Editor’s note: This commentary is by Donald M. Kreis, an attorney based in Hartland and a senior energy law fellow at Vermont Law School, where he teaches in the VLS distance learning program. He is a former member of the board of the Vermont Journalism Trust, parent organization of VTDigger.org. He lives in Hartland.
Milton Friedman and Franklin Delano Roosevelt are surely rolling over in their graves upon learning that Green Mountain Power (GMP) has become the nation’s first electric utility to gain the much-hyped “B Corp” certification.
Friedman was the leader of the so-called “Chicago school” of economics who famously proclaimed in 1970 that “the social responsibility of business is to increase its profits.” Roosevelt was the presidential candidate who declared in a 1932 campaign speech that it is the job of government to “act as agent of the public … to investigate the acts of public utilities relative to service and rates, and to enforce adequate service and reasonable rates.”
B Corp certification defies both of these principles by casting an unaccountable, private nonprofit organization, called B Lab, in the role of determining whether a petitioning corporation meets B Lab’s self-proclaimed standards for corporate virtue and can thereby claim to be pursuing the greater good alongside the quest for return on shareholder investment.
This is not to say that GMP is anything but a fine example of an investor-owned utility (IOU). It would please Friedman for its efficient ability to provide earnings to its Canadian owners. It would please Roosevelt for holding itself accountable to state and federal regulators whose job is to assure that IOUs provide safe and reliable service at the lowest possible cost and with the fewest possible environmental externalities.
Vermont law is especially exacting. It requires GMP to submit, to gain approval of, and to live by a “least-cost integrated resource plan” that provides for “meeting the public’s need for energy services, after safety concerns are addressed, at the lowest present value life cycle cost, including environmental and economic costs, through a strategy combining investments and expenditures on energy supply, transmission, and distribution capacity, transmission and distribution efficiency, and comprehensive energy efficiency programs.” The Vermont Public Service Board (PSB), tasked with enforcing these and other requirements, has approved a so-called Alternative Regulation Plan for GMP that takes the company beyond traditional cost-of-service rate regulation and rewards GMP’s owners for doing the right thing.
You might quibble over what the “right thing” truly is. Maybe the regulators don’t always get it right. But this regulatory regime provides for strict public accountability – an example of what has come to be known by scholars as the “regulatory compact” in which IOUs submit to pervasive government regulation, and accept an obligation to serve everyone who wants service, in exchange for a fair opportunity to earn a reasonable return on shareholder investment.
But, just as a criminal defendant waives the constitutional right to avoid self-incrimination by agreeing to testify at trial, so too should GMP not be allowed to brag about its B Corp status without submitting fully to complete public scrutiny, especially on matters that it also reports about to regulators.
There is no room in this compact for B Lab, the photograph of GMP CEO Mary Powell smiling with Ben and Jerry (co-founders of a famous and foreign-owned B Corp) on the GMP website notwithstanding. In fact, the Department of Public Service should investigate, and report to the PSB, on the extent to which GMP is recovering from customers the cost of acquiring and promoting its certification as a B Corporation. By all rights, the answer should be “zero” because this certification provides no benefit to customers whatsoever. It does nothing but provide feel-good publicity for GMP and its owners.
Moreover, there is arguably a form of double-dipping going on here. No, not the double dipping of which GMP has been accused by virtue of producing or buying renewable energy in Vermont that meets our state’s renewable energy goals at the same time it is exporting the bragging rights and renewable attributes (as renewable energy credits purchased by utilities elsewhere in New England). The double dipping here has to do with GMP bragging about doing B-certifiably good stuff that Vermont law already requires it to do as a regulated public utility.
According to the B Lab website, GMP received 84 out of a possible 200 points, roughly equal to the median score of 80 for all companies that submitted to this possibly rigorous but arguably murky private scrutiny. What’s murky about it? You can’t tell from checking the B Lab website what the benchmark for achieving B Corp status truly is, any score higher than zero is considered “good,” and what is variously referred to as the median or average score of 80 is labeled by B Lab as “great.”
How, specifically, might GMP be double dipping by bragging about doing stuff it is already required by law to do? GMP received a score of 28 under B Lab’s “environment” criteria, vastly outperforming the median score of 9. This is what one might expect from a company that lives by a least-cost-integrated resource plan as required by Vermont law.
GMP achieved a score of 3 – equal to the median – in the category of transparency. This is noteworthy because Vermont law has, to date, allowed GMP and other public utilities to shield from scrutiny essentially anything they want shielded by invoking the “trade secrets” disclosure exception in the Access to Public Records Act. The Public Service Department and the PSB routinely accede to utilities’ confidentiality requests and the Vermont Supreme Court has never had occasion to review one of these these determinations. Thus it is not surprising to see how much information is blacked out on the version of GMP’s B Corporation “impact assessment” that B Lab and GMP have publicly released.
Among the redacted metrics are gross revenue, earnings before interest and taxes, and net income. Net income? Really? If that information isn’t public, and highly relevant to whether GMP is diverting any profits to the realm of virtue, to say nothing of having just and reasonable rates, then what is? The total wages paid by GMP are blacked out and, inexplicably, the company apparently didn’t even have to answer the detailed questions about its salaried (as opposed to hourly) workforce. An electric utility employs a lot of professionals, which means a big salaried payroll.
Also redacted is data about GMP’s employee attrition (which presumably sheds light on whether the company is truly a good place to work), the company’s response to whether it employs a greater percentage of ethnic minorities than is present in the company’s service territory, how much money GMP is donating to charity, who GMP’s significant suppliers are, and how much in carbon emissions were offset or saved by use GMP’s services – and the percentage of its revenue that can be attributed to these carbon-saving and offsetting services.
GMP would surely point out that these redactions are just a few bits of data out of a 45-page impact assessment report. But, just as a criminal defendant waives the constitutional right to avoid self-incrimination by agreeing to testify at trial, so too should GMP not be allowed to brag about its B Corp status without submitting fully to complete public scrutiny, especially on matters that it also reports about to regulators. The business of avoided carbon emissions is especially controversial in light of the complaint filed by Vermont Law School earlier this year before the Federal Trade Commission accusing GMP of making false claims about how renewably produced its electricity is – a charge GMP has vigorously denied.
IOUs like GMP should be virtuous corporate citizens – every last one of them eligible for B Corp status – because the law requires such virtue of them. By all means let GMP brag about becoming the first utility to gain B Corp status (as long as the bragging is not paid for by customers). But, at the very least, the utility should also provide a detailed report on the extent to which it has been anointed by B Lab as the result of going above and beyond regulatory requirements.
