By Jim Efstathiou Jr.
April 9 (Bloomberg) -- Maryland will take $70 million it receives by charging utilities for carbon emissions to help low- income residents pay power bills, breaking with neighboring states that will use the revenue to lower energy use.
The state’s legislature is expected to approve a budget by April 13 that will divert spending on energy-efficiency projects to rebates. The move proposed by Maryland Governor Martin O’Malley will make it more costly to fight climate change with a “cap-and-trade” emissions market, said Brad Heavner, state director for Environment Maryland, a non-profit advocacy group.
Maryland is one of 10 Northeastern states in the Regional Greenhouse Gas Initiative, or RGGI, the first U.S. market for carbon-dioxide emissions. Maryland is being outspent by New York, New Jersey and the rest of the RGGI states on energy- saving solar-heated water systems and improved home insulation, the best way to lower costs for consumers, Heavner said.
“It’s incredibly shortsighted,” he said in an interview. “We need to make sure that the bulk of the money is used for energy-efficiency programs. If it isn’t, then cap-and-trade doesn’t function very well.”
The Maryland debate is resonating in Washington where President Barack Obama and Democrats in Congress are crafting a federal cap-and-trade program projected to take in $646 billion in carbon-auction revenue over eight years. Obama wants to use $526 billion of that for a tax cut.
“It’s a big pot of money and everyone wants a piece,” Heavner said.
‘Unprecedented Economic Times’
O’Malley’s decision took into consideration rising energy costs and the impact of the recession on low-income families, said the governor’s spokesman Shaun Adamec. Household power prices in Maryland are the 13th highest in the country, according to Energy Department data.
“One of his chief obligations as governor is to ensure that the safety net, particularly in these unprecedented economic times, is there for families who are struggling to keep their lights on and keep their heat on,” Adamec said in an interview.
The shift to short-term aid means higher costs later, according to Sam Krasnow, a policy advocate at the Rockport, Maine-based consulting firm Environment Northeast. Every dollar spent on efficiency cuts energy costs $3 to $4 by lowering demand, said Krasnow. At least 30 percent of cap-and-trade revenue should be used to lower energy use, he added.
“If you want to do cap-and-trade and you care about protecting consumers, you have to invest a substantial portion in efficiency in order to keep carbon prices low,” Krasnow said in an interview.
Climate Damage
RGGI seeks to reduce climate damage by setting limits on greenhouse-gas pollution and making companies get permits for their emissions. By gradually reducing available permits, RGGI aims to reduce global-warming gases 10 percent by 2019.
The 10 RGGI states agreed to use at least 25 percent of permit revenue for “consumer benefit or strategic energy purposes,” which include energy-efficiency programs, according to the 2005 RGGI memorandum of understanding.
O’Malley’s plan would divert $70 million over two years to rebates, lowering the share of permit revenue for energy efficiency to 17.5 percent, said Malcolm Woolf, director of the Maryland Energy Administration.
The RGGI memorandum has “generally been interpreted as being energy-efficiency, or something closely related to that,” Judi Greenwald, a policy director at the Arlington, Virginia- based Pew Center on Global Climate Change, said in an interview. “Any diversion is worrisome from that perspective.”
RGGI States
The RGGI states are allocating an average 71 percent of permit revenue to energy efficiency, according to Environment Northeast. Maryland would use 73 percent of the revenue, or $77 million, for rate rebates and low-income energy assistance, Woolf said.
Electricity rates in Maryland have surged 68 percent since 2006 when state utilities were allowed to pass on higher power costs to consumers. Maryland’s average household power price last year was 13.81 cents a kilowatt hour compared with 8.23 cents in 2005.
In 2006, then-Baltimore Mayor O’Malley, a Democrat, campaigned against utility rate increases in his bid to unseat Governor Robert Ehrlich.
“We are using the money on energy,” Woolf said in an interview. “We’re not paying off the teachers’ pension or building a highway.”
Aaron Koos, a spokesman for Baltimore-based Constellation Energy Group Inc., declined to comment on the state’s budget. Constellation owns power plants in seven states including Maryland.
Economic Stimulus Tie-In
Maryland is also counting on a boost in federal funding for energy-efficiency programs from February’s $787 billion economic-stimulus package, Adamec said. Maryland will receive $165.5 million under the plan.
The Maryland Senate last week passed the state’s $31.5 billion budget. The 40-7 vote paves the way for talks with the House of Delegates on a compromise spending plan. A final vote on the budget is expected by Monday.
The 2010 budget will allocate $53 million to help up to 140,000 families with incomes of less than $36,000 a year pay utility bills, Woolf said. An additional $24 million will lower bills for all state rate-payers. Energy-efficiency programs will get $29 million.
“Taking money away from energy-efficiency programs hurts the very families you’re trying to help,” Heavner said.
The RGGI program also includes Connecticut, Delaware, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.
To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net.
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