For ReleaseWednesday, Sept. 28, 2005

BUSINESS LEADERS URGE NORTHEAST LAWMAKERS TO RECONSIDER RGGI PROPOSAL

ALBANY—Significant changes must be made to the proposed Regional Greenhouse Gas Initiative (RGGI) to minimize impacts on the economy of the Northeast, business association leaders in nine northeastern states wrote in a collective letter to their respective Governors.

In the September 22 letter to Governor George Pataki and his counterparts in Connecticut, Delaware, Massachusetts, Maine, New Hampshire, New Jersey, Rhode Island and Vermont, the organizations criticized the plan as likely to drive electric prices higher for businesses and residents.

“For the private sector businesses we represent, the costs of electric power, and the reliability of our power grids, are priority issues,” the letter said. “Obviously, recent developments have made energy prices a significant issue for the average citizen as well.”

The letter was signed by Daniel B. Walsh, president and CEO of The Business Council of New York State, as well as the leaders of eight other business and trade organizations representing the other states affected by the proposal.

In New York, the RGGI proposal would be the latest in a series of actions by the Public Service commission and Department of Environmental Conservation that are inflating electric prices by hundreds of millions of dollars. The state Energy Plan calls for policies that would reduce New York’s high energy costs.

“The RGGI region already has the highest average electric prices in the continental United States, with New England region at 52 percent above the national average, and mid-Atlantic region at 31 percent [above the national average],” the letter said. “For many businesses, these high energy costs are already having an adverse impact on their competitiveness.”

The proposal poses a “significant risk” of increasing electric power prices in the region by driving generators toward natural gas, imposing additional costs for the acquisition of carbon dioxide allowances or offsets, and requiring upgrading of combustion units, the letter said.

The letter also expressed concern that the proposal would affect power supply and the reliability of the power grid. “The proposal will pose another impediment to the siting of new generating capacity in the RGGI region,” the letter said. “It may also impact the financial viability of some existing generating units.”

Furthermore, “power plants in the RGGI region are already among the ‘cleanest’ and most energy efficient in the nation,” the letter said.

The letter also said that capping of carbon emissions in the region will make imports of electricity into the region from higher carbon, lower-cost generating plants located out of the region more attractive.

“Because of these very real concerns, we call on the RGGI governors to clearly demonstrate how RGGI will impact energy prices, energy supplies and suppliers, and economic growth in the Northeast before our states make a final commitment to the RGGI process,” the letter said.

"Every RGGI state should promulgate or enact the proposal before any state's rule goes into effect," the letter said. "If there is any benefit to RGGI, its value is that it attempts to address climate change on a broader basis than a state level." The letter emphasized that if one or more states did not enact the the proposal "emission leakage to those states will occur and the economic consequences will be unfairly distributed."

The proposal should provide that it would not be effective in any one state until all other RGGI states have enacted the proposal, the letter said.

The letter suggested that the proposal could be modified to make it “realistic, usable” and “minimize impacts on the economy of the Northeast.”

The letter suggested that there be no limit on the use of offsets to “ensure that affected sources have access to flexible and low-cost emissions reduction opportunities.”

“Because RGGI may significantly raise retail electric rates, we recommend that the proposal contain a ‘circuit breaker’ or ‘safety valve’ mechanism that, when the price of credits reach a certain level, would trigger a pause in the regional emissions cap or would allow generators to purchase more credits at a set price,” the letter said.

The letter also recommended that if a national program is adopted the RGGI should automatically sunset. “The value of RGGI, if any, is that it provides a model for a national climate change program,” the letter said. “Accordingly, the proposal should provide that it sunsets when a national program is developed.”

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