Electricity disclosure

If you feel in the dark about where the electricity you consume comes from and how it is produced, you are not alone. Unless you are buying certified green electricity, that is, electricity produced from renewable energy sources, it is difficult to know what fuel sources are used to generate your power.

However, you will probably be aware that electricity production can be very polluting, and some sources more so than others. So you may wonder, “if I’m not given information about electricity production and its environmental implications, how can I make an informed decision about the electricity I buy?”

This is where electricity disclosure plays a role. The principle of disclosure works on the premise that markets function best when participants are given adequate information. This applies as much to a packet of biscuits as to electricity. Consumers are familiar and expect information about the ingredients and nutritional value of, for example, food items. They may want to know the sugar, fat or salt content of a processed item or whether it contains genetically modified organisms (GMO) or comes from organic production. The GMO labelling demands, which started a few years ago, are testimony to the fact that consumers want information on environmental or other contentious issues. And so it should be for electricity.

In a regulated market with no competition there was perhaps little reason to provide this information since consumers didn’t have a choice about their electricity product. They could not switch supplier unless they moved to another region. Today this is less and less the case. As the electricity markets of Europe and many parts of the world open, consumers are given a choice about who they buy their power from and even what product they buy. In such a deregulated, competitive market consumers need to be able to distinguish between the products they are being offered. Electricity disclosure helps them do this, by making it mandatory for all electricity suppliers to label their products with a list of ‘ingredients’ (the supply mix) and their nutritional value (the environmental effects).

Electricity disclosure started in the USA with the State of California’s Power Content Label being one of the first mandatory labels, applied from 1998. Today more than 21 States (all those that have liberalised markets + three non-liberalised) have similar requirements, although each state may have its own label design and information requirements. There is no standard disclosure system in the US as each State has jurisdiction over its electricity industry.