A new bill in the House aims to ramp up clean energy, but advocates say it falls short

After decades (and decades) of trying to reform the way that energy projects are approved and sited in Massachusetts, legislators are poised to notch a win after a House energy bill passed Wednesday night.

The reforms — which are expected to cut approval times to less than half the current speed — may seem in the weeds, but they are crucial for expeditiously building out all of the substations and transformers needed to support a transition from fossil fuels to electricity.

“We need to get a handle on the orderly decommissioning of the gas system,” said Kyle Murray, Massachusetts program director at the clean energy advocacy group the Acadia Center. “This isn’t saying we’re going to turn it off overnight, because you can’t do that. But we need a plan in place.”

The Senate bill also leans on decommissioning leaky gas pipes when possible, rather than just replacing or repairing them.

To read the full article from the Boston Globe, click here.

The Rocky Road to Performance-based Regulation in Connecticut

In the sometimes sleepy world of utility ratemaking, Connecticut is frequently making headlines over public disputes between the state’s utilities and their regulators.

PBR encompasses a wide range of regulatory approaches including financial incentives and penalties, performance metrics and scorecards, multi-year rate plans, and revenue decoupling, all aimed at achieving goals and outcomes not explicitly considered in traditional ratemaking.

“Under cost-of-service regulation, we see a real tension between the kinds of investments that earn utilities an allowed rate of return and those they pass on to customers as operating expenses,” Oliver Tully, director of utility innovation at the Acadia Center, told RTO Insider. “We see a situation where the high capital-cost investments may not be the ones that are actually best for ratepayers and the grid overall.”

Traditional regulation, Tully said, can lead to “a clear misalignment between the incentives that the utilities face when making investment decisions and the policy priorities that the states have, especially around clean energy, equity, greenhouse gas emissions and affordability.”

Some advocates have expressed concern that the pushback to Connecticut’s proceeding could discourage other states from considering the pursuit of comprehensive PBR.

Acadia’s Tully said that, while he views the Connecticut proceeding as “a model for other states to follow,” he has been disappointed by the utilities’ response and is “a little bit fearful of what this could mean for other states.”

To read the full article from RTO Insider, click here.

Utility Rate Design Is a Key Piece of the Energy Transition Puzzle

What is Rate Design?

In order to deliver energy in the form of electricity and gas, utilities oversee and operate the wires, substations, pipelines, and other equipment that together make up the energy distribution systems. Utilities make regular investments in that infrastructure to help meet demand and maintain reliability. Utilities then recover the cost of those investments through customers’ monthly bills. Rate design is the process of determining how exactly to allocate those costs to ratepayers across the many residential, commercial, and industrial customers that make up a utility’s service territory.

As states consider how to accelerate the clean energy transition, utility rate design is a vital piece of the puzzle. Rate design is one of the fundamental tools that regulators have to ensure that utilities have sufficient revenues to bring power to our homes and businesses. But rate design is also a powerful lever for achieving policy goals related to clean energy, equity, affordability, and greenhouse gas emissions.

Why does Rate Design Matter?

Today, as customers face increasingly high utility bills, it is vital for regulators to get rate design right. In Massachusetts, for example, average energy burden (the percentage of household income spent on energy expenses) for low-income households is around 10 percent, and—remarkably—energy burden for some low-income households can reach as high as 31 percent.¹ Experts generally agree that customers are energy burdened if they spend 6% of their incomes or more on energy. It is important to note that recent increases in utility bills in the Northeast have been a direct result of an overreliance on gas in the region. Gas and other fossil fuels used to generate electricity are susceptible to price spikes, which we have seen especially during recent winters, and these costs are passed on directly to customers.²

Decisions over how to allocate energy system costs through rates have enormous implications not only for the energy burdens that customers face, but also for the success of building and transportation electrification, deployment of distributed energy resources like rooftop solar and battery storage, and many other programs and policies.

Utility bills are made up of the 1) costs for the generating resources that provide power (e.g. a wind farm or a gas plant); 2) costs that cover building and operating the transmission and distribution systems; and 3) funding for range of important policies and programs, such as energy efficiency programs and bill assistance. These costs are recovered through a combination of fixed charges, which stay the same every month, and volumetric charges, which vary depending on the amount of electricity or gas a customer uses. The majority of a residential customer’s bill comes from volumetric charges (i.e. the volumetric rate times the amount of electricity or gas consumed), so energy efficiency improvements that reduce consumption are a primary way of lowering bills.

