The Green Controversy

Who should have "green tag" ownership under power purchase agreements, the buyers or the sellers?

A legal controversy is brewing in the electric industry over who should reap the financial benefits of the green characteristics of power plants, under existing power purchase agreements (PPA).

Many of those PPAs were entered into well before there was any intrinsic value to the renewable resources generating the power sold under those contracts, other than that created under the Public Utility Regulatory Policies Act of 1978 ("PURPA")¹ and analogous state laws. In fact, the PPAs ignore any environmental commodity produced by these plants separate from energy and capacity.

The debate has continued to heat up as states adopt renewable portfolio standards² and fuel disclosure laws,³ while the environmental attributes of green power-"green tags" as they are sometimes known-are becoming increasingly valuable in their own right as tradable commodities separate from their associated power.

Now, not surprisingly, the buyers and sellers of the power under those agreements are arguing that the financial benefits of the plants' environmentally friendly attributes belong to them.

Although there is no decisive answer on the ownership of these green tags, one thing is certain: With the upswing in state laws requiring renewable energy sources and the development of a retail green power market, this issue must be resolved.