February 4, 2014
U.S.

Cold and unhedged: How the polar vortex drove Clean Currents out of business

Michael Neibauer, Staff Reporter- Washington Business Journal | Feb 3, 2014 | www.bizjournals.com

The Silver Spring-based renewable energy supplier surprised its customers, the green energy industry and government officials on Friday when it announced that it would no longer serve its 6,000 residential and 2,000 commercial clients in D.C., Maryland and Pennsylvania. Those customers were being returned to their local utility, effective immediately.

Gary Skulnik, Clean Currents president and co-founder, told the Washington Business Journal Monday that the company was too exposed on the wholesale energy market during the recent historic cold snap.

“The financials of the company were fine,” Skulnik said. “I’m not saying we were sitting on Apple kind of money, but we were operating. None of us suspected that we would be out of business in a week.”

On Jan. 23, the D.C. Public Service Commission approved the company’s 3-month-old bid to operate as a natural gas supplier in the nation’s capital. The DCPSC’s decision read, in part, that “Clean Currents has the ability and the financial integrity to serve natural gas customers in the District of Columbia.”

A majority of Clean Currents’ on- and off-peak wind power purchases were hedged, Skulnik said, but enough were unhedged to sink the company as wholesale energy prices spiked.

“It’s not like prices went up 20 percent, or even 50 percent,” he said. “We saw prices that went up 500 percent. We were hedged, but we were not hedged enough. We didn’t have the resources to cover the spot market prices we were being hit by.”

One of the region’s fastest growing companies as recently as two years ago, Clean Currents was a business that area governments were eager to host.

In 2011, Montgomery County awarded Clean Currents a $50,000 grant to expand its business and remain in the jurisdiction for five years. The grant required that Clean Currents employ at least 29 permanent, full-time workers by Dec. 31, 2014 and maintain an average of 29 employees while keeping its primary business operations in the county until Dec. 31, 2016.

With the company now out of business, falling short of its contract with the county, that grant automatically becomes a loan that Clean Currents will have to pay back. The loan, per the contract, will have a 5 percent interest rate. Repayment “will be made in a lump sum on demand,” county officials say, or at the county’s discretion over a two-year period.

“Obviously, we’re just going to try to reach out them and start that process,” said Kristina Ellis, spokeswoman for the Montgomery County Department of Economic Development.

Roughly 40 percent of Clean Currents’ customers were located in the District, the remaining 60 percent in Maryland and Pennsylvania.

In Maryland, Clean Currents’ customers may search for a new third party renewable energy supplier, or, if they choose, return to the standard utility – Pepco, in most cases. In the District, there is some question as to what options Clean Currents’ commercial customers have. The Washington Business Journal is working on an answer.

Skulnik said his next step is to finish his obligations to Clean Currents and then “let the dust settle a little bit.” He wants to do something in the private sector that helps the climate, he said, and the sudden Clean Currents closure should have no effect on his future.

“It had nothing to do with the fact that we were a clean energy supplier,” he said. “It had everything to do with the fact that we were were a small company with limited access to resources and we got hit with a once in a generation event.”