Comments on Northeast Regional Electric Sector Carbon Cap (RGGI) Model Rule

Rob Sargent, Senior Energy Policy Analyst

May 2nd, 2006 Hartford, CT

05/02/06 Rob Sargent, National Association of State PIRGs

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Core Principles Guiding Implementation of Power Sector Carbon Cap

1. Keep It Real by ensuring that emissions reductions go well beyond reductions that would occur from other programs and/or activities.

2. Keep it Simple by limiting the number of flexibility mechanisms allowed to achieve the modest reductions envisioned in the first phase of this program

3. Put Customers First by auctioning off allowances rather than giving them away to polluters for free and ensuring that allocations are spent wisely in accordance with the goals of RGGI and other environmental objectives.

4. Put Global Warming First by having the model rule reflect a declining emissions trajectory beyond 2019.

05/02/06 Rob Sargent, National Association of State PIRGs

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Keep it Real

At a Minimum, Maintain Integrity of the Original Cap

1. Cap should cover all eligible fossil units. Don’t exempt “behind the meter” generation.

2. Cap should cover all fossil fuels used in generating facilities.

3. The Model rule must have some a backstop to protect against net emission increases outside the region (leakage).

05/02/06 Rob Sargent, National Association of State PIRGs

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Keep it Simple

Limit “Flexibility Mechanisms”; which create loopholes, make the program unnecessarily cumbersome and undermine the goal of the program.

1. Price caps and safety valves, as proposed, should be revisited.

Safety valves, at current levels, could undermine real reductions from the program

Low price caps will tempt generators to “buy their way out” of the requirement to reduce emissions.

Offsets should be limited to keep focus on real reductions from CO2 emitting power generation.

05/02/06 Rob Sargent, National Association of State PIRGs

5

Put Customers First

Allowances created under this program should be auctioned off to polluters, not given away for free. The model rule should better reflect this principle and be much clearer that the 25% set aside for consumers is the minimum and that the expectation is that the % of consumer allowances will grow over time.

05/02/06 Rob Sargent, National Association of State PIRGs

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Put Customers First

Money from the sale of allowances should be spent in ways that maximize the value of the program for consumers and should be guided by the fact that energy conservation and efficiency reduce bills, lower prices and are the most cost effective method of avoiding and reducing global warming emissions.

05/02/06 Rob Sargent, National Association of State PIRGs

7

Put Customers First

Money set aside for “strategic energy purposes” must be spent wisely and in accordance with the goals of RGGI and other environmental objectives. And should be used to:

1. provide additional benefits for activities or projects that would not have occurred anyway and not replace existing programs or investments; and

2. support activities that do not pose a significant risk to human health and the environment.

05/02/06 Rob Sargent, National Association of State PIRGs

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Put Global Warming First

Prioritize reductions from within the electricity sector so that the power sector in the region can begin doing its share of what is necessary to stabilize carbon dioxide emissions in the atmosphere.

The model rule should reflect an expectation that emissions will need to continue to decline beyond 2019.