PSC Asked to Offset its $330M Efficiency Surcharges with $220M from Sale of Greenhouse Gas Allowances

This week, Multiple Intervenors, a group of industrial and other large electricity-consuming customers, filed a petition at the PSC this week seeking a declaratory ruling to reduce the PSC-created $334 million System Benefit Charge ("SBC") by the expected annual revenue of $220 million from the sale of Greenhouse Gas Allowances. The February 24 petition states:

The need for such an offset is especially compelling given the extremely high cost of electricity in New York, as well as the current economic conditions. Considering these factors and the burdens they place on the State’s businesses and residents, the Commission must take all reasonable actions to avoid the imposition of unnecessary costs and surcharges on electricity customers.

The SBC was created by the PSC without enabling legislation to collect money through electric utility customer bill surcharges to be used to advance energy efficiency. The PSC directs money collected by the utilities to be turned over to a state authority, the New York State Energy Research and Development Authority (NYSERDA), and then NYSERDA contracts with providers to spend the money.

The use of the SBC funds is decided by the PSC, and implemented by NYSERDA. It is not appropriated by the legislature. NYSERDA has used funds to give grants to landlords to submeter electricity, shifting their bills to tenants for inefficient fixtures and equipment still owned by the landlords. See PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants' Rights.

The PSC nearly doubled the amount of the surcharges last year in order to raise the SBC fund from $175 million/year to $334 million/year in a June 23, 2008 Order in its generic energy efficiency proceeding stating:

The electric System Benefits Charge (SBC) is augmented such that beginning on October 1, 2008, the annual level of overall SBC electric revenue collections is increased from $175 million, as previously established, to $334,307,002. . . .

In a parallel development, substantial new revenues are beginning to flow to NYSERDA from the state's sale of greenhouse gas allowances in the RGGI program. According to the RGGI website,

The Regional Greenhouse Gas Initiative (RGGI) is the first mandatory, market-based effort in the United States to reduce greenhouse gas emissions. Ten Northeastern and Mid-Atlantic states will cap and then reduce CO₂ emissions from the power sector 10% by 2018.

States will sell emission allowances through auctions and invest proceeds in consumer benefits: energy efficiency, renewable energy, and other clean energy technologies. RGGI will spur innovation in the clean energy economy and create green jobs in each state.

The revenues from the sale of the allowances are not appropriated by the legislature. According to the Governor's December 19, 2008 press release after the first RGGI auction,

New York's share of the auction proceeds will be approximately $42 million.

New York plans to use the proceeds from the RGGI auction to fund energy efficiency and renewable energy programs and services and other greenhouse gas reduction strategies. The RGGI regulations require that the New York State Energy Research and Development Authority (NYSERDA) use the proceeds for energy efficiency, renewable energy, programs to reduce greenhouse gas emissions in other sectors of the economy and other initiatives.

In its 2007 comments on NYSERDA regulations concerning use of the RGGI allowance sale proceeds, PULP urged NYSERDA to target substantial RGGI allowance revenues to benefit low income consumers. See PULP Urges NYSERDA to Use RGGI Auction Revenue to Support Low Income Energy Efficiency Programs. NYSERDA did not adopt PULP's recommendation and there is no regulatory setaside of RGGI funds for low-income energy efficiency.

Due to the uniform clearing price feature of the NYISO markets, the resulting higher prices will be paid for all wholesale electricity in the state. Fossil fuel generators will incorporate the price of RGGI allowances in their NYISO spot market bids, and these will set the clearing price for all producers -- even those who make electricity with uranium, water or wind, whose costs do not rise because they do not need to buy RGGI allowances.