Columbus energy aggregation program predicted to fall short of green goals, cost customers more
It’s almost been four years since Columbus ushered in a program that promised lower energy prices using clean energy generated in Ohio.
But, the program is falling short of some of those promises. And, the city has quietly renegotiated the agreement to lower the green standards and increase costs to consumers.
That renegotiation came after the aggregation program's electricity supplier, AEP Energy, asked Mayor Andrew Ginther's office for a meeting in May 2023. The agenda? An AEP representative wrote it was about the “potential sale of AEP Energy and the city’s aggregation program,” according to a public records request. Later, company representatives told Columbus City Council members the program just wasn't viable unless the terms were changed.
AEP Energy was selected to be the supplier for the program even before 75% of voters in the city in 2020 passed a ballot issue to create the aggregation program, which was the biggest in Ohio. The company is a subsidiary of AEP.
An aggregation program allows a lot of customers to come together to buy their electricity, reaping the benefits of mass purchasing electricity for lower prices. Its aim is to reduce electric bills and use power generated from renewable sources in Ohio.
Erin Beck with Sustainable Columbus said the program will fulfill elements of the city’s climate action plan.
“Our goals for Columbus were that we wanted to be committed to 100% clean energy and making that transition as quickly as possible to help support our sustainability goals,” she said.
And, there’s the added benefit of encouraging green energy development in central Ohio.
AEP Energy stood to benefit as the one picked to supply the electricity to nearly 200,000 participants. There are more than 100 electricity suppliers in the central Ohio region.
So, AEP Energy had immediate access to a large pool of customers who are automatically opted in to the program. The participants can opt out, but the program guarantees a lot of new customers for the supplier over similar companies.
The company had three years to find a way to provide all of the electricity from Ohio-based renewable sources, including solar and wind. While the transition would not happen overnight, the city still considered the program to be green.
“I do want to be clear, the program is always going to be 100% clean energy. It's just kind of a matter of where is that energy coming from and how quickly and at what cost we can transition to local, Ohio-based clean energy?” Beck said.
AEP Energy was allowed to meet the green factor of the contract by purchasing something called Renewable Energy Certificates. Basically, AEP Energy gives money to a renewable energy project somewhere else to offset having to use non-renewable sources to power the aggregation program in Columbus.
The original contract called on AEP Energy this year to switch from these certificates and start using power from Ohio-based renewable projects. But the company was unable to meet the goals.
Frank Wilson, an AEP Energy vice president, told city council AEP Energy failed to fulfill the original terms of the contract, because 70% of the renewable energy projects in Ohio the company planned to source electricity from did not come online as predicted.
“...the landscape has shifted dramatically. The COVID-19 pandemic. The war in Ukraine. New requirements on renewable energy development in Ohio, as well as changes to the power-siting board process. Supply chain disruptions, runaway inflation... has severely challenged renewable energy project development,” Wilson said.
Wilson said a recent state law that gives more local say when it comes to renewable projects has stymied development.
These circumstances necessitated the renegotiation "to address timing and price changes," Wilson said.
"Without revising the original 2021 agreement, AEP and AEP Energy has no viable path to sustain the development of many of these existing renewable energy projects, potentially halting their development and jeopardizing job creation and renewable energy benefits," he said.
The city and AEP Energy rewrote the contract that was originally slated to be in place for 10 years. Columbus City Council approved it unanimously last month.
It has higher rates and now only requires 60% of its electricity from Ohio-based clean energy projects, instead of 100%.
The new contract does have new commitments to specific projects. But under these new terms, the more electricity AEP Energy does source from those projects, the higher the rate climbs.
Customers in the program have been saving about $25 a month on their electric bills. Those savings are expected to dwindle, starting this summer, but it’s unclear by how much.
Beck says because other parts of that rate are negotiated each year, based on market trends. So, it’s impossible to tell just how much higher bills will be.
“The overall program rate is set on an annual basis. The rate that we're discussing related to the clean energy is one component of the overall program rate. There are about, you know, 17 or so different aspects that go into the overall program rate,” Beck said.
Before voting “yes,” Councilman Nicholas Bankston said because he still believes in the goals of the program, asked if the new contract adjusted AEP’s profit margins.
“If profit margins are going to stay the same, it’s the cost of doing business with the agreement that you sign. And so we're putting this increase on the back of our residents,” he said.
Alana Shockey with Sustainable Columbus said, “We worked closely to get verification from AEP Energy that these projects, they're not taking a profit on this contract. And these projects are basically at value to them. So there's not a profit that they're receiving.”
WOSU asked Beck if there are checks built into the contract to monitor the company’s profit. There are none. But, Beck said the retail margin fee that the company gets did not increase in the new contract.
Councilman Rob Dorans asked Shockey why they shouldn’t put the program back out to bid to find a company that could meet the original goals.
Shockey said only four companies bid on the contract in 2020, and AEP Energy was the only one that would commit to using 100% renewable energy.
“Amending the contract with AEP retains an 100% Ohio-based clean energy project goal, with a minimum requirement of 60% Ohio-based clean energy projects. None of the other suppliers who previously bid on the project offered this value, while maintaining a cost competitive rate,” Shockey said.
It’s unclear exactly how AEP Energy and city leaders decided it was in the best interest of the city to renegotiate the contract, or what would have happened if they didn’t renegotiate.
City council didn’t bring the issue up until the contract was already renegotiated, six months after AEP Energy sent the email to Mayor Ginther’s office indicating the company was thinking of selling off the aggregation program.
That wasn’t mentioned at the city council meeting.
Council approved the new contract as an emergency, so it passed with just one reading and without any of the fanfare that happened when the program was first proposed.
WOSU is seeking more records related to the renegotiation.