SENATE BUDGET AND APPROPRIATIONS COMMITTEE

 

STATEMENT TO

 

SENATE COMMITTEE SUBSTITUTE FOR

SENATE, No. 2976

 

with committee amendments

 

STATE OF NEW JERSEY

 

DATED:  JANUARY 3, 2008

 

      The Senate Budget and Appropriations Committee reports favorably Senate Bill No. 2976 (SCS) with committee amendments.

      The Senate Committee Substitute, as amended by the committee, would authorize the Department of Environmental Protection (DEP) to sell, exchange, retire, assign, allocate, or auction allowances from greenhouse gas emissions.  The bill sets forth requirements to be followed by the DEP if allowances are to be conveyed using an auction.

      The bill provides that dispatch agreement facilities, as defined in the bill, may be eligible to purchase allowances at a price of $2 per allowance.  The bill sets forth the process for such certification, and establishes civil penalties of not more than $500,000 for each offense and revokes the eligibility to be certified as a dispatch agreement facility for signatories to a sworn affidavit who knowingly give or cause to be given any false or misleading information or who knowingly make any false or misleading statement concerning such eligibility.

      The bill would dedicate any revenues received through the auction or other conveyance of allowances to a special non-lapsing fund, the “Global Warming Solutions Fund.”  The bill provides that the revenues in the fund be used for the following purposes:

      (1) 60% by the New Jersey Economic Development Authority (EDA), to provide grants and other forms of financial assistance to commercial, institutional, and industrial entities to support end-use energy efficiency projects and new, efficient electric generation facilities that are state of the art, as determined by the DEP, including but not limited to energy efficiency and renewable energy applications, to develop combined heat and power production and other high efficiency electric generation facilities, and to stimulate or reward investment in the development of innovative carbon emissions abatement technologies with significant carbon emissions reduction or avoidance potential;

      (2) 20% by the Board of Public Utilities (BPU) to support programs that are designed to reduce electricity demand in the low-income and moderate-income residential sector with a focus on urban areas, including efforts to address "heat island effect" and reduce impacts on ratepayers arising from the enactment of this bill into law;

      (3) 10% by the DEP to support programs designed to promote local government efforts to plan, develop and implement measures to reduce greenhouse gases, including, but not limited to, technical assistance to local governments, and the awarding of grants and other forms of assistance to local governments to conduct and implement energy efficiency, renewable energy, and distributed energy programs and land use planning where the grant or assistance results in measurable reductions in greenhouse gas emissions or measurable reductions in energy demand; and

      (4) 10% by the DEP to support programs that enhance the stewardship and restoration of the State’s forests and tidal marshes that provide important opportunities to sequester or reduce greenhouse gases.

      Moneys in the fund may also be used to cover the costs incurred by the EDA, the BPU, and the DEP in administering their responsibilities under the bill.

      The bill directs the DEP, in consultation with the BPU and the EDA, to adopt guidelines and a priority ranking system to be followed to award monies from the “Global Warming Solutions Fund,” and the bill sets forth evaluation criteria to be included in the guidelines and priority ranking system.

      The bill further provides that, within three months after the enactment of federal law providing for implementation of a national emissions allowance trading program, the DEP commissioner would render an interim decision as to whether the national program is substantially comparable to the greenhouse gas emissions allowance trading program in which the State is participating at that time.  If the DEP commissioner determines that the national program is substantially comparable to the existing greenhouse gas emissions allowance trading program being implemented in the State, then the DEP would take such anticipatory administrative action in advance of the adoption of rules and regulations providing for implementation of a national emissions allowance trading program in order to minimize any delay in the State’s participation in the national program.  Further, within three months after the adoption of rules and regulations providing for implementation of a national emissions allowance trading program, the DEP commissioner would render a final decision as to whether the national program is substantially comparable to the greenhouse gas emissions allowance trading program in which the State is participating at that time.  If the DEP commissioner determines that the national program is substantially comparable to the existing greenhouse gas emissions allowance trading program being implemented in the State, the DEP would thereafter sell, exchange, retire or otherwise convey allowances only as part of the State’s participation in the national program and may consider the value of allowances or allowance auction proceeds directed to the State or other entity to benefit New Jersey energy consumers.

      The bill also provides that the DEP commissioner and the BPU president, or their respective designees, are authorized to enter any agreement or arrangement with the appropriate representatives of other states, including the formation of a for-profit or non-profit corporation, any form of association, or any other form of organization, in this or another state in order to further the purposes of this bill upon enactment into law or the “Global Warming Response Act.”  In addition, the bill authorizes the DEP commissioner and the BPU president, or their respective designees, to participate in any such corporation, association, or organization, and in any activity in furtherance of the purposes thereof, in any capacity, including, but not limited to, as directors or officers.  The bill validates any actions, consistent with, and that further the purposes of, this bill upon enactment into law and the “Global Warming Response Act,” taken to form such corporation, association or organization, to participate in its activities, or to enter an agreement or arrangement prior to the date of enactment of this bill into law.

