Delaware’s experiment with a Regional Greenhouse Gas Initiative (RGGI) has been a failure. The effort has had no significant impact on carbon dioxide emissions, has increased Delaware electricity rates, and the funds raised through the program were largely wasted. The program is being revised to increase electric ratepayer cost from about $8 million a year to as much as $38 million. The primary purpose of the revision is to raise revenue, not to reduce emissions. The added cost will act as a barrier to building much needed electric generation infrastructure. We encourage the legislature to amend the law to require legislative approval of revisions to RGGI.
Cap and trade has had no impact on greenhouse gas reduction
Delaware has already reduced emissions 45% from fuel switching from coal to natural gas and by closing power plants. The emission reductions have been driven by market forces not RGGI.
Proposed revisions may add $172 million to electric rates by 2020
The Delaware Department of Natural Resources and Environmental Control can revise RGGI without legislative approval. This will be accomplished by increasing the original 10% emission reduction goal by 2019 to 45% in 2014 and 53% by 2020 thus reducing the number of permits available for sale. If the permits sell for the maximum price cap each year the revision will cost electric ratepayers $227 million by 2020 compared to about $55 million without the revisions.
Money has been wasted
- Only about one third of the $30 million raised to date from the carbon dioxide permit auction has gone to direct program expenses. Only one fifth (7% of total RGGI revenue) of the spending for programs has been audited for actual performance compared to expected savings.
- Two thirds of the revenue has been spent on administrative costs or sits unspent because of difficulties with program formats.
- A Low Income Weatherization program was run so poorly by the Health and Human Services Department the federal government required 100% inspection with many projects upgraded because of shoddy work and materials. Several contractors were investigated for fraud. The program was suspended for a year.
- The Home Performance Program run by the Sustainable Energy Utility (SEU), a private non- profit funded with state money, was so poorly monitored it was over-subscribed by 50% and needed several million dollars of bailout money. The program has been suspended for a year.
- The core SEU program of financing energy efficiency upgrades in public buildings took four years to put in place and could have been done in less than one year and for less money using private financing options used everywhere but Delaware.
- 70% of the money spent on an “Energy Star” compliant appliance program was spent on refrigerators. Studies show almost all refrigerator rebates are wasted as recipients would have purchased the “Energy Star” refrigerator anyway.
- The SEU is required to file monthly, quarterly, and annual financial reports to the SEU Oversight Board. None were filed between May, 2011, and April, 2012. It took nine people two months to straighten out the books. The SEU receives 65% of RGGI revenue. All SEU programs have been suspended for over a year.
New rules are a barrier to building much needed new electric generating capacity
The problem is electric power generation capacity has not kept pace with demand and Delaware imports a larger share of its electric power than any other state, almost 60%. We are paying an extra $300 million a year cost penalty for causing grid congestion and our electric prices are not competitive holding back industrial growth. Plans are being laid to increase in-state generating capacity using low cost natural gas but there will not be enough permits to go around. The price of carbon permits will sky rocket to $38 million a year. Meanwhile, every new natural gas plant will replace coal fired generation and cut CO2 emissions in half. We need to build those new power plants in Delaware but increased RGGI costs act as a deterrent. If a power company wants to build new plants why not build in Pennsylvania or Virginia that do not have cap and trade taxes?
The program has clearly been a failure and it was a mistake to place the power to expand this program in the hands of regulators. The state Constitution gives the power to initiate revenue and spending bills to the state legislature. Changes to the Regional Greenhouse Gas Initiative (RGGI) will not only increase revenue to the state by over $30 million a year but also determines how the money will be spent. The Delaware legislature needs to act now to amend RGGI to require legislative oversight of this major, and flawed, program revision.