Originally published at ilsr.org. This article was originally written by former ILSR Research Associate, Matt Grimley.
The misunderstandings that from time to time occur between communities and the managers of electric-lighting companies will, to my mind, disappear entirely if the relations between the two are correctly founded on the basis of public control, with corresponding protection to the corporations operating this industry.
More than 100 years ago, standing in front of a crowd of investors, Samuel Insull articulated his vision for a responsive and responsible electric utility.1
Fresh from building his own electric utility empire from Thomas Edison’s companies, Insull wanted his electric industry recognized as a natural monopoly with competition viewed as a threat the public good. Public regulation, he argued, would provide a reasonable and steady profit to the monopoly utility, while economies of scale of power plants would allow the utility company to deliver increasingly inexpensive electricity in service of the public good.
A century later, only half of Insull’s rough vision has come true. Most of today’s investor-owned electric utilities retain their century-old monopoly, but insufficient regulation has often left the public good by the wayside. Instead, investor-owned electric utilities (IOUs) have kept a laser focus on shareholders’ returns. They have built large, unnecessary fossil-fueled power plants when more energy-efficient approaches would cut consumers’ costs. They try to change electric rates in ways that harm the poor and elderly, then use public funds to help the indigent pay their bills. They spurn rooftop solar and customer-owned power generation.
In some sense, this behavior is no surprise. The regulatory scheme Insull imagined shaped two key profit motives for utility companies: selling more power and building more infrastructure. But neither makes sense any longer. Electricity demand has leveled off, and distributed, non-utility power generation is often less expensive than relying on utility shareholder capital.
Adding insult to the injury of the public good, investor-owned utilities frequently lobby against legislation in the public interest, from renewable energy to energy efficiency standards to community solar programs. They use their publicly-granted monopoly profits to oppose the public interest.
One new model is emerging, however, that offers an alternative to the traditional investor-owned utility, and aligns with the fantasy of Insull’s original vision to simultaneously protect the public good. It’s the B Corp.
Green Mountain Power B-lines into a B Corp
In 2014, one electric utility in Vermont shuffled away from historic investor-owned electric utility trends. Green Mountain Power transformed itself into a B Corp, a designation that cements its commitment to sustainability, transparency and accountability. The certification, administered by nonprofit B Lab, mirrors legislation in most states allowing businesses to become “benefit corporations” that uphold similar goals.
A benefit corporation is an alternative corporate structure. Essentially, it changes the for-profit corporation, which may consider the public interest, into one that legally must pursue greater social goods and regularly report to shareholders on its progress. Failure to do so could trigger a shareholder lawsuit.
It was an easy decision for Green Mountain Power to join the well over 1,000 corporations publicly committed to working toward the public good. The company wanted to “become the Ben and Jerry’s of the utility world,” according to CEO and President Mary Powell. The ice cream giant, also a B Corp based in Vermont, won praise in the late 1980s for putting its social mission on par with its economic goals.
More than anything, Green Mountain Power’s move reflected its embrace of changes (and threats) to the outdated, centralized business model still used by many electric utilities.
But unlike many of its counterparts, Green Mountain Power helped expand net metering across its home state. It also fronts the cost of retrofitting homes with solar and energy efficiency products (paid back via the utility bill) in a program that generates substantial cost savings for households. Green Mountain Power also built one of the nation’s first all-solar microgrids, and finances energy storage for customers.
The utility, has mapped out its distribution circuits (shown below) to help solar developers see where’s there’s room to grow. Even while adding more renewable energy to its fuel mix, Green Mountain Power has lowered its electric rates three times in the past four years.
As a vertically-integrated utility, Green Mountain Power controls everything from power plants to the distribution wires that connect to homes. But it decided to turn its gift of monopoly control into the “un-utility,” Powell says, to “really become an organization that was fast, fun, and effective.”
It was a culture shift that enabled the change.
Powell works in the same “colorful Costco” of an office as everyone else. Workers can come and go as they please. Everyone understands that the customer is at the core of the business model — a far cry from the conservative culture of most monopoly, investor-owned utilities, which prioritize shareholder value over the public interest in a decentralized renewable energy future.
“Culture eats strategy for breakfast every day,” says Powell.
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The numbers tell part of the story.
Since Green Mountain Power sealed its B Corp status in late 2014, its net income — a central metric used to gauge the utility’s financial success — has not wavered from its general upward trajectory. The leadership at Green Mountain Power doesn’t expect that to change.
Gaz Metro, the Canadian energy firm that bought Green Mountain Power several years ago, has enjoyed a healthy run so far, Dorothy Schnure, a spokesperson for the Vermont utility, told ILSR in June. But those benefits have not shortchanged customers or the public interest.
“We want to keep a very stable rate path, and we want to earn healthy and stable returns for our investor, which we have done,” Schnure said. “Our approach has been if we serve our customers really well and we delight our customers and we look out for our customers, our investor’s going to be OK.”
Green Mountain’s leap to B Corp certification was a natural one. For years before, the utility had focused on policies supporting its customers and their communities. Company leaders insisted on upholding this corporate philosophy through acquisition talks with Gaz Metro a decade ago, when they made clear that the Canadian company’s parent — pipeline operator Enbridge, hotly contested for its environmental impact — needed to stay on the sidelines.
“Before we agreed to that purchase, we did a lot of due diligence in making sure that Gaz Metro’s philosophy would align with ours and that we would be able to continue working as a deeply conscious and socially-conscious entity,” Schnure said. “That’s how we operate and it’s part of what makes us so successful.”
Green Mountain Power might have been well-positioned to pounce on the B Corp process, but that doesn’t mean the utility’s work is done. To keep the certification, it must submit annual reports that support its status — a motivator, Schnure said, for Green Mountain Power to deepen its focus on sustainability and accountability.
