Many environmentally conscious consumers, including a number of us at KLD, have signed up for “green power” programs. These typically charge ratepayers a small premium on each electric bill, which the sponsoring utility then directs towards the purchase of energy from wind, solar, biomass, or other renewable sources.

Or does it? BusinessWeek has reported that some green energy programs have directed more funds towards marketing costs than for alternative energy purchases.

The article describes how Florida regulators recently shut down a green power program that served almost 40,000 subscribers:

“…[An] audit found that more than half of the premiums collected went to marketing and administration instead of renewable energy purchases. The program, known as Sunshine Energy, had more than 38,000 participants paying an additional $9.75 a month. In a regulatory hearing in July, Public Service Commissioner Nathan Skop described the program as ‘all about PR and of little substance.’”

The article quotes utilities that defend their marketing expenditures as necessary to their programs’ long-term success. Even if this is true, Florida’s experience highlights the importance of transparency. Before asking consumers to hike their own electric bills, utilities should commit to full disclosure of how premiums are actually spent.

A study by the federal National Renewable Energy Laboratory describes a Wisconsin program that limits marketing and administration costs to 20% of revenues, and notes that Texas requires green power programs to meet comparable standards.

Even well-run green power programs are only an interim step towards a more sustainable energy supply. The NREL study points out that as the cost differential between renewable and non-renewable sources declines, premiums should decline as well. Towards that end, Congress recently acted to reduce the green power cost gap by renewing and expanding tax credits for both consumers and providers of renewable energy.

For more info, click here for a Department of Energy site that lists green power programs by state.