Smart Rate Design Can Accelerate the Clean Energy Transition

As states work to reduce greenhouse gas emissions, utility rates must enable affordable and efficient electrification of our buildings and transportation sectors. In an effort to incentivize customers to electrify their homes, some jurisdictions are considering higher fixed charges and lower average volumetric rates. This would mean that customers who install electric heat pumps, for example, would not be penalized for using more electricity. This may be a promising solution to enable broad electrification, but regulators must prioritize efficient electrification by ensuring that incentives for energy efficiency are preserved and that customers and installers right-size electrification measures and avoid unnecessary or overly expensive system upgrades.

Regulators must also be careful to consider potential knock-on effects for other customers. In the past, stakeholders, including Acadia Center, have rightly (and successfully) pushed back against higher fixed charges, which are unresponsive to changes in customers’ behavior and therefore stay the same no matter what a customer does to reduce their demand, such as installing more efficient lighting or appliances. Higher fixed charges can disproportionately burden lower income customers and create a disincentive for energy efficiency investments, which may become less financially attractive as volumetric charges are replaced by fixed charges.

At the same time, customers with rooftop solar may face different incentives, and rate designs that work in favor of electrification may have unintended negative consequences for those net metering customers. As fixed charges grow, the value of rooftop solar and the payments received for exporting excess power to the grid may decrease. As regulators consider the allocation of costs between fixed and volumetric charges, they must be sure to prioritize equity and affordability, while preserving sufficient price signals for energy efficiency and other distributed energy resources like rooftop solar and battery storage.

Although the rates paid over time for the electricity a heat pump or electric vehicle uses (i.e. the operational costs) are an important piece of the decision to electrify, the upfront costs of installation are perhaps an even greater barrier to customer adoption. States should pursue both rate design solutions and efforts to improve the upfront economics of electrification.

In designing rates to enable affordable electrification, regulators should explore all possible methods to help customers manage utility bills and reduce their energy burdens. This includes a broad set of solutions, such as low-income discount rates, as well as more comprehensive approaches, such as Percentage-of-Income Payment Plans, which cap energy costs as a percentage of household income (e.g. so that customers pay no more than 6% for energy, for example). Increased access to programs such as community solar can also help to reduce bills.

States in Northeast also have lots of room for growth in implementing rates that more closely track the changes in energy prices throughout the day. By creating an incentive for customers to adjust their demand throughout the day in response to clear price signals, time-varying rates can help customers lower their electricity bills while delivering benefits to the grid overall. Time-varying rates can help reduce peak demand, which in turn reduces the reliance on the dirtiest, most expensive sources of power used to meet periods of highest demand. The many consumer and system-wide benefits of electric vehicles, heat pumps, and other distributed energy resources cannot be fully realized without the use of time-varying rates.

The demand flexibility that time-varying rates enables—much of which can be automated—will become increasingly important as more renewable resources are deployed and more customers electrify. As regulators consider rate reforms to support affordable electrification, they must focus on making the transition as easy as possible for customers, providing actionable price signals that accurately capture the benefits of clean energy, and avoiding situations where customers are financially worse off if they choose to electrify.

As electrification becomes more common, regulators should explore innovative ways to pay for the transition away from gas and identify solutions to break down silos between gas and electric utilities, which can often frustrate electrification efforts. Regulators should pay close attention to the kinds of gas investments that are approved for cost recovery through customer rates. Gas infrastructure can last for decades, which means customers well into the future may still be paying for investment decisions made today, even if that equipment is no longer needed in light of states’ climate targets. Acadia Center is deeply involved in these complex issues in proceedings throughout the region and is focused on ensuring that regulators implement effective rate designs that help advance a clean and equitable energy system.

While rate design alone cannot ensure the success of the clean energy transition, it remains an essential tool that states should not neglect as they pursue a clean energy future.

1 Kimberly Clark, Metropolitan Area Planning Council, Reducing Energy Burden: Resources for Low-Income Residents (2022). https://www.mapc.org/planning101/reducing-energy-burden-resources-for-low-income-residents/

2 As an example of the relationship between gas and electricity prices, see: https://www.eia.gov/todayinenergy/detail.php?id=51158 and https://www.sciencedirect.com/science/article/pii/S2589004223028031#bib36

Myth Busting: Congestion Pricing

Congestion is a policy designed to reduce traffic in the most congested areas of cities by charging vehicles a fee to enter designated areas. Congestion pricing has been successfully used in London and other locations. New York City’s (NYC’s) created the first major congestion pricing plan in the United States. The plan imposes a charge on vehicles to enter the highly congested lower part of Manhattan below 60^th Street. The goal of this policy is to decrease traffic volume in the central business district (CBD) of Manhattan, improve air quality and generate revenue for public transportation improvements. Additionally, the plan is intended to improve walkability, capacity for bikes and increase funding for ADA accessibility to public transit, making multimodal transportation safer for everyone in NYC. The program was estimated to generate about $1 billion per year and finance $15 billion for infrastructure projects for the Metropolitan Transportation Authority (MTA), which is in urgent need of improvements to the city’s subway system.

