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RGGI: Should We Stay or Should NH Go?

Published Wednesday May 16, 2012

Author MICHAEL MORTENSEN

A recent study extolling the economic impact of the Regional Greenhouse Gas Initiative has done little to redraw the political battle lines over the three-year-old program, which supporters say is doing a lot of good, but opponents decry as a boondoggle.

 

The first-of-its kind study, conducted by the Analysis Group, a Boston-based consulting firm, concluded that the 10 states participating in the RGGI (pronounced Reggie) program experienced what amounted to a $1.6 billion stimulus to their economies. Analysis Group Vice President Paul Hibbard says this figure was arrived at after calculating the program's funds together with the secondary spending the program funding triggered. The study further credited the program with creating 16,000 jobs from Maryland to Maine. New Hampshire alone realized $17 million in added economic value due to the program and added 458 jobs, concludes the report released in December. Supporters of RGGI say the study reinforces their argument that RGGI is a worthwhile investment in the state's and region's energy future. But RGGI opponents say the study is flawed and that RGGI is just one more example of government interference in something better left to the private sector.

 

For the second year in a row, the state Legislature is set to take up a bill that would have NH leave the regional initiative. Last year a similar bill passed both the House and Senate. But supporters in the Senate were unable to muster the necessary majority to override Gov. John Lynch's veto. By every indication, this year's debate will be a replay of last year's, with the same result.

 

What's at Issue?

 

Under the RGGI emissions reduction program there is a trading system that limits carbon dioxide emissions from electric power plants. RGGI requires power plants in participating states to cap CO2 emissions at 188 million tons per year through 2014 (New Hampshire's cap is 8.6 million tons), and to eventually cut 10 percent of annual emissions in 2018.

 

The system issues allowances and then auctions those allowances, with the proceeds going to the participating states, which can then use them to fund energy efficiency programs, clean energy technology, and sustainable land-use planning and transportation projects that reduce greenhouse gas emissions or lessen demand for energy.

 

Supporters of the program in NH say that lowering energy consumption is critical to lowering the demand that NH residents and businesses now place on costlier power. The total number of carbon allowances purchased so far in the state totals 15,108,177, according to Joe Fontaine, a program manager at the NH Department of Environmental Services, which oversees the carbon credits auction portion of the RGGI program in NH. The sale of those credits has generated $34,720,252. That money has been used to underwrite the cost of energy audits, energy efficiency improvements, and training programs designed to promote ways businesses and homeowners can reduce energy consumption. Those projects, according to the NH Public Utilities Commission, include the following:

 

$2 million to the NH Community Loan Fund for energy efficiency retrofits for 425 manufactured homes around the state.

 

$5 million to TRC Energy Sales which worked with various large commercial and industrial facilities to conduct energy audits and undertake energy efficiency improvements.

 

Buildings grants to Manchester City Hall, Rye Junior High School, three buildings at Southern NH University and two buildings at the University of NH. 

 

$176,531 to Crotched Mountain Rehabilitation Center in Greenfield to connect two of the larger buildings in its complex to its existing biomass heating plant, saving 25,000 gallons of heating oil a year. The institution matched the $176,531 it received from RGGI with $98,290 it raised privately.

 

$51,354 to Enfield Shaker Museum for weatherization and other energy-efficiency improvements to the historic Great Stone Dwelling as well as create an energy education exhibit.

 

 Catherine Corkery, chapter director for the NH Sierra Club, a RGGI supporter, says that if leveraged, the $34 million realized through the sale of carbon allowances ultimately translates into a $100 million benefit to the state in the form of energy efficient schools, programs to retrofit low-income housing and low interest loans to small businesses.

 

But RGGI opponents believe the program is a bad bargain because Public Service of NH, which serves about 70 percent of the state's retail electric consumers, passes on to customers the cost of the allowances it needs in order to emit carbon into the air from fossil fuel power plants in Bow, Portsmouth and Newington. And since PSNH is the only electric utility in the state that emits carbon, it is the only one that needs the credits.

 

There are two other power plants that fall under RGGI, both gas-fired. However, those plants are operated by merchant generators that sell their power on the New England electric grid, not to individual customers, so they are not considered to be regulated utilities like PSNH. According to PSNH spokesman Mike Skelton, RGGI adds 26 cents a month, or $3.12 annually, to the bill of a residential customer using 500 kilowatts a month. And when customers buy power from other utilities, Skelton notes that part of the rate is attributed to RGGI as all power plants must meet RGGI requirements.

 

State Rep. Jim Garrity, R-Atkinson, who chairs the House Science, Technology and Energy Committee, is among those who believes that NH would be better off if it left the RGGI program. Garrity's committee is considering a bill that would have the state leave the program in 2015. The bill also calls for lowering the state's carbon cap to 8.4 tons effective January 2013-a reduction of 2.5 percent. Another element of the bill would grant the Granite State carbon allowances to the emitters rather than putting them all directly into the auction, as is the case now. This would save PSNH customers $8 million to $10 million a year, according to Garrity.

 

Current CO2 emissions from the five power plants that currently fall under RGGI are well below what would be allowed under the bill, according to DES's Joe Fontaine.

 

Businesses Weigh In

 

Some members of the state's business community say that program has spurred investment in energy-saving technology, which will continue to pay benefits for businesses for years to come.

