Dylan Voorhees, NRCM Clean Energy Director
Senator John Cleveland, Chair
Representative Barry Hobbins, Chair
Joint Standing Committee on Energy, Utilities & Technology
Testimony of the Natural Resources Council of Maine
Senator Cleveland and Representative Hobbins,
Despite the laudable title, this bill neither creates heating options nor reduces business energy costs.
We agree that Maine people deserve more action to help them lower their heating and other energy costs. This bill doesn’t actual create options. Consumers already have many options. They also face important market barriers for which public policy is needed. These barriers are especially apparent and well documented when it comes to investing in energy efficiency and weatherization. The bill re-directs some existing RGGI funding toward heating programs. If amended, this could be a positive step.
More concerning is the fact that this bill will actually raise business energy costs. It does so by cutting funding for Efficiency Maine. These funds would otherwise be spent on business programs that would save businesses considerably than they cost or those businesses would gain through rebates. We estimate that the impact of these changes would, over a 3-year time period, increase electricity costs for businesses by over $100 million (net present value.)
The bill does seven substantive things, which I will comment on briefly in turn. In sum, five of those things are ill-conceived, unnecessary, and/or will negatively affect Maine energy consumers in the short and/or long-term and should be swiftly set-aside by the committee. One of the seven changes implements regional agreements on RGGI and should be passed. The final one, using some of the RGGI money for heating, has some merit if done carefully and we believe the committee should focus on this provision through work session on this and other related bills.
In the order they appear in the bill, these are the substantial changes in this bill:
1. Political influence. Section 3 of the bill adds two political appointees to Efficiency Maine’s board (and removes the Director of the Housing Authority.) This is an absolutely unnecessary move which will further inject politics into the functioning of Efficiency Maine, which is supposed to be consumer-oriented, including at the Board level. Efficiency Maine was designed to have as much independence from politics as possible. As it is, the Governor already nominates all of the Board members to staggered terms, and his energy director has an automatic seat on the Board.
2. Diluting the mission of Efficiency Maine. At least ten sections of the bill make apparently minor wording changes to the mission of Efficiency Maine or the description of its programs, all of which change the focus from saving energy and efficiency to moving people to more “affordable” energy. In some places, the bill replaces “energy efficiency programs” with “energy and energy efficiency programs.” What does an “energy program” even mean? Saving energy is a clear focus that has kept Efficiency Maine away from picking some fuels over others. Believe me, NRCM believes some fuels are better than others (e.g. environmentally.) But we don’t think Efficiency Maine should be the instrument of those priorities. These deceptively innocuous-looking changes will make the actual work and objectivity of Efficiency Maine much more difficult.
3. Cutting RGGI funding for efficiency. Section 11 of the bill changes Maine’s current wise strategy of directing RGGI revenue toward highly cost-effective energy efficiency. 3-B of this section would spend approximately 60% of RGGI money on bill rebates. The math on this is not hard. It might sound nice, but the result of cutting efficiency spending is to raise electricity costs. Roughly $8-10 million would otherwise be spent on efficiency for businesses with a benefit to cost ratio of 3:1. This will undermine what has made RGGI so successful for our economy, and take away a valuable source of funding for efficiency.
4. RGGI funds for residential heating. Section 11 of the bill directs approximately 40% of the RGGI funds toward a mix of residential heating-related investments. This language is a little unclear to us. Some of it is positive, because it includes the terms “lower heating demand” and “energy efficiency”. However other language is not clear, such as “technology-neutral”. Overall it seems too open-ended to give sufficient direction to the Trust. If part of the intention is to provide rebates for switching fuels regardless of any efficiency gain, then this should be changed. (My testimony on LD 1426 contains significant information on fuel-switching vs. efficiency.)
5. Open-ended uses for electric ratepayer funds. Section 13 makes very significant changes to how electric ratepayer funds could be used. This section would allow electric ratepayer funds currently used for reducing electricity demand and benefiting electric ratepayers could be used for totally open-ended purposes, the scale of which could be almost limitless. The implications of this change are potentially enormous and it would be extremely concerning for the committee to adopt these provisions without extensive analysis. It could unravel the entire justification of ratepayer funding for energy conservationâthe justification not just in Maine for decades, but in almost all other states. The challenge is that it might appear superficially attractive to ask electric ratepayers to pay for open-ended purposes like weatherizing Maine homes or converting huge numbers of Maine homes to different heating equipment. As much as NRCM favors additional funding for cutting heating cost through efficiency, we hope you will join us in rejecting asking electric ratepayers to be the funding source. If you use ratepayer funds for totally open-ended energy purposes, then it begins to resemble taxation, not procurement of a resource to quantitatively lowers ratepayer costs.
6. Eliminating efficiency funding for industrial customers. Section 17 of the bill would exempt about 15% of Maine’s electricity consumption from Efficiency Maine programs. There is no good reason to do this, and again, this will raise electricity costs for these consumers. When combined with the efficiency cuts proposed for RGGI, this would leave our largest manufacturers and employers (representing 30% of Maine’s electricity use) with almost zero funding for efficiency programs to benefit them. Maine should be going in the opposite direction. All ratepayers benefit somewhat from efficiency programs, even as non-participants. There are huge savings opportunities for cost-effective savings in large businesses. The PUC recently recommended significantly higher ratepayer investment in efficiency, including in large businesses, in order to lower electricity costs.
7. Implement reforms to RGGI emissions program. Sections 21 onward in the bill are the implementing statutes corresponding to the recent agreement among the states to reform RGGI, primarily by resetting the programs emission limits to current emissions. These important changes were extensively debated and analyzed by the states. They are necessary for Maine to remain in RGGI. If we do not pass these changes in the next year or two, Maine will be forced to withdraw. The impact of that would be unequivocally negative from an economic and ratepayer perspective. With other states continuing the program, impacts on electric markets and ratepayers would be unchanged. But we would lose program revenues which can be used to benefit energy consumers in Maine. We believe the language of Section 24 need to have some additional language to make full reference to the changes adopted regionally. The statute does not need to contain the details of these changes, but the rules will need to be properly updated. (We will provide our suggested language before the work session.)
In conclusion, we appreciate that the Governor’s proposed legislation recognizes that more could be done for heating efficiency, and that Maine would remain better off as a continued participant in RGGI. However the other changes in the bill will take Maine in the wrong direction on energy efficiency, will hurt businesses by raising electricity costs, and undermine the effectiveness of Efficiency Maine.