Seemingly everything was in line to start the program, including a state law passed back in 2019 and the approval from the federal government in 2023. But in an unexpected step, New York City’s congestion pricing program has been indefinitely paused by Governor Hochul, just weeks before its planned start date on June 30, 2024. The governor’s office cited concerns over affordability and the cost of living. Additionally, articles like one from Politico suggest that the decision was driven by public polls showing strong opposition to the initiative, especially among voters in the greater metropolitan region and suburbs.

Congestion pricing in NYC presented an excellent opportunity for such a transit-dependent city to keep reducing its collective carbon footprint and improve the quality of life for residents, but opponents to the program seem to perpetuate several myths about congestion pricing that contributed to the program being paused. So, let’s clear up some common myths and get to the facts about what congestion pricing could mean for the city.

Myth: Congestion Pricing Will Hurt the Economy

Fact: Unfortunately, much of the tolling infrastructure needed to implement the program has already been installed in NYC, at a cost of $507 million. Unless the Governor reverses course, this significant infrastructure investment will now go to waste, effectively flushing away taxpayer money. As a direct result of the congestion pricing pause, there is now a $15 billion shortfall in the MTA’s 2020 – 2024 Capital Program. The funds to compensate for this shortfall will now have to be sourced from elsewhere. Some sources like CNN believe it will likely come from increase in taxation either on individuals or on businesses.

NYC’s economy largely relies on public transportation, with 70% of residents commuting by subway, bike or by foot. Most NYC commuters wouldn’t be directly impacted by congestion pricing. Instead, not implementing it deprives public transit of essential funding, hurting the majority who rely on it.

Reducing congestion would also bring significant economic benefits. It improves productivity by decreasing the time spent stuck in traffic. Efficiency in transportation translated to cost savings for businesses that depend on timely deliver and punctuality. Less congestion means lower operating costs for businesses and workers including lower fuel consumptions. Furthermore, cleaner air from fewer emissions can lead to lower healthcare costs, fostering a healthier workforce and community.

Myth: Congestion Pricing Will Hurt Low-Income Drivers the Most.

Fact: According to MTA’s Environmental Assessment, over 91% of low-income commuters do not commute using a car.  The vast majority of the commuters who are low-income in NYC rely on public transportation. The data from that Assessment shows that among low-income commuters, 79% use public transit, 8% are vehicles from NY, 1% are vehicles from NJ and CT, and 12% use other means. Highlighting that low-income individuals in the tri-state area are unlikely to be impacted by congestion pricing and more likely to reap the benefits from improved public transit funded by the program.

F urthermore, exemptions and discounts were also planned by the MTA for Low-Income Drivers and for exemptions for Disability. A 50% discount would have been available for low-income vehicle owners enrolled in the Low-Income Discount Plan (LIDP) after the first 10 trips in a calendar month. With additional low-income tax credits for those whose earn a gross income under $60,000 would qualify for a tax credit equivalent to the amount of tolls paid. The Individual Disability Exemption Plan (IDEP) is available for individuals whose disabilities or health conditions prevent them from using transit. This exemption can apply to a vehicle registered to the applicant or a designated caregiver’s vehicle used to drive the applicant in the Congestion Relief Zone.

The suburb commuters who will benefit from halting congestion pricing are also the smallest percentage of commuters. By not implementing congestion pricing, the state is effectively prioritizing the needs of suburban residents over low-income commuters into NYC and the residents of NYC.

Myth: Congestion Pricing is Intentionally Punishing Commuters from Others States Like NJ and CT.

Fact: According to its Environmental Impact Assessment, the MTA found that from all the work trips entering the CBD only 3.2% of them where drivers from NJ and CT. The program also planned to have notable “crossing credits” which are reduced fees for tunnel users from NJ and Long Island. Congestion pricing could motivate CT and NJ to enhance their own transportation systems, directly benefiting their residents and addressing long-standing demands for better commuter options.

