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Economic Impact of New Hampshire Participation in Regional Greenhouse Gas Initiative

Economic Impact of New Hampshire Participation in Regional Greenhouse Gas Initiative. University of New Hampshire Whittemore School of Business & Economics Ross Gittell, James R Carter Professor Matt Magnusson, MBA 1/10/2008. Overview of Presentation. Overview of Methodology

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Economic Impact of New Hampshire Participation in Regional Greenhouse Gas Initiative

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  1. Economic Impact of New Hampshire Participation in Regional Greenhouse Gas Initiative University of New Hampshire Whittemore School of Business & Economics Ross Gittell, James R Carter Professor Matt Magnusson, MBA 1/10/2008

  2. Overview of Presentation • Overview of Methodology • Summary of Findings • NH Ratepayer Impacts • NH Economy-Wide Impacts • Recommendations for Approach to Implementation • Summary • It is in the long term economic interest of the state of New Hampshire to participate in the Regional Greenhouse Gas Initiative (RGGI)

  3. Research Method • Detailed review and updating of existing documentation and analyses of RGGI • Incorporated the most current and detailed available information about NH electricity market and NH economy • Input from board range of stakeholders • received guidance and suggestions during initial research • feedback after release of draft report …and refined the report

  4. Research Method • NH Electricity consumption & price forecasts based on ISO New England • Specifically considered utility rate impact for PSNH & the other utilities determined using detailed spreadsheet model • NH economy impacts modeled using REMI econometric model • Sensitivity analysis of different key factors and assumptions

  5. Examples of Studies Referenced • Compensