Legislative Allocation of the $187 Million RGGI Revenue from Sale of Greenhouse Gas Allowances

In light of the Governor’s failure to make any provision for PULP in his proposed budget, and in light of the current tight budgetary situation facing New York State due to a falloff of revenue during the recession, and due to the late state budget, the future of PULP is in jeopardy. See State Budget Impasse Threatens PULP’s Future, PULP Network, April 09, 2010.

A small portion of the newly created $187 million/year stream of funds from the sale of carbon allowances in the “Regional Greenhouse Gas Initiative” or RGGI program is a logical potential source of funding that could be tapped for financial support of PULP. Appropriating a small part of the RGGI funds to support PULP’s advocacy for low-income energy and utility customers is not inappropriate, inasmuch as RGGI is adding to the high cost of electricity in New York state and hence adding to the financial burdens of low-income households.

An April 19, 2010 decision of the Public Service Commission discusses how a significant part of the RGGI funds are not yet appropriated, how the use of RGGI funds is currently decided by NYSERDA, and illustrates how the legislature could further direct their use.

Background
The SBC. As a consequence of agreements with utilities to restructure New York’s investor-owned electric utilities in the 1990’s, the New York State Public Service Commission (PSC) created a “System Benefits Charge” or “SBC.” It is a surcharge on electric bills, the proceeds of which are sent by the utilities to NYSERDA to support energy efficiency programs under PSC oversight. The SBC is pnow yielding $175 million/year in revenue.

The EEPS. During the Spitzer/Paterson administrations, a new goal was set to reduce growth of the State’s electricity consumption. To move toward that goal, the PSC began an additional initiative known as the “Energy Efficiency Portfolio Standard” or “EEPS.” The EEPS allows utilities to collect additional money from customers, through utility rates, to finance more energy efficiency programs, some of which are administered by NYSERDA and some of which are administered by the utilities. This encourages major investor-owned utilities to enter the energy efficiency line of business, in which they recover all the EEPS program costs from ratepayers, and more. According to a January 2010 PSC press release, EEPS program funding is as follows:

  • Consolidated Edison Company of NewYork, Inc., $235.8 million;
  • National Grid (upstate), $147.7 million;
  • National Grid (downstate), $39.9 million;
  • New York State Electric and Gas Corporation, $31.7 million;
  • Rochester Gas and Electric Corporation, $20.1 million;
  • Central Hudson Gas & Electric Corporation, $19.6 million;
  • Orange and Rockland Utilities Inc., $14.3 million;
  • Corning Natural Gas Corporation, $0.2million; and
  • St. Lawrence Gas Company, Inc., $0.08 million.

The RGGI
New York joined with nine other Northeast states during the Pataki administration in creating the “Regional Greenhouse Gas Initiative” or RGGI. This was an effort, in the absence of adequate federal programs, to reduce greenhouse gas emissions from electric power plants by means of a cap and trade system. As a result, NYSERDA is now receiving substantial auction revenue from the sale of RGGI allowances to power producers that emit carbon dioxide.

PSC Denial of Multiple Intervenors’ Petition
Multiple Intervenors (MI), an association of large industrial, commercial and institutional electricity customers, filed a petition for a declaratory ruling from the PSC, arguing that the new major funding stream from the sale of RGGI carbon dioxide emission allowances justifies reduction of the existing EEPS surcharges, because the RGGI money could supplant them. As summarized by the PSC:

MI proposes that EEPS funding be reduced in proportion to RGGI proceeds to reduce the burden on ratepayers and avoid duplication of funding and programs. Specifically, MI requests that the Commission issue a declaratory ruling to reduce the approved annual EEPS funding from approximately $330 million to approximately $110 million.

In its April 19, 2010 decision, the PSC declared that it sympathized with MI, saying “[w]e share MI’s concerns” about overlapping energy efficiency programs, but denied the MI petition.

NYSERDA, Not the PSC Controls the RGGI funds.
The PSC pointed out that under the RGGI arrangements, the PSC lacks power to redirect the use of the RGGI funds. Thus, even if the PSC wanted to use RGGI money instead of money collected from utility customers for EEPS programs, it could not effectuate that result, because NYSERDA controls the RGGI money:

[B]oth the New York State Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA) have adopted regulations governing the implementation of RGGI…. Each year New York issues a number of tradable allowances: one allowance permits the emission of one ton of CO2 for one year, to cover electric generating units that must obtain allowances equal to their CO2 emissions within a three-year compliance period. These allowances have been sold at auction, in a process managed by NYSERDA and described under DEC and NYSERDA regulations.

The proceeds generated by these auctions are managed from a NYSERDA account and disbursed solely by NYSERDA pursuant to its Operating Plan and regulations.

The 2009 NYSERDA Operating Plan stated its RGGI-funded programs

are designed to create synergies with existing efficiency and clean energy programs and encourage redefinition of program goals in the context of a more comprehensive climate change strategy.

Legislative Action Can Redirect RGGI Funds.
The PSC observed that although the RGGI scheme puts NYSERDA nominally in charge of spending the RGGI auction proceeds, legislative action can also steer the use of RGGI money. The PSC cited examples in the past year where the Legislature exercised its powers to appropriate RGGI funds:

Since the commencement of the RGGI auctions, the resultant proceeds have been tapped or otherwise encumbered for a variety of uses other than those intended by the Operating Plan****

On October 13, 2009, the Green Jobs/Green New York bill was signed into law, directing NYSERDA to establish revolving loan and green jobs training programs to retrofit existing homes, using $112 million of RGGI auction proceeds to leverage private investment****

Finally, on December 4, 2009, the New York State Legislature enacted numerous deficit reduction measures that included the transfer of $90 million in RGGI auction proceeds to the General Fund****

The proceeds from RGGI, and their uses, remain to some extent uncertain, if not speculative. Indeed, in the March 2010 Revised RGGI Operating Plan, NYSERDA revised downward the estimates of program funding available through March 2012, from $525 million to $302 million****

As indicated by the last year’s allocation of RGGI proceeds, those funds are subject to redistribution for a wide range of purposes by the legislative and executive branches, not all related to energy efficiency.

The PSC rejected the effort of MI to reduce the EEPS program charges paid by utility customers, stating:

MI seeks . . . to have the Commission reduce EEPS collections from customers, in anticipation that the same purposes would be achieved using RGGI funds for energy efficiency. However, MI also argues that it should be mandatory that those auction proceeds be used to offset the incremental costs of EEPS to electricity consumers. This relief is unavailable in a declaratory ruling by this Commission, as the operation of RGGI and the allocation and disbursement of RGGI funds are governed by NYSDEC and NYSERDA regulations.

Conclusion
The current NYSERDA Operating Plan for use of RGGI funds was adopted April 27, 2010. It anticipates RGGI revenue of approximately $187 million per year through 2012. The recent PSC decision makes it clear that any change in how RGGI money is used must come from the Legislature.

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