Myth: Suspending Congestion Pricing is Inconsequential

Fact: Congestion pricing is a proven and effective solution for reducing air pollution and improving urban living conditions. Congestion pricing tackles critical urban issues like enhancing public transportation, air quality, safety, walkability, or accessibility which are tangible benefits residents can appreciate.

Delaying congestion pricing indefinitely fosters distrust and delays the implementation of a program that is essential to achieving the State’s climate goals. For government to earn trust, it must be consistent. Changing course so suddenly has consequences for many, including state lawmakers who backed the law, government agencies who were counting on the funding and even the construction industry planning for the subway improvements funded by congestion pricing. The $507 million already spent on the tolling infrastructure risks appearing to be wasted, leaving many constituents feeling distrust of the decision-making process.

Recommendations

Acadia Center believes that the economic, climate, quality of life and equity benefits of the NYC Congestion Plan are clear and powerful. Gov. Hochul and other state and city leaders should work together now to implement a congestion pricing plan, avoid massive interruptions in funding needed for transportation infrastructure and send the right price signals around over reliance on cars in urban areas.

Join the Conversation

We encourage you to share your thoughts and questions about congestion pricing. Let’s work together to create a better, more sustainable tri-state area.

Paola Moncada Tamayo

Policy Analyst

ptamayo@acadiacenter.org

212-256-1535 ext.204

Green groups push Northeast states to update regional carbon market

A coalition of environmental groups is making the first move to apply organized pressure on 10 Eastern states to set new climate goals for a regional carbon market and provide a status update on a review of the program that is more than 18 months overdue.

Details: The groups will say in new letters, led by Acadia Center and set to be released on Wednesday, that they “have grown increasingly concerned with the lack of communication and engagement” from the Northeastern and mid-Atlantic states participating in the Regional Greenhouse Gas Initiative.

RGGI members are engaged in their third program review, with the first concluding in 2013 and the second in 2017. They have reduced power sector emissions by 50 percent and generated $7 billion since 2005, according to the program.

The review will weigh comments like a proposal from Acadia Center, an environmental nonprofit, calling for mandated spending on alleviating pollution and air quality monitoring in overburdened communities. The letter also urges states to lower the threshold for electric-generating units and set an emissions cap that lowers to zero by 2040.

What’s next: While there is no updated timeline for the program review, the groups wrote that they hope states will provide clarity “in the days ahead.”

To read the full article from Politico, click here.

The Long Game

RGGI RUMBLE — A coalition of green groups is rallying to push Eastern states to move faster to set climate goals for the power sector, according to letters shared with POLITICO.

The environmentalists “have grown increasingly concerned with the lack of communication and engagement” from the 10 Northeast and mid-Atlantic states participating in the Regional Greenhouse Gas Initiative, a program that caps and prices power sector pollution, your host reports.

The letters, sent to top environmental officials in the member states, come as RGGI continues to work on a significantly delayed program review meant to broadly assess the program’s impacts and set the next round of climate targets.

The review that started in early 2021 was originally supposed to finish by January 2023. The delays are largely attributable to uncertainties regarding participation in RGGI by Pennsylvania and Virginia, swing states where the carbon market has become intensely controversial.

Groups like Acadia Center, the environmental nonprofit that led the letters, have issued proposals for consideration during the review, including setting an emissions cap that lowers to zero by 2040 and mandates spending focused on overburdened communities.

To read the full newsletter from POLITICO, click here.

RIDOT environmental planner job, key to meeting state climate goals, draws just seven applicants

The job of helping Rhode Island’s transportation sector achieve its goals of becoming carbon neutral by 2050 required a master’s degree and supervisory experience.

But when applications closed June 30, only seven people applied to be the Rhode Island Department of Transportation’s (RIDOT) supervising environmental planner.

The plan does not require an emissions reduction analysis in determining what projects the state should tackle, said Emily Koo, senior policy director and Rhode Island program director for the Maine-based Acadia Center.

“So it makes really broad sweeps of weighing things,” she said. “There has to be an analysis in order for there to be factored criteria — so maybe this person can do that.”

To read the full article from the Rhode Island Current, click here.

It’s time to talk about what decarbonization will cost

According to a 2022 poll, three-quarters of Massachusetts residents see climate change as a “very serious” or “somewhat serious” issue for the state to address. But if we’re to have any success at responding to climate change, we have to begin thinking about it as not only as a technical, behavioral, and infrastructure challenge – designing more efficient and cost-effective wind turbines and solar panels; getting more people to accept heat pumps; and building out the grid to move the power needed for all the EVs and air source heat pumps we expect to come on line – but as a major financial challenge for the state as well.

