Update: Newton goes green – at a price

Mayor says contract will save an estimated $300,000

UPDATE, May 9, 2012: Newton officials said on Tuesday that they expect to save an estimated $300,000 over the next three years by purchasing electricity generated from renewable energy, but the story is a bit more complicated than that.

The municipality put out to bid a contract for all of its electricity needs over the next three years (a total of 70 million kilowatt hours) at a reverse auction, where the lowest bidder is selected. The winner was Houston-based Reliant , a division of NRG Energy, which supplies electricity to more than 1.5 million customers in Massachusetts, Texas, Delaware, Illinois, Maryland, New Jersey, Pennsylvania, and the District of Columbia. The contract price was 6.6 cents per kilowatt hour for all of Newton’s electricity except what flows to street lights, which was priced at 5.1 cents per kilowatt hour.

A press release issued by Gov. Deval Patrick said the contract “calls for the city to source 100 percent of its energy needs from renewable sources.” Newton Mayor Setti Warren told CommonWealth the contract showed that green energy isn’t always more expensive than electricity generated by using fossil fuels.

“What this shows is you can go green and save money,” Warren said.

But the story painted by Patrick and Warren isn’t complete. Newton’s electricity starting July 1 won’t come entirely from renewable sources and the city will be paying more for its power because of its desire to promote green energy.

Pat Stafford, a spokeswoman for Reliant, said on Wednesday that Reliant will buy electricity for Newton on the wholesale market and the power will come from a variety of energy sources. The primary energy source is likely to be natural gas because nearly 60 percent of the state’s electricity is produced by gas-fired power plants.

Newton’s green energy connection will come after the fact. Under current law, green energy producers receive renewable energy credits for the power they produce. They can sell those credits to companies like Reliant that market electricity to their customers and have to demonstrate that a portion of the power is coming from renewable sources. Reliant normally would have to buy RECs equivalent to 7 percent of its electricity sales, but under its contract with Newton it will buy RECs equivalent to 100 percent of the city’s electricity consumption. Those additional RECs, essentially subsidies for renewable energy producers, will inflate Newton’s electricity tab but town officials say the cost will still be lower than what it was previously.

“They’re paying more than they would have paid had they not made that decision, but less than what they had been paying,” Hammond said.

Robert Rooney, Newton’s chief operating officer, said the savings estimates for the electricity contract are based on projections of what the cost of electricity in Massachusetts will be over the next three years.

Warren said the electricity contract is part of an overall effort by Newton to rein in the city’s energy costs and climate impact. He said the city recently signed a contract locking in its natural gas prices for the next four years that will save Newton an estimated $2 million.

Newton officials say they expect to save an estimated $300,000 over the next three years by purchasing electricity generated only with renewable energy.

The announcement on Tuesday was surprising, given that most renewable energy these days comes with a higher price tag. The wind-generated electricity from Cape Wind, for example, is expected to cost significantly more than electricity from non-renewable sources. Newton’s projected savings are even more remarkable considering that the price of natural gas, the dominant fuel used to produce electricity in New England, has been falling rapidly.

“What this shows is you can go green and save money,” said Newton Mayor Setti Warren.

The process was set in motion when Newton officials assembled a contract for all of the municipality’s electricity needs over the next three years, a total of 70 million kilowatt hours. The officials put the contract out to bid at a reverse auction, where the lowest bidder is selected. Seven companies expressed interest in the contract but only four ended up participating in the bidding process, Warren said.

The winner was Houston-based Reliant , a division of NRG Energy, which supplies electricity to more than 1.5 million customers in Massachusetts, Texas, Delaware, Illinois, Maryland, New Jersey, Pennsylvania, and the District of Columbia. Robert Rooney, Newton’s chief operating officer, said the electricity will cost roughly 6 cents a kilowatt hour. He said the contract will spur the generation of 70 million kilowatt hours of electricity produced from renewable sources, primarily solar, hydro, and wind facilities.

Meet the Author

Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Rooney said the savings estimates for the electricity contract are based on projections of what the cost of electricity in Massachusetts will be over the next three years. Officials at Reliant could not immediately be reached for comment.

Warren said the electricity contract is part of an overall effort by Newton to rein in the city’s energy costs and climate impact. He said the city recently signed a contract locking in its natural gas prices for the next four years that will save Newton an estimated $2 million.