Positioning begins over CO2 reduction initiative

No one is opposing a bill in the Legislature that calls for creation of a commission to study the issue, but the proposal for a seven-state Regional Greenhouse Gas Initiative to reduce carbon dioxide emissions from power plants has New Hampshire’s largest energy producer and other business interests in the state concerned about the likely impact on electric rates.

“It’s really too soon to tell,” said Martin Murray, spokesman for Public Service of New Hampshire, of the effect of the commission if it’s formed. He said the company only recently received a copy of the memorandum of understanding among the seven states (New Hampshire, Maine, Vermont, Connecticut, New York, New Jersey and Delaware) on a “cap and trade” plan that would allow power plants in the participating states to sell or swap credits for CO2 emissions, while reducing overall emissions by 10 percent by the year 2019.

“I can say that at PSNH we are concerned about any program that would potentially impact our ability to provide power to our customers at a reasonable cost,” and that could happen, Murray said, if the company has to either buy credits to cover emissions from its own generating plants or purchase more power from other sources.

According to Michael Giaimo of the Business & Industry Association of New Hampshire, other businesses are concerned about the effect emissions caps might have on electric rates, though the BIA has endorsed the bill to create a commission to study the proposal.

“The BIA and the whole business community has to pay attention to this,” said Giaimo, the BIA’s vice president of energy and environmental affairs. “There needs to be a proper cost-benefit analysis before the BIA can support anything like RGGI.”

But the RGGI (pronounced “Reggie”) plan has significant support in New Hampshire from, among others, Gov. John Lynch and the state Department of Environmental Services.

“Capping at current levels or even a 10 percent reduction is an extremely modest goal,” said Joanne Morin, an administrator with the DES Division of Air Resources.

When the idea of capping emissions was discussed in the 1990s, the goal of many in the environmental community was to cap emissions at 25 percent below 1990 levels, Morin said.

“If you just look at the energy-efficiency programs that currently exist and consider increasing them by a small amount, you could meet this cap with energy efficiency,” she said.

The proposal also includes flexible mechanisms for reducing greenhouse emissions including the trading of credits with other power companies in the region and offset provisions for potential projects like landfill gas capture, manure gas capture and the capture of emissions from leaks in natural gas transmission.

Giving credits

Supporters say the plan would further the environmental goals enacted in the state’s Clean Power Act of 2002 — the first legislation of its kind in the nation calling for reductions in mercury, nitrous oxide and sulfur dioxide, as well as CO2 pollutants.

In announcing the initiative last December, Governor Lynch said the agreement among the seven states gives New Hampshire the opportunity to “continue the discussion about how we can achieve the goals of RGGI and the New Hampshire Clean Power Act in a manner that is cost effective, protects the environment and encourages energy efficiency and independence.”

According to the memo of understanding, signed by the governors of all seven states, Phase I of the program, to run from 2009-2014, would “stabilize” emissions at 21,253,550 tons for the seven states and 8,620,000 tons for New Hampshire alone. During Phase II (2015-2018) emissions will be reduced by 10 percent, or 2.5 percent per year.

Roughly half of New Hampshire’s initial allocation of 8.6 million tons will go to PSNH, the state’s largest energy producer. About another 25 percent would be allocated to a “set-aside” program to grant credits under the offset provisions, Morin said, with the remaining allotment divided between the two natural gas-burning electric plants in Londonderry and Newington.

Murray said PSNH already produces 6 million tons annually, or 1.7 million tons more than it would be allowed under the initial phase of RGGI.

“If we are short by 2 million credits, we’re either going to have to power down some of our plants or spend more money to purchase more credits. Either way, it’s going to cost our customers money,” Murray said.

The company is in the process of converting part of its coal-burning operation at Schiller Station in Portsmouth to a wood-burning facility, a $70 million project that is expected to reduce carbon emissions from the plants operations by 380,000 tons a year, he said, a reduction that will earn the company credits for use or trade under the state’s Clean Power Act.

It also might be credited under the offset provisions of RGGI, Morin said.

“That would hopefully drive economic development” to other forms of energy production, she said of the offset provisions. “What this program is trying to do is create a very slight market shift to less carbon-intensive energy production,” she said.

That will create economic benefits as well as reduce the risks associated with global warming, Morin said.

“There’s no question climate change is real and is getting quite a bit of attention,” Morin said. “We need to promote energy diversity. The more home-grown diversified energy source we have, the less we have to depend on oil imported from other countries.”

‘Thorough analysis’

Nine states were originally involved in the planning of RGGI, which began in 2003. Massachusetts and Rhode Island have since withdrawn from the program. The seven remaining states are expected to come up with a model for implementing the plan sometime this spring.

New Hampshire’s House Bill 1531 — sponsored by Rep. Lawrence C. Ross, R-Peterborough — will create a commission to study the proposal and issue a report by Nov. 1. A bill to implement the plan is expected in the 2007 legislative session.

At a recent hearing of the House Science, Technology and Energy committee, one committee member disputed the underlying claims about climate change.

“You know, the climate is always in a state of changing,” said William Introne, R-Londonderry, “In the long term, we’re coming out of the ice age. In the short term we’ve had a 1.2 degree change in temperature over the last 20 years.” Introne, a retired Air Force meteorologist, argued there is no convincing evidence that the change is the result of human activity. “The driver of climate change is the sun and the sun does not beam to us at a constant rate.”

At the same hearing, Erika Staaf, representing both the New Hampshire Public Interest Research Group and Clean Water Action, said New Hampshire needs “a strong statewide plan to tackle the growing threat to the environment, human health and public safety.”

Both PSNH and the BIA endorsed the creation of a study commission, however, though not without some reservation.

“We do recognize that climate change is a very serious issue and deserves very serious attention,” Donna Gamache, the utility’s director of governmental affairs, told the committee, adding that the company also hoped the commission would make “a full review of the economic impact” of the plan.

“The biggest unknown for everyone is the cost of the credits,” which would be subject to market fluctuations, said Lynn Tillotson, a generation engineer with the company. Tillotson said that, worldwide, emissions credits have ranged from $1 to $2 per ton on the Chicago Climate Exchange to $30 in the European Union.

The BIA’s Giaimo said the issue “might better be addressed by federal legislation,” but praised the committee for “not passing legislation without a thorough analysis. The (study) commission will provide that thorough analysis.”