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N.H. bill for lower RGGI cap endorsed by Senate panel after passing House

Just two years after lawmakers came close to pulling New Hampshire out of the Regional Greenhouse Gas Initiative, the Legislature is on track to sign off on a 45 percent reduction in the nine-state region’s cap on carbon dioxide emissions.

The RGGI states agreed in February to lower the cap to account for a dramatic decline in emissions since the program got under way in 2008, in part due to growing use of natural gas. A bill to implement that change in New Hampshire’s RGGI-related laws passed the Democratic-led House in March, 190-156, and was endorsed yesterday, 3-2, by the Senate Energy and Natural Resources Committee.

But that doesn’t mean Republicans who opposed RGGI are any happier now with the cap-and-trade program. Sen. Russell Prescott, a Kingston Republican and chairman of the Senate committee, said he’s still concerned RGGI limits New Hampshire’s flexibility and that the state doesn’t have an easy way to exit the program.

“Going through this process, I kept an open mind as long as I could and tried to see if the benefits outweigh the difficulties that I have with RGGI,” Prescott said yesterday. “And coming to those two points, I think that it’s the wrong choice for me to vote for the expansion of this program.”

He voted against the bill, along with Senate Majority Leader Jeb Bradley, a Wolfeboro Republican. It was supported by the committee’s two Democrats, Sen. Martha Fuller Clark of Portsmouth and Sen. Jeff Woodburn of Dalton, as well as Republican Sen. Bob Odell of Lempster.

The legislation next heads to the floor for a vote. The full Senate has 13 Republicans and 11 Democrats.

“We’ll have to wait and see,” Fuller Clark said.

RGGI is a cap-and-trade system with nine participating states: the six states in New England plus Delaware, Maryland and New York. Power plants in those states must buy “allowances” for each ton of carbon dioxide they emit, with the proceeds from auctions of allowances going to the states for energy efficiency and other projects.

In 2011, the Republican-controlled Legislature tried to remove New Hampshire from the program, saying it drives up costs for businesses and residents. But then-Gov. John Lynch, a Democrat, vetoed the bill, and four Republicans joined all five Democrats then serving in the state Senate to sustain his veto.

(Three of those Republicans are still serving in the Senate: Odell, Sen. Nancy Stiles of Hampton and Senate President Peter Bragdon of Milford.)

RGGI caps carbon dioxide emissions in the region at 165 million tons a year. But that number is higher than the actual level of emissions in the region, which in turn depresses the auction price for allowances.

Mike Fitzgerald, administrator of the technical services bureau at the Department of Environmental Services, said the decline in emissions has resulted from a weak economy, energy efficiency improvements (including projects funded by RGGI) and the growing use of natural gas, among other things.

“In any case, emissions in the region have dropped rather radically,” Fitzgerald said. “So lowering this cap is really about coming to what actual emissions are, which was always the intent of RGGI.”

In February, the RGGI states announced they would lower the cap to 91 million tons in 2014. From 2015 to 2020, the cap would drop an additional 2.5 percent a year.

All nine states are in the process of implementing that change in their individual laws and rules, Fitzgerald said. The bill headed to the Senate floor would make the necessary changes for New Hampshire.

If it didn’t pass, Fitzgerald said, the state would be in a sort of limbo, with its laws out of step with the other RGGI states’. Those other states could decide to exclude New Hampshire from allowance auctions, he said, in a sense kicking it out of the program.

Allowance prices are expected to rise with the lower cap, which means higher costs for ratepayers, too. But in New Hampshire, utility customers will have a cushion thanks to a law passed by the Legislature last year that sends auction proceeds above the level of $1 per allowance back to ratepayers in the form of rebates. The rest of the money goes to energy efficiency projects.

In 2011, the average household paid 43 cents more each month for electricity because of RGGI, according to the program. In 2014, assuming the cap drops to 91 million tons, DES and the Public Utilities Commission predict New Hampshire ratepayers will be paying an average of 56 cents more a month.

Without the rebates, DES and the PUC said, it would be 98 cents more a month.

Even if New Hampshire dropped out of RGGI, Fitzgerald said, that extra cost wouldn’t necessarily go away. But, he said, the state would lose revenue from the program.

“Whether New Hampshire is in or out of RGGI, the RGGI costs are embedded in the wholesale price of electricity. So if RGGI is still implemented in all the states around us, we would still have that cost,” Fitzgerald said. “But we would have no revenue from the sale of allowances, because we would have no allowances.”

(Ben Leubsdorf can be reached at 369-3307 or or on Twitter @BenLeubsdorf.)

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