How do renewable energy mandates contribute to your electric bills? Follow the money

Energy bills surged for Delmarva Power customers this winter with inclement weather and higher usage mostly to blame. But that doesn’t mean green energy initiatives don’t play a role on monthly bills.

For over 25 years, Delmarva Power customers have been contributing, at least in a small way, to the state’s push to increase its renewable energy usage.

Here’s how those goals make their way to your energy bills.

As reported Delmarva Power cost spikes, theories on green energy circulate

In the first few months of 2025, customers of Delmarva Power reported skyrocketing electric bills, sometimes reaching into the thousands of dollars owed per month.

During a Senate Committee hearing into the reasons for the charges, Delmarva Power Regional President Phil Vavala said higher usage is to blame for around 99% of the higher bills because of the unusually cold temperatures in December. The other 1% is from the rate change Delmarva Power announced in the fall, he said.

Delmarva Power also sent out a new bill format. It lists numerous different charges for which customers are footing the bill.

Theories began to circulate that green energy mandates are leading to this spike in energy costs. That is, mandates enforced by the state onto Delmarva Power being passed onto customers.

Many Republican lawmakers have latched on to President Donald Trump’s rhetoric admonishing renewable energy. That has included introducing state legislation to withdraw from the Regional Greenhouse Gas Initiative, as well as looking to roll back measures that progress Delaware's renewable energy projects.  

Renewable energy goals do play a role into the charges that are passed onto consumers.

But those charges — and the renewable energy goals themselves — have been frozen for years.

What are the state's renewable energy goals?

Delmarva Power is required to meet the state’s renewable energy standards, which call for 40% of the utility’s energy supply to come from renewable sources by 2035.

These Renewable Portfolio Standards were established in 2005, and most recently amended in 2021. The updated standards require commission-regulated utility companies like Delmarva Power to get 22% of the utility's energy from renewable sources.

Only 6.8% of Delmarva Power’s energy portfolio came from renewable sources between June 2022 and May 2023, according to the Public Service Commission's most recent data.

How does Delmarva meet these goals?

In efforts to prove the company is sourcing power from renewable sources, utilities use renewable energy certificates, or RECs.

These certificates are immaterial and are sold separately from the renewable electricity itself. They merely represent a record that a utility company is sourcing green energy from somewhere.

A certificate may be issued to a utility when one megawatt-hour of electricity is generated and delivered to the electricity grid from a renewable source, according to the U.S. Environmental Protection Agency’s definition. So if a solar farm generates 10 megawatt-hours of electricity, for example, that farm has 10 certificates they can either sell or keep.

There is no distribution or transmission fee associated with renewable energy certificate marketplace. So, these are not passed on to energy costumers directly, according to the Sierra Club's Delaware Chapter.

The problem comes when there is not enough renewable energy generation online. That means, demand for these renewable energy certificates, and subsequently their prices, increase.

Does Delmarva Power pay a fine if it can't meet these goals?

Here's where things get more complicated.

If the price of an REC is too expensive, Delmarva Power has the option to pay an alternative compliance payment.

A utility may pay $25 per megawatt-hour “deficiency” instead of a more expensive certificate, per Delaware code. Currently, renewable energy certificates are $35 to $37 per megawatt-hour.

Alternative compliance is not a fine. In fact, technically it could save consumers money, since Delmarva Power can avoid going to a more volatile market to purchase the other certificates.

When Delmarva Power pays an alternative compliance payment, the money goes into Delaware’s Green Energy Fund on top of the base rate that the utility already contributes to it.

Spelled out in Senate Bill 33, if a utility is opting into such alternative payments for two years in a row, instead of paying more for a certificate, the renewable energy source standards for that year remain frozen.

In Delmarva Power’s case, this has frozen the utility’s renewable energy requirements at 2023 levels — or 23% — until the market balances out a little more.

So, how do these charges show up on electric bills?

The compliancy payments that Delmarva Power has had to pay to keep up with Delaware’s renewable goals show up in a few different ways on bills.

Costs associated with complying with the state’s renewable energy standards make up between 1% and 4% of total utility bills, according to the Sierra Club Delaware Chapter, and these fees have remained flat for the past five years for the average ratepayer.

A Delaware Online/The News Journal review of Delmarva Power bills in New Castle County,p h along with interviews with legislators, advocates and utility regulators show those charges increased by only about $2 to $8 on consumer's monthly bills.  

Where are the increases?

Payments that allow Delmarva Power to comply with state standards are reflected on two different line items of a typical electric bill: "qualified fuel cells" and "wind and solar."

Alternative compliance payments, as well as the costs of renewable energy certificates, are represented in the “wind and solar” line item.

Wind and solar charges went into effect in 2008 and typically change once per year when Delmarva Power files its annual application to the Public Service Commission.  The current rate is $0.006367 per kWh, as of June 2024.  

According to Sen. Stephanie Hansen, chair of the Senate Committee for Environment, Energy and Transportation, over the past two years, these payments added up to around $25 million — or around $12 million in 2023 and $13 million in 2024.

When divided evenly among Delmarva’s roughly 315,000 residential customers, these charges end up being around $3.43 per customer per month. 

These charges support the state's Green Energy Fund, which contribute to green energy programs around the state that are available for Delmarva Power customers. That includes rebates for solar installation and electric vehicle charging infrastructure.

Delmarva Power's energy efficiency programs

Delmarva Power has its own energy efficiency programs that are reflected on customer bills.

Some of these programs include a “Home Energy Check-Up," which offers a free inspection and report from the company on your property’s energy usage, rebates for energy-efficient appliances and bill credits for products like smart thermostats.

The rate typically changes on an annual basis every January. The current rate is $0.000476 per kWh, which took effect Jan. 1. Delmarva Power is currently in front of the Public Service Commission to get an approval to increase the rate for their energy efficiency programs.

Delaware faces a lack of energy diversity

Delaware lacks diversity in its energy generation, with nearly 90% of all generation coming from natural gas, which puts the state at risk, Hansen said. Natural gas also has a lot of “price volatility,” she said, which can drive costs higher.  

The problem in Delaware’s case is not necessarily that there are not enough renewable energy certificates available, they are just too expensive. Demand is so high from other utilities around the region clamoring for the relatively lower supply of renewable energy sources.

Among other transmission upgrades and programmatic funding, Delaware would have received free renewable energy certificates from U.S. Wind’s offshore wind project off the coast of Sussex County and Ocean City, Maryland, but the county has fought against the proposal moving forward.

There is a lower supply of renewable energy sources because of backlogs from the regional grid operator for 13 states, PJM Interconnection.

Over 90 gigawatts of predominantly clean energy are set to be cleared from the PJM connection process by the end of next year, according to a PJM presentation to Delaware lawmakers in February. Once this new generation comes online after clearing that process, REC prices are expected to come back down.

"PJM's processes and decisions have a huge effect on the REC market," said Dustyn Thompson, president of the Sierra Club Delaware chapter. "If they're not connecting renewable energy generation, but states are increasing their REC requirements on utilities, then REC prices will go up."

Molly McVety covers community and environmental issues around Delaware. Contact her at mmcvety@delawareonline.com. Follow her on Twitter @mollymcvety.