest and will not emit any of the usual pollutants associated with electricity production: carbon dioxide, nitrogen oxide, sulfur dioxide and particulates. Green Mountain has contracted with a company to build new turbines, which are under construction in Pecos County, Taddune says. But she would not reveal how many were going up or who was constructing them, saying only that BP Amoco secures the energy supply for Green Mountain.

Texas environmentalists like Tom "Smitty" Smith and Todd Main of the Texas Campaign for the Environment welcome Green Mountain. In spite of the criticism levied against the company, its mixed record in other states and its ties to corporate interests, they're willing to give it a chance.

"Generally they're learning as they go and getting better," Main says. "In Texas they say they're doing 100 percent renewable. And basically that's what I care about."

At 9.8 cents per kilowatt-hour for the Reliant Energy area and 9.2 cents in the TXU service territory, the rates will be slightly higher than current rates for those customers but will be fixed to avoid fluctuations in the market. The company also will charge a $4.95 monthly service charge. Green Mountain arrived at its prices after factoring in the cost of supply (the wholesale cost of wind is three to five cents per kilowatt-hour, according to the AWEA), wire charges and marketing costs, Taddune says.

"To get at the residential sector is an expensive endeavor," she says.

With OPEC threatening to hike oil prices again, Green Mountain may soon be more affordable than the regular mix, but Taddune wants people to switch to Green Mountain for the right reasons.

"We don't want them to switch because we're the cheapest game in town, because we can't guarantee that. We want them to understand why."

Deregulation could create companies on the order of MCI and Sprint, both of which rose out of phone industry deregulation. Compared to incumbent utilities, though, green retailers like Green Mountain make up a small fraction of the market. Some more traditional companies including Reliant and newcomer First Choice Power plan to offer renewable products, but so far Green Mountain and National Green Power are the only two green energy companies to enter the fray in Texas.

"We're like the crumbs at the elephants' banquet, and they're duking it out and have big nuclear and gas plants. And renewables are the crumbs, and they don't take it seriously," National Green Power's Rushing says. "Meanwhile, there's this environmental market and people who are environmentally concerned who really want alternatives are not being served. That's what a start-up company is all about."

National Green Power, also based in Austin, plans to offer 100 percent renewable power by the time the Texas market opens in January. The company opposes biomass and will purchase from wind suppliers until it gathers enough capital to build turbines. Rushing and Chief Operating Officer Pat Thomasson used to work in computers. The pair, who describe themselves as the right and left brains of the company, respectively, seem idealistic yet knowledgeable, and just a little bit edgy. The company Web site greets visitors with "You're reading this because you give a damn."

Sure, Rushing says, people might -- and should -- view with skepticism a young start-up run by thirtysomething tech geeks, but tech geeks can offer consumers something big industry utilities can't.

"The industry guy is an expert on what can be done," Rushing explains. "Problem is, when we have an energy crisis and renewables have just become viable, these two don't fit into what-can-be-done. Coal does. Dick Cheney is a perfect example.

"Where we come out of, the tech world, has been invented only for the last five years….We come at it from a much more creative approach."

And a creative approach is what attracts consumers like Craig Gerhard, who care about the way electricity is made.

"It's a very viable solution to how we use our resources," he says of green retailers. "The way we've been producing electricity is pretty destructive."

Gerhard is on the verge of signing up with Green Mountain, though he worries he won't get what he pays for.

"I think the biggest fear I have is that I'll be spending money on renewables and I won't be able to tell," he says. "I mean, how am I really going to know? The light's not going to shine green or anything. Everything is going to be the same to me."

That's a risk he's willing to take.

Related sites

Green Mountain Energy: www.greenmountain.com
Public Citizen: www.publiccitizen.org
Public Utitlies Commission/deregulation in Texas: www.powertochoose.com
Boycott Green Mountain: www.boycottgreenmountain.com
National Green Power: www.nationalgreen.com

We use cookies to collect and analyze information on site performance and usage, and to enhance and customize content and advertisements. By clicking 'X' or continuing to use the site, you agree to allow cookies to be placed. To find out more, visit our cookies policy and our privacy policy.


Join the Press community and help support independent local journalism in Houston.


Join the Press community and help support independent local journalism in Houston.