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Reconsidering RGGI
House says repeal, Senate may reform environmental compact

05/12/11



Former Minnesota governor and current presidential candidate Tim Pawlenty apologized at a forum in Manchester two weeks ago for his previous support of a cap-and-trade program. He called it a mistake. He called it stupid. And he said he was sorry.

Of course, Pawlenty is trying to talk his way to the presidency. Cap-and-trade isn’t going to fly in a Republican primary. But should cap-and-trade wings be clipped in New Hampshire?

While House lawmakers quickly worked to pass a bill that would withdraw New Hampshire from the Regional Greenhouse Gas Initiative (RGGI), the Senate appears to be taking a more thoughtful approach.
That might make sense, since withdrawal appears to carry some financial downfall, says Jim O’Brien, executive director of Conservation New Hampshire.

“Repeal of the program would be short-sighted for the state and there are a lot of reasons why,” O’Brien said, adding that studies have shown it makes more sense economically, in a macro sense, to participate in a regional program like RGGI than to sit on the sidelines.

RGGI is a compact of 10 states that have capped and will reduce carbon emissions from the power sector 10 percent by 2018. Under the mandatory program, states sell emissions allowances at auction and invest the proceeds in energy efficiency, renewable energy, and clean energy technologies, according to the RGGI website (www.rggi.org).

Senate President Peter Bragdon, R-Milford, has voiced support for staying in RGGI. That doesn’t thrill all conservatives. Sen. Jeb Bradley, R-Wolfeboro, proposed an amendment to the House’s proposal to withdraw from RGGI. Bradley’s proposal would keep the state in RGGI but would create some safeguards. The Senate was expected to vote on RGGI on Wednesday, May 11.

The Josiah Bartlett Center for Public Policy, a free-market think tank in Concord, released a report on the first two years of RGGI earlier this year. Among its findings were that the market for carbon allowances has fallen dramatically, which means the cost to ratepayers has been small but also puts in jeopardy the revenue slated for energy efficiency programs; that nearly half of the RGGI auction revenues have gone to private-sector businesses that “can afford to make their own energy efficiency improvements”; and that the Public Utilities Commission has committed “millions more in grants than has been generated from New Hampshire’s share of the carbon auctions.” It also determined New Hampshire could have difficulty selling off its remaining carbon allowances.

Providing savings to ratepayers?
“Repealing RGGI puts more money in the pockets of New Hampshire citizens through lower electric bills,” said Speaker of the House William O’Brien, R-Mont Vernon, in a statement earlier this year. “Eliminating RGGI sends a clear signal to the business community that we are reversing the state’s direction toward a pro-business regulatory environment.”

However, Jim O’Brien said withdrawal from the program wouldn’t put more money in ratepayers’ pockets.
The electricity that’s bought and sold on a regional grid doesn’t stay within the Granite State’s borders. What’s happening in other states, like Massachusetts, Rhode Island and Connecticut, affects the energy prices in New Hampshire.

If the state were to pull out now, the state’s ratepayers would continue to pay as though New Hampshire were still a part of the program — because rates are administered on a regional basis. So ratepayers would keep paying higher rates, but the state would lose the money coming back for energy efficiency investments, Jim O’Brien said.

It’s not big dollars for individual ratepayers — about 36 cents per month — but it all adds up $5 or $6 million in ratepayer costs. Through the auction process New Hampshire has been averaging between $13 and $18 million to help with energy efficiency projects.

“A lot of businesses wouldn’t get energy efficiency upgrades,” O’Brien said. “[Ratepayers] would still be paying the additional cost of electricity.”

Speaker O’Brien went on to say in his statement RGGI is a “backdoor tax increase” and that legislators needed to end it to bring in jobs.

Jim O’Brien says RGGI is creating jobs in the form of energy efficiency projects.

Reform versus repeal
Bradley’s amendment sort of provided new life for RGGI. It’s a little odd since Bradley said he’d prefer full withdrawal, but he acknowledged the votes weren’t there in the Senate to overcome a veto by Gov. John Lynch.

Bradley’s plan would call for some RGGI dollars to be spent on providing ratepayer rebates. Bradley also put a trigger in the bill that would allow New Hampshire to withdraw if other states begin to drop out. Jim O’Brien said other states’ dropping out has been a concern, since no one wants to be the last state in the system “holding the bag.”

O’Brien said no business group has voiced opposition, not one chamber of commerce. He said he hasn’t heard any businesspeople speak about RGGI.

“The opposition is really an ideological one,” O’Brien said. “The same groups that oppose national cap-and-trade programs are here trying to drum up opposition to regional cap-and-trade programs.”
The House took a particularly strong stance for repeal.

“It’s good to see the Senate really diving into the issue,” O’Brien said. “I’m not sure the House spent a great deal of time on it. They were more driven by a desire to get rid of the program on ideological grounds.”
Conversely, O’Brien said the Senate, which itself holds a 19-5 Republican majority, is delving more into the economics of the program.

“[Bradley’s amendment] keeps us in the program while still investing in energy efficiency a bit more cautiously,” O’Brien said. “I think it’s good the Senate is having a conversation about reform rather than repeal.”
 






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