 

Nancy Kyle, president and CEO of the Retail Merchants Association of NH, says that the organization will disburse $3.4 million in grants funded through RGGI credits to help defray the costs of energy audits and new energy-efficient technology at NH businesses. We are the first (trade) association in the country to put together a program for small- to medium-sized businesses, says Kyle.

 

All told, 75 businesses enrolled in the Retail Merchants' program last year, according to Joe Lajewski, the energy efficiency program manager. This is not just important from a green, wholesome, and earthy standpoint. But this will have a positive financial impact as well, Lajewski says.

 

Ken Young, co-owner of Young's Restaurant, a downtown Durham landmark, says that without the assistance that he received through the RGGI program, he could not have afforded the energy audit that showed him how he could cut his energy costs.

 

They paid three-quarters of the energy audit. We paid $1,500 in two fiscal years. I could never afford a $6,000 energy audit, says Young.

 

That audit showed how he could cut costs by installing thermostatically controlled kitchen exhaust fans, re-insulating the restaurant's roof, upgrading to more efficient condensers and compressors for the walk-in cooler and freezer, and spending $500 for new dining room lightbulbs that use 40 percent less energy.

 

Other businesses also support the program, like grocery and convenience stores. Energy costs are the second-highest expense for supermarkets after labor, according to John Dumais, the president and CEO of the NH Grocers Association, which is tied to the Retail Merchants' Energy Efficiency Program. Some improvements in stores include coolers and freezers with doors that customers have to open to reach for a product, and use of LED lights in refrigeration cases that give off less heat so the cooling compressors do not have to run as hard. While the Grocers Association has not taken a formal position on RGGI, Dumais says, RGGI has shown some benefits and we would consider staying with it.

 

The Business and Industry Association also takes no formal position on RGGI. The business community is fairly divided on the program, says Michael Licata, a vice president at the BIA. He says his organization is aware that some members have concerns about how funds have been spent.

 

Our concern is that a number of the projects don't achieve carbon savings, he says, citing the use of RGGI funds to underwrite training programs or setting up websites that promote the Energy Efficiency Program as examples of where it is impossible to unequivocally prove that particular spending resulted in cleaner air. RGGI puts the PUC in a position to have to appease different groups, he says.

 

Despite his objection to the RGGI program, Garrity gives the PUC high marks for the way it has administered the program. The PUC has done an admirable job, he says.

 

The Politics of RGGI

 

For state Rep. Peter Hansen, R-Amherst, one of the co-sponsors of this year's RGGI repeal legislation, getting NH out of the program is a matter of principle. Whenever you've got the government involved there's bound to be waste, says Hansen. He calls the program non-functional, saying the benefits its supporters point to are questionable, and adding that the only ones who stand to make money from the arrangement are the brokers who trade allowance credits.

 

But Gov. John Lynch thinks its important NH continue to participate in RGGI. Without the program we would be paying higher electric rates without getting the benefit, says  Lynch's press secretary, Colin Manning. It's important that New Hampshire participate." For the governor and others, NH's higher electric rates are not so much due to RGGI, but rather because the state imports most of its power from out of state. New Hampshire imports about 90 percent of its power from neighboring states that are also part of RGGI.

 

State Sen. Jeb Bradley, who heads the Senate Energy Committee, applauds energy conservation efforts, but believes those goals could be better accomplished through the CORE Energy Efficiency Programs run by the various electric utilities rather than RGGI. Having power companies in charge would take the politics out of the issue, Bradley says.

 

Some RGGI grants are probably okay, but some grants in earlier years were motivated by politics, he says, citing a grant for yogurt maker Stonyfield Farm as an example. I don't see why one of the most successful companies in New Hampshire needs a grant. Grants that went to fund projects at Dartmouth College and the University of NH were also inappropriate, he says.

 

Garrity believes RGGI funds have been disbursed fairly. However, he notes that some critics have been upset when money went to thriving businesses. They feel the help should have gone [strictly] to those who couldn't have afforded to make the improvements without the help, he says. Garrity agrees with Bradley that the CORE program is a better way to promote energy efficiency and reduce CO2 in the air. Garrity says the program is more efficient because it is managed by the various light companies with PUC oversight.

 

The CORE program is broader, says Bradley. It's all about energy conservation and it's open to everybody. My feeling is that if you've got a program that is already working, it makes more sense to use that one. Last year Bradley offered an amendment to the RGGI repeal bill in order to broaden its support. Under the amended bill, the state would have replaced an emission reduction fund with an energy efficiency fund and would have increased energy-efficiency rebates.

 

The amendment did not require the state withdrawing from RGGI, but rather would allow NH to exit the initiative if another state with at least 10 percent of the total electricity production under RGGI also left the program. The amendment had the votes of 16 senators--enough for a veto override--but Bradley failed to convince the House leadership to back it and it died. Bradley says he is willing to reintroduce the amendment, but only if House leaders signal they are more amenable to it.

 

In Hansen's opinion there is not much appetite for compromise among RGGI opponents in the lower chamber. The people I know in the House were very adamant on getting out, Hansen says. But Garrity thinks this year may be different.

 

The bill is different from last year's, he says. He expects the current bill in some amended form will be sent to the full House with a recommendation that it pass and that by the time it reaches the House floor it may look similar to the amendment Bradley offered last year.

 

That would be very encouraging if that turned out to be the case, Bradley says.

 

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