Senator David Woodsome, Chair
Representative Mark Dion, Chair
Joint Standing Committee on Energy, Utilities & Technology
My name is Dylan Voorhees and I am the Clean Energy Director for the Natural Resources Council of Maine. Thank you for allowing us to present this testimony. As most of the committee knows, I have been closely involved in policy and implementation from the start of the Regional Greenhouse Gas Initiative (RGGI) as well as the Efficiency Maine Trust. There can be no real dispute that Maine’s approach to RGGI has been incredibly successful in lowering pollution and lowering energy costs and befitting our overall economy. This bill would take Maine in the opposite direction and make RGGI less effective at doing all of those things.
As a very brief background on RGGI, this nine-state cooperative initiative started in 2008 and uses a market-based mechanism to lower the amount of climate-changing carbon pollution emitted from fossil fuel-fired power plants. At the heart of the program are carbon credits or “allowances” that power plants must possess to cover their emissions. Fewer and fewer credits are available each year, sending a clear, predictable, long-term market signal to electricity sector investors. From the outset states recognized that these allowances are a public good and should provide as much consumer benefit as possible. Therefore the states conduct quarterly auctions of allowances and each state receives the revenue from those auctions to benefit consumers.
Since the beginning, the large majority of revenue was used by the states to support energy efficiency efforts. Maine led this trend and has generally used 85-90% of RGGI funds for highly cost-effective energy efficiency improvements. As a result, Maine’s total energy costs have been lower as a direct result of RGGI and we’ve had net job creation attributable to this program. This is born out not only by direct experience by businesses but by independent economic analysis.
As you can see from the attached 4-page factsheet, from the outset Efficiency Maine invested RGGI funds heavily in the large industrial sector, helping manufactures and others capture big savings from big projects they wouldn’t otherwise have been able to achieve on their own. The list of beneficiaries reads like a “Who’s who” of Maine’s industrial and forest products sectors. The first $12 million in large business grants leveraged $35 million in private capital investment in mills and other facilities and achieved $139 million in lifetime energy savings.
Efficiency Maine has also used RGGI funds to help small and medium size businesses invest in efficiency upgrades that cut electric and fuel bills by roughly $5-6 for every $1 of RGGI spending.
These investments make businesses more competitive by lowering energy costs. They also leverage private capital investment in our state—sometimes at facilities with national owners who must constantly decide whether to invest in Maine or elsewhere. The resulting lower energy spending means job creation, both at participating businesses which are more profitable and in the growing clean energy.
The energy and economic impacts of RGGI have undergone periodic independent scrutiny and proven themselves time and time again..
I think you would be hard pressed to find a more successful and effective policy in Maine or elsewhere to lower energy costs for businesses.
As part of the omnibus energy bill—a complex and carefully negotiated package of energy legislation—this committee made some specific allocations of RGGI revenue for the 3-year period which ends this summer. Those allocations were generally consistent with how Maine was using RGGI funds. The bill clarified a policy preference that RGGI funds should be used for energy efficiency efforts that reduce heating and fuel waste (as opposed to electricity savings.) Today RGGI accounts for almost all of the funds for Efficiency Maine to help homes, business and industry lower heating and fuel costs.
LD 1398 would slash support for lowering fuel costs at Maine businesses by 80%. Over the next three years, it would lower funding for business efficiency by $20 million. Left with Efficiency Maine, that $20 million would be used to help businesses lower energy costs by $100-$125 million over the lifetime of those capital improvements. Let me repeat: if you divert this $20 million away from energy efficiency, you will effectively raise business energy costs by $100 million.
It’s true, you could instead use the money to subsidize electric rates. $20 million in rate subsidies would be worth…$20 million. Not only would this leave Maine businesses with higher overall energy costs but it would indeed be a subsidy. The governor’s proposal is to take funds generated for public benefit at auction and buy down electric rates for one set of consumers below what they would otherwise be. That’s a subsidy.
This change would also reduce capital investment in Maine businesses over the next three years by tens of millions of dollars.
For all of these reasons I urge you to resoundingly reject this backward proposal.
Instead, I urge you to use this opportunity to further lower residential energy costs through the RGGI program.
As I stated, the RGGI allocations in the omnibus bill apply through this summer, at which point the Efficiency Maine Trust will begin operating under its next 3-year plan, now under review at the Public Utilities Commission. Under the existing law, Efficiency Maine could use 100% of RGGI funds for energy efficiency and that is exactly what was proposed in the draft 3-year plan prepared by the Trust. They proposed to use 50% of the funds for home heating efficiency efforts, an increase from the 35% over the past three years.
Efficiency Maine’s Board was of mixed opinions about this and the law is not extremely clear on this point. At the urging of the LePage Administration the board did not adopt the increase for home heating efficiency in deference to this legislature. I urge the committee to consider a clarification to the law and give the Efficiency Maine Board clear direction or authority to boost home heating efficiency efforts with the remaining RGGI funds.
Increasing assistance for helping Maine households lower energy costs through insulation, heat pumps and other efficiency improvements has been the stated priority not only of bipartisan legislators but of the governor himself. I couldn’t have put it better than Mr. Woodcock in his testimony to this committee last year:
“Given the situation of additional revenue, we believe that we should transfer funds to where there is the most public benefit, and given our challenging winter, and the opportunities available today that we should assist Mainers with investing in affordable heating.” {emphasis added}
Last December the governor wrote to Speaker Eves and President Thibodeau:
“Under your leadership, the Legislature has failed to provide even a modest amount of funding for low-income Mainers to upgrade to more affordable and efficient heating systems.” The omnibus energy bill, which the governor vetoed, is a direct contradiction of this statement, but you have another opportunity to rise to this challenge.
Efficiency Maine’s home heating efficiency program has been running at full steam for several years now and is also incredibly successful and effective. They have helped well over 10,000 households reduce fuel bills through a wide variety of efficiency improvements, with heat pumps being the most popular. In FY 2015, Efficiency Maine spent $5 million from RGGI for home heating efficiency and those improvements will save $30 million in oil bills.
A 50% allocation would add $7.5 million to Efficiency Maine’s home heating initiatives, allowing it to reach 5,000 – 7,000 additional homes. In particular Efficiency Maine has recently implemented features of its program specifically designed to offer greater assistance to qualified low-income households.
If helping Maine homes become more energy efficiency and helping households lower how much they need to spend on oil is indeed a bipartisan priority, you should use this opportunity to amend this bill and make a real difference for thousands of Mainers.
Thank you.
