February 17, 2013

Michael Cuzzi: Part of governor's energy reform plan deserves a closer look

With changes, some proposals could win bipartisan support and boost the economy.

It's not often that I agree with Gov. LePage, particularly on energy issues. But the governor's plan to dedicate some Regional Greenhouse Gas Initiative (RGGI) revenues to fund more residential fuel conversions is promising.

We don't know the specifics because the legislative language is not yet available, but Patrick Woodcock, the director of the Governor's Energy Office, laid out the general framework in his testimony before the legislature's Energy, Utilities and Technology committee last week.

RGGI is a market-based approach to reducing regional greenhouse gas pollution by requiring all power plants of 25 megawatts or more in ten participating New England and mid-Atlantic states to purchase allowances for their carbon dioxide emissions.

Those costs are then passed on to electricity customers, representing 46 cents on the average monthly electric bill. Money raised through the allowances is distributed amongst the ten RGGI states.

Since 2008, Maine has benefited from over $34 million dollars in RGGI revenues, which are disbursed locally through the Efficiency Maine Trust. As its name implies, the trust primarily funds electricity efficiency projects, such as home weatherization.

To date, the RGGI funds for those projects have created more than $102 million in lifetime electricity savings for Maine ratepayers, as well as 1,100 job-years in the efficiency and energy sectors.

However, what RGGI can and should do more of is facilitate our transition from expensive oil heat to other cleaner, cheaper domestic fuel sources.

The average Maine family spends more than $3,000 on oil each year to heat their homes. Alternatives to oil, while commercially available, require capital-intensive conversions that are cost prohibitive for most families. However, Efficiency Maine's own programs have demonstrated that financial incentives in the form of loans and rebates can be very effective in overcoming this cost barrier.

That is why the governor is proposing to use some RGGI dollars to provide rebates to fund residential fuel conversions from oil to advanced systems such as heat pumps, wood pellets and natural gas, all of which also reduce greenhouse gases. That's an important and laudable policy reversal for a governor who proposed withdrawing Maine from RGGI in the last legislative session.

Gov. LePage recognizes that if we can provide incentives to homeowners to invest in these alternative fuel technologies, participating families could halve their energy costs while also reducing greenhouse gas emissions and using more domestically sourced fuels. That's a win-win-win.

Even so, one can credibly argue that efficiency investments should precede fuel conversions. After all, swapping out oil for natural gas in an inefficient home may save consumers money on fuel costs but their heat (along with the RGGI money which funded the conversion) will continue to leak out drafty windows, doors and attics.

The biggest bang for our RGGI dollars, then, comes when efficiency programs and fuel conversions are coupled in that order.

I part company with the governor on his proposal to eliminate the so-called System Benefit Charge on all business electricity consumers. Theoretically, that exemption would save businesses $5.5 million annually in electricity costs, but only by gutting a program that saves Maine businesses millions more than that every year.

In 2012, Efficiency Maine's Business Incentive Program used system benefit funds to help more than 1,600 Maine businesses save more than $44 million in lifetime energy costs. In 2011, over 1,200 Maine businesses participated, creating more than $47 million in lifetime savings.

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