RGGI running $600K deficit in New Hampshire
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(CONCORD) Plummeting demand for carbon allowances has left New Hampshire officials $600,000 short of the grants they’ve made with the state’s Regional Greenhouse Gas Initiative revenues. The quarterly RGGI auctions are the sole source of revenues for the state’s Greenhouse Gas Emissions Reduction Fund (GHGERF), which has pledged more in its first two years than the RGGI program generated for the Granite State in its first three years.
When the Legislature signed New Hampshire up for RGGI in 2008 it set aside $1.2 million from the future auctions to boost the state’s existing Weatherization Program. The Legislature also diverted $3.1 million from the GHGERF in June 2010 as part of a budget balancing package put forward by Governor John Lynch to close the state’s $300 million deficit. In 2009, the Public Utilities Commission handed out $17.66 million from the GHGERF. In 2010, the PUC issued $13.4 million in grants.
With demand in the RGGI auction falling since 2009, New Hampshire and its nine partner states began to see less revenue from each quarterly auction. The PUC did not make any awards from the GHGERF in 2011. You can see how all of RGGI’s New Hampshire revenues were spent in the Josiah Bartlett Center’s February 2010 report, RGGI in New Hampshire: The First Two Years.
RGGI Inc. began offering carbon allowances for sale in September 2008. New Hampshire began its participation in the second auction, held in December 2008. The first three auctions each generated more than $4 million for the state. But RGGI revenues have not reached that level since, topping $3 million just twice since September 2009, and bottoming out at less than half a million dollars in September 2011.
In the five auctions held between December 2008 and December 2009, New Hampshire realized more than $18.2 million. That was slightly more than the Weatherization set-aside and the 2009 round of GHGERF grants. As RGGI prices dropped to the preset reserve price in 2010, New Hampshire revenues fell to a little more than $10 million. The PUC and the Legislature spent $16.5 million that year. RGGI revenues dropped again in 2011, as millions of carbon allowances went unsold, even at the floor price of $1.89 per ton. New Hampshire took in just $6.5 million, not quite enough to cover its commitments from the year before.
The Legislature and the PUC committed a total of $35.36 million dollars in RGGI’s first two years, while auction revenues from the program’s first three years brought in only $34.7 million.
The deficit won’t impact New Hampshire General Fund budget. Jack Ruderman is Director of the Sustainable Energy Division at the PUC, and he tells NH Watchdog that not all of the grants awards in 2010 have been paid out yet.
“We’re not going to have any trouble paying out those grants,” Ruderman explains. He says while RGGI is the only way to replenish the GHGERF, they can use proceeds from next year’s RGGI auctions to fulfill last year’s grants.
Ruderman says most of the RGGI awards made in 2010 weren’t paid out in a lump sum, and that his Division in tracking the cash flow from RGGI Inc. to make sure payments are made. If RGGI revenues were to dry up completely, either from the collapse of the carbon market or from New Hampshire withdrawing from the interstate compact, he says the PUC would be able to take back grants that has been awarded but not yet paid.
December’s Fourteenth Quarterly Auction, which netted nearly $1.8 million for New Hampshire, was the final sale in the program’s first three-year control period, which runs from 2009 through 2011. Covered utilities, including five fossil fuel power plants in New Hampshire, will need to produce enough RGGI allowances in March to account for every ton of carbon dioxide they released over those three years. January marks the beginning of the second three-year control period, and RGGI allowances go on sale in March. Ruderman expects those revenues to cover the GHGERF’s outstanding commitments. If the state raises more than $600,000, any additional funds could go towards another round of energy efficiency grants, or the Legislature could again decide to use RGGI revenues for other purposes.
RGGI will be one state short in its second three-year cycle. New Jersey is withdrawing from the program next month, though its power plants will have to show compliance over the last three years in March. New Hampshire’s Legislature approved a RGGI repeal bill, but Governor John Lynch’s veto held up in the State Senate in September.
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