Michael Bradley, Director

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Background material related to Tom Kings,
(President, National Grid), presentation at Dec.
5, 2008 MA Energy Roundtable.
The Clean Energy Groups Clean Air Policy
Initiative
Michael Bradley, Director Jackie Carney,
Legislative Director The Clean Energy Group
December 2008
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History of the Clean Energy Group

• Founded in 1997, The Clean Energy Group (CEG) is
  a coalition of electricity generation and
  distribution companies that share a commitment to
  responsible environmental stewardship. The
  companies focus on state and federal air quality
  and climate change policy. By working
  cooperatively with the environmental community,
  government, and other stakeholders, the Group
  seeks to promote the adoption of progressive
  environmental policies that are sustainable from
  both an environmental and an economic
  perspective.
• Since 2000, a subset of the group, what we call
  the Clean Air Policy Initiative (CAPI), has
  advocated the regulation of greenhouse gas
  emissions and other key pollutants from the
  electric power sector.
• The current CAPI membership includes Avista,
  Calpine, Constellation Energy, Entergy, Exelon,
  National Grid, FPL, PSEG, PGE Corporation, and
  Seattle City Light.
• Our members comprise some of the largest
  regulated electric and natural gas utilities in
  the United States serving more than 60 million
  residential and business customers. Together,
  the Clean Energy Group members represent a fifth
  of all U.S investor-owned generation capacity and
  produce almost a quarter of all U.S.
  investor-owned electricity while emitting less
  than a tenth of the associated greenhouse gases.
  They include the nations largest nuclear energy
  producer, the largest wind energy producer, the
  largest solar energy producer, the largest
  geothermal producer, the largest wholesale power
  seller, the largest competitive supplier of
  electricity to large commercial and industrial
  customers, and the first electric utility to
  achieve greenhouse gas neutrality. Their
  combined operations extend to all 50 states.
• M.J. Bradley Associates is a technical resource
  for the organization, coordinating the day-to-day
  activities of the group and evaluating
  legislative proposals to regulate greenhouse gas
  emissions.

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Participants in the Clean Energy Groups
Legislative Initiative The Clean Air Policy
Initiative
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• CAPI Company Operations

Power Generation
Electric or Natural Gas Service

• Our members
• Serve electricity to more than 57 million people
  (20 of U.S. population)
• Deliver natural gas to more than 8.3 million gas
  customers, including homes and businesses
• Have nearly 170,000 megawatts of generating
  capacity throughout the U.S. (over 20 of total
  generation of top 100 U.S. investor-owned
  generators)
• Produce almost a quarter of all U.S. electricity
  (investor owned) while emitting less than 10
  percent of the associated greenhouse gases

Sampling of Clean Energy Group company facilities
from around the U.S.
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CEG Legislative Principles

• We support a single, national cap-and-trade
  program that includes aggressive reduction
  targets and compliance timelines that create the
  right incentives to drive innovative compliance
  solutions.
• Reduction targets and compliance timelines should
  challenge the electric power sector to find
  innovative compliance solutions and continually
  improve performance.
• Federal legislation should include a framework
  for the distribution of emission allowances.
• We support a robust auction of emissions
  allowances.
• We support an equitable distribution of
  allowances that recognizes the value of low- and
  non-emitting forms of generation, while creating
  incentives for efficiency improvements and
  technology innovation.
• We support the adoption of cost control measures
  that do not compromise an effective market,
  including a comprehensive greenhouse gas offset
  trading program and provisions to guard against
  extreme volatility and excessively high prices to
  minimize the economic costs of the program, while
  maximizing the reductions achieved.
• Federal policies should provide increased funding
  and support for research and development and
  deployment of advanced energy technologies and
  energy efficiency.
• We support the establishment of a transparent and
  liquid federal carbon trading market. A properly
  functioning trading system, with a clear price
  signal, is critical for a smooth transition to a
  lower carbon economy. Federal legislation should
  include policies that will encourage the
  integration of domestic greenhouse gas trading
  marketsas well as international trading
  marketsinto a single U.S. trading system.

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CEG Allowance Allocation Principles

• Climate change legislation must dedicate a
  significant share of allowances to a federal
  auction and for consumer benefit.
• If allowances are distributed for free to local
  distribution companies (LDCs), LDCs should serve
  as an important tool to protect consumers from
  the energy-cost impacts related to a national
  cap-and-trade program.
• To the extent Congress allocates any allowances
  to electric generators or merchant facilities,
  allowances should be allocated to all fossil
  units on an updating, output basis.
• We support an allocation methodology based on
  electric output or sales because it
• drives investment in, and encourages the
  development and deployment of, the advanced
  technologies necessary to transition to a
  low-carbon economy, and
• protects customers that have already paid for
  clean generation and energy efficiency.
• Allocating emission allowances based on historic
  emissions is not the right allocation approach
  for any allocation to the electric sector.
• An allocation methodology should not reward the
  actions that are contributing to the problem of
  climate change.
• An allocation methodology for LDCs based on
  historic emissions is difficult, if not
  impossible, to fairly administer given the
  complexity of tracking electrons to their
  generation source. All of electricity generated
  by a company may not be consumed by that
  company's customers. By contrast, LDCs already
  report their annual sales to federal regulators.

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CEG Allowance Allocation Principles

• The distribution of allowances to LDCs must be
  transparent, and LDCs must be required to sell
  100 percent of the allowances at fair market
  value within one year of receipt and direct that
  revenue toward
• mitigating consumers rate impacts
• funding energy efficiency programs
• supporting the deployment of low-carbon
  technologies.
• The allocation to LDCs should be adjusted upward
  for electricity not delivered as a result of
  consumer energy-efficiency programs implemented
  by the LDC and verified by the regulatory agency
  of the LDC.

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A Historic Emissions Based Allocation Creates
Inequitable Results

• A historic emission allocation creates
  inequitable results and conflicts with the goals
  of transitioning to a low-carbon economy
• Customers served by utilities with lower average
  emissions would receive fewer allowances and less
  cost mitigation than customers with higher
  average emissions
• Customers with lower average emissions also
  generally pay the highest average electricity
  rates. An emissions based allocation widens this
  gap.
• Distributing allowances based on emissions
  rewards higher emitting utilities for the
  emissions that have contributed the most to
  climate change and discourages them from pursuing
  energy efficiency programs and clean energy
  technologies.
• The impacts of climate change may impact
  electricity customers in ways that do not
  necessarily correspond with their historic
  emissions. For example, a utility with
  significant hydroelectric resources may face
  higher costs in the future because of reduced
  snowpack.

CEG members support an allocation methodology
based on electricity output or MWh sales.
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Consumers of Low-Emitting Electricity Pay the
Highest Rates
Emission rates (tons per MWh) of electricity sold
in states
An allocation methodology should not reward the
actions that are contributing to the problem of
climate change.
Customers with lower average emissions generally
pay the highest average electricity rates.
An emissions based allocation may widen the gap
between rates paid by consumers of low- and
high-emitting electricity.
Average electricity rates (cents/KWh)
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Contacts
Michael Bradley, Director mbradley_at_mjbradley.com
Jackie Carney, Legislative Director jackie_at_thecle
anenergygroup.com