The Star-Ledger

Last Alternative Energy Supplier May Quit State

The Star-Ledger — Tuesday, March 4, 2003

Star-Ledger Staff

Green Mountain Energy Co., the only alternative energy supplier actively serving residential customers in New Jersey, is thinking about pulling the plug.

The Austin, Texas-based supplier's senior management team is meeting today to discuss its future in New Jersey, its enthusiasm for the state dampened by the results of last month's $5.2 billion energy auction, The Star-Ledger has learned.

The auction set the prices customers of New Jersey's biggest utilities will pay starting next August. It turned out to be a good deal for consumers – their bills will not rise as much as expected – but bad for Green Mountain, which will find it almost impossible to cut its prices low enough to lure customers.

The departure would deal a blow to the idea that a robust, competitive marketplace for power could be created to drive down prices. In the three years since the state broke up its electric monopolies, a few suppliers tried to compete, but gave up. Ultimately, they decided most homeowners were unwilling to shop around.

"You can't overlook the fact that we've been here three years and we are still serving only about 2,000 customers in New Jersey," John Holtz, Green Mountain's director of public affairs, said.

In 1999, Green Mountain was excited about its prospects in New Jersey. The company sells a combination of power produced from cleaner sources of energy such as solar and wind power.

Given the state's high-income demographics and high public awareness about environmental problems, Green Mountain thought it could do well selling cleaner energy from wind and solar power facilities, even at a higher cost. In New Jersey, it costs about $8 to $10 a month more than power from traditional utilities.

The company, which has yet to turn a profit, enrolled about 600,000 customers in Pennsylvania, Ohio and Texas. In New Jersey, though, rate discounts mandated by the Legislature kept prices down. Those discounts expire in August.

Green Mountain was not part of the auction – which will keep prices relatively stable – because it buys electricity from other power suppliers beyond what it produces itself. In the auction, the state's four electric utilities bought power from companies to resell to customers.

If the auction price was higher, Green Mountain might have had a better opportunity to compete.

"We have to be in the same ballpark for people to switch," Holtz said.

Senior management plans to discuss what steps to take in New Jersey at a meeting today in its Philadelphia regional offices, he said. The company recently decided to discontinue service in Connecticut by the end of this month, saying regulations there make it prohibitive.

One scenario would be for Green Mountain to sharply curtail marketing efforts here, but not leave completely because it has some long-term contracts.

If Green Mountain does depart, there would not be a single supplier left serving the residential market – a sign critics say shows the state's efforts to create a competitive energy marketplace has failed.

"Energy competition was supposed to reduce prices," said Staci Berger, program advocate for New Jersey Citizen Action. "It hasn't brought prices down. We haven't seen deregulation work in a single industry yet."

In the long run, suppliers like Green Mountain may never be able to compete against the entrenched utilities, said William Potter, an energy lawyer from Princeton.

"Basically, it's the New York Yankees against my son's Little League Team," Potter said. "That type of aggregation is always going to get the best price."

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