Senator Mark Lawrence, Chair
Representative Seth Berry, 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 (NRCM). NRCM opposes this bill, which—despite its title—would limit the extent to which funds from the Regional Greenhouse Gas Initiative (RGGI) can be used for energy efficiency. Using RGGI funds for energy efficiency improvements is the best way to benefit energy consumers and lower energy costs for Maine.
This bill is unnecessary. Repeated analysis has shown that our current approach to RGGI is working well. The use of RGGI auction revenue for energy efficiency is one of the reasons why RGGI has been shown to lower total energy costs in participating states. The fact that Maine has consistently used a relatively high proportion of its funds for energy efficiency has meant that Maine’s total benefits from the program are among the highest within RGGI states.
Efficiency Maine makes extremely effective use of RGGI funds. I encourage the committee to review the background materials about RGGI, and the use of RGGI funds in Maine, which I provided on LD 398 from Representative Kessler. Your passage of that bill to give Efficiency Maine some additional flexibility in allocating those funds reflects this success and public confidence in Efficiency Maine on this matter.
Since discussions about RGGI began and the program was initially developed in 2005-2007, there were fears that putting a limit on carbon emissions from power plants would lead to high prices for carbon allowances, which would translate into higher electricity supply costs. Nothing has been further from the truth. If RGGI has had any flaw, it is that policymakers routinely overestimated the “cost of compliance”. In fact RGGI allowance prices have been very low. For years, prices remained at the auction floor of around $1.50 per ton. Even after states took major action to reduce oversupply of allowances, prices have remained low. The average price over 42 separate allowance auctions has been $3.45/ton. Prices have rarely exceeded $5.00/ton and there is no reasonable projection that significant increases are on the horizon. The bill may be a “solution” in search of a problem.
To the extent RGGI allowance prices rise above $5, the bill would create inequity among electric ratepayers by giving a few large customers direct rate relief. This is not NRCM’s primary area of concern. However, the committee should be aware that the past several years have resulted in disproportionately large direct payments to the large industrial consumers, at the expense of other customers and investments in energy efficiency. During that time, large industrial customers made fewer investments in energy efficiency. Under current law, those payments are phasing out and large industrial customers will once again be fully eligible for RGGI-funded energy efficiency programs at Efficiency Maine. That is the right direction.
When RGGI was first implemented, there was a ceiling on the use of funds for energy efficiency of $5/ton. (Again, this reflected an unfounded fear by some about major electricity impacts that would need to be softened by direct rate relief.) At that time, Maine had nearly six million tons of allowances to sell annually. At $5/ton, they would have fetched nearly $30 million/year for energy efficiency. (In fact, Maine never received close to those prices/funds.) As a result of declining carbon caps, Maine today has closer to two million tons of allowances to sell. Limiting the energy efficiency funding to the first $5/ton would mean an efficiency funding limit of only $10 million/year. This proposal, which was reasonable more than a decade ago, is not appropriate today.
Investing in energy efficiency is investing in lower energy costs for years to come. When energy prices are very high it becomes much more tempting to slow investments in efficiency in order to pay (or subsidize) energy costs in the short term. But it is especially when energy costs are high that we wish we had maximized energy efficiency improvements. Energy costs are not high now—and they won’t be high as a result of RGGI prices of $6 or $7 or $10/ton. Now is the time to fully invest in energy efficiency and send the signal to the energy efficiency sector and energy consumers large and small that Maine is serious about cost-effective improvements in our buildings, equipment, and industry.