It is conservatively estimated that just converting all existing residential gas and oil heating systems to air source heat pumps will cost over $25 billion. Decarbonizing all customer sectors will require many billions more.

The challenges are so multi-dimensional that it can be hard to get all of the relevant stakeholders to focus on the many solutions we need to develop. But we believe the financial challenges have perhaps received the least attention. After all, we have the MassSAVE program to address customer behavior. We have major programs for the state to procure massive amounts of wind power. The price of solar panels is projected to decline by 40 percent between now and 2028. And the pending climate bills will squarely address the need to expedite infrastructure siting.

A relatively new coalition, the Commonwealth Coalition for Decarbonization, is pressing the Legislature to pass language that would require the administration to take a first, essential step regarding the financial challenges to reaching our mandated climate goals. Separately, but moving in a similar direction, the MassSAVE “program administrators” (the state’s electric and gas utilities, and the Cape Light Compact) are also developing an estimate of the funding that will be required to meet our climate goals. Simply put, there currently isn’t enough funding.

We know how much carbon we emit, with reasonable accuracy. We know how much carbon we need to stop emitting. We know much about the carbon-free resources we need to procure. Now we just need to know the cost to the Commonwealth.

Once we know what is available from all actual and likely sources and what the cost will be to achieve our goals, we’ll know how much more funding needs to be procured. At that point, we can begin the difficult work of figuring out how to pay for our climate plan. Without that information and funding, we will hit a dead end.

The 14-member Commonwealth Coalition for Decarbonization includes advocates from low-income non-profits, environmental groups, labor, and the utilities who participate in MassSAVE as well as others. Despite our quite diverse interests, we all work together to move the state in the direction of implementing practical policy approaches and solutions. We hope to monitor progress toward the ambitious climate goals that the Legislature has set, and especially keep banging the drum about getting more information about available and needed funding.

Much is being done to drive uptake of energy efficiency measures and decarbonization investments. But until we know where we stand on the funding need, we will be unable to sustain the efforts needed to maintain Massachusetts as a leader in the country in addressing climate change. We have decades of important and challenging work ahead of us.

Charlie Harak is a senior attorney at the National Consumer Law Center. Kyle Murray is director of state program implementation at the Acadia Center, a nonprofit climate advocacy group.

Originally published in CommonWealth. Click here to read it there.

With latest announcement, the Healey administration eyes how to move power plants past fossil fuels

Until now, the conversation about the clean energy transformation in Massachusetts has largely revolved around building more: wind, solar, battery storage — all of it.

But it’s not enough just to build, the Healey administration acknowledged in an announcement Wednesday morning. Moving forward, there needs to be plans for how to shut down or convert existing fossil fuel power plants, such as the so-called peaker plants that run on oil or gas and fire up on the coldest and hottest days.

Kyle Murray, director of state program implementation at the clean energy advocacy group Acadia Center, said the formation of the advisory board was “exciting,” and exactly the kind of approach that’s needed to address the thorny issues the state is wrestling with. But in order to be effective, he’s hoping to see its scope broadened.

“The major question to solve, obviously, is the sprawling gas system that we have in place right now,” he said. “These priorities are parts of it, but it’s also figuring out how we get beyond all those pipes in the ground, what we do with it, and how we electrify everything.”

To read the full article from the Boston Globe, click here.

Environmental Advocates Say 2024 Legislative Session Produced Mixed Bag

PROVIDENCE — It’s been more than two weeks since lawmakers adjourned for the year, so how are Rhode Island’s environmental groups feeling about the state of the session?

No one in politics gets everything they want, so perhaps unsurprisingly, the results are mixed. The General Assembly passed a number of longstanding environmental priorities, including a ban on per- and polyfluoroalkyl substances (PFAS) in consumer products (with a few exceptions); mandating state environmental officials write a coastal resiliency plan; and dedicated funding for the state’s climate council.

But several other major priorities of environmental groups were left on the committee room floor.

Barker’s organization, together with the Acadia Center, were the strongest proponents of energy benchmarking legislation, aimed at reducing emissions from large buildings across the state.

The Building Decarbonization Act would have required owners of buildings larger than 25,000 square feet to begin tracking their energy use and emissions as early as next year. Data derived from the legislation would have been used to come up with emission reduction goals for large buildings, similar to an ordinance enacted last year by the city of Providence.

To read the full article from ecoRI, click here.