      The bill amends current law (paragraph (2) of subsection c. of section 38 of P.L.1999, c.23 (C.48:3-87)) to require the BPU, by January 1, 2009, to adopt a greenhouse gas emission portfolio standard to mitigate leakage or another regulatory mechanism to mitigate leakage.  The bill specifies that, unless the Attorney General or the Attorney General’s designee determines that a greenhouse gas emissions portfolio standard would unconstitutionally burden interstate commerce or would be preempted by federal law, the adoption by the BPU of an electric energy efficiency portfolio standard, a gas energy efficiency portfolio standard, or any other enhanced energy efficiency policies to mitigate leakage would not be considered sufficient to fulfill the requirement for the adoption of a greenhouse gas emissions portfolio standard to mitigate leakage or another regulatory mechanism to mitigate leakage.

      The bill further provides that electric public utilities and gas public utilities, on a regulated basis, may provide and invest in energy efficiency and conservation programs, in their respective service territories, and invest in Class I renewable energy resources or offer Class I renewable energy programs.  These programs may be offered regardless of whether the energy efficiency or conservation program involves facilities on, or the renewable energy resource is located on, the utility side or customer side of the point of interconnection.  The bill also provides that the BPU shall allow electric public utilities and gas public utilities to recover program costs through their regulated rates.

      Finally the bill requires the DEP and the BPU to jointly hold a public hearing or hearings on allowance prices and develop an action plan for immediate ratepayer relief if the prices exceed $7.00 for two consecutive regional auctions, and issue a report to the Governor and the Legislature with their findings and recommendations concerning allowance prices.

 

COMMITTTEE AMENDMENTS:

      The committee amendments: 1) change the definition of “compliance entity” to remove the definition’s exclusionary provision of “an electric generating unit with a nameplate capacity equal to or greater than 25 megawatts of electrical output that holds an operating permit from the DEP containing a condition restricting the supply of the unit's annual electric output to the electric grid to less than or equal to 10 percent of the annual gross generation of the unit,” and replace such exclusionary provision with “any cogeneration facility or combined heat and power facility that is an ‘on-site generation facility’ as that term is defined in section 3 of P.L.1999, c.23 (C.48:3-51) and sells less than 10 percent of its annual gross electrical generation;” 2) provide that the DEP, in exercising the authority to sell, exchange, retire, assign, allocate, or auction any or all allowances that are created by, budgeted to, or otherwise obtained by the State in furtherance of any greenhouse gas emissions allowance trading program, shall exclude from the requirement to purchase or acquire any allowances under the program pertaining to any cogeneration facility or combined heat and power facility that is an “on-site generation facility” as that term is defined in section 3 of P.L.1999, c.23 (C.48:3-51) and sells less than 10 percent of its annual gross electrical generation; 3) change from one to two percent of the total amount in the fund each year the EDA may use to pay for administrative costs justifiable and approved in the annual budget process, incurred by the EDA in administering the provisions of the bill; 4) require the DEP to take into consideration the principles and goals of the New Jersey Energy Master Plan in the rule making process; 5) remove vehicle miles traveled as a factor in the priority ranking system; 6) allow the DEP Commissioner to consider the value of allowances or allowance auction proceeds directed to the State or other entity to benefit New Jersey energy consumers when considering the national program; 7) change from January 1, 2009 to July 1, 2009 the date the BPU is to adopt the greenhouse gas emissions portfolio standard; and 8) provide that, unless the Attorney General or the Attorney General’s designee determines that a greenhouse gas emissions portfolio standard would unconstitutionally burden interstate commerce or would be preempted by federal law, the adoption by the BPU of an electric energy efficiency portfolio standard, a gas energy efficiency portfolio standard, or any other enhanced energy efficiency policies to mitigate leakage would not be considered sufficient to fulfill the requirement for the adoption of a greenhouse gas emissions portfolio standard to mitigate leakage or another regulatory mechanism to mitigate leakage.

      As amended and reported by the committee, Senate Bill No. 2976 SCS is identical to Assembly Bill No. 4559 ACS (1R) ACS.

 

FISCAL IMPACT:

      The OLS estimates that $46 million in emission allowances could be purchased annually.  This reflects one scenario which assumes that 23 million tons of emissions, the figure calculated by the RGGI as the yearly emissions budget cap for New Jersey, were sold at $2 per ton.  This estimate, however, can vary greatly, depending on the price of allowances sold at any given time.  It should also be remembered that the estimated revenue level assumes that all available allowances will be purchased at one price.  Since there is no assurance that this will occur, more reliable estimates of revenue levels can be determined only several years after enactment.  In any case, all revenues less administrative expenses, are dedicated for specific program purposes.

      The OLS estimate of $3.68 million in State costs is again based on the assumption that $46 million in allowance revenue will be generated.  This sum reflects eight percent of $46 million, the percentage allocated under the committee substitute for program expenses incurred by the DEP, the BPU and the EDA.  The OLS cannot, however, determine at this point in time whether program costs will be fully supported by this allocation level.  As mentioned above, reliable projections can be better calculated after actual fund revenues and incurred costs are realized during the first year or two after enactment.  In any case, State funding may be needed during the first year after enactment to support implementation costs prior to the generation of sufficient allowance revenues.  It is assumed that any such appropriations would likely be repaid from the Global Warming Solutions Fund once sufficient revenues are collected.