Oklahoma Gas & Electric's Green Pricing Program

March 7, 2007

The Energy Policy Act of 2005 requires renewable electricity consumption by the federal government to be not less than 3 percent in FY 2007-FY 2009, 5 percent in FY 2010-FY 2012, and 7.5 percent in 2013 and thereafter. To meet these goals, FEMP encourages federal agencies to develop on-site renewable projects and to purchase renewable electricity.

One of the ways federal agencies can purchase renewable electricity is to participate in a utility "green pricing" program. These programs typically charge a premium over the normal tariff to provide renewable electricity. However, a few programs offer a provision that can effectively reduce or even eliminate the premium for green power. These programs offer an exemption from the fuel adjustment clause that is part of many utility tariffs. Since the fuel adjustment clause causes the tariff to fluctuate according to natural gas prices, exemption from this provision means that the green power price may be less than the normal tariff when natural gas prices are high.

Oklahoma Gas & Electric's (OG&E) green pricing program is a shining example of this approach. OG&E has offered wind power as a renewable energy option since September 2003. OG&E's wind power program, with 50 megawatts of power produced by 34 wind turbines at the Oklahoma Wind Energy Center, is one of the largest in the country.

When natural gas prices are high, wind power costs less than standard OG&E electricity. As of January 2006, the premium for wind (in addition to OG&E's standard charge for electricity) was significantly decreased from $2 per block of 100 kilowatt-hours (kWh) to 10 cents per block of 100 kWh. Since participants in the wind power program are exempt from the fuel adjustment charge, their standard (or base) charge is lower than for customers not in the program when natural gas prices increase. With a premium of only 10 cents per block of 100 kWh, and with gas prices at levels of early 2006, customers with 100 percent wind power were saving as much as 10 percent on their monthly electric bills. Depending upon how natural gas prices change, the cost of wind power may be higher or lower than OG&E's standard electricity in the future.

Due to overwhelming response to its wind power program, OG&E is currently sold out of wind power and has reached capacity on the waiting list. By early 2007, however, it will add 120 megawatts of electricity generated by wind to its system. OG&E plans to target the green pricing program to large power customers, which may include federal facilities in Oklahoma.

Gary Marchbanks, OG&E's manager for Government Accounts, noted that "OG&E is a strong supporter of wind power as well as other renewable technologies. We welcome the participation of our federal customers in our wind program and we look forward to Federal Aviation Administration Monroney Center and Tinker Air Force Base joining us in our newest wind offering. OG&E actively encourages our federal customers to investigate and participate in renewable projects at their facilities. We are ready to assist all our federal customers in the evaluation of potential projects."

For more information, please contact Rich Brown of Lawrence Berkeley National Laboratory at REBrown@lbl.gov or 510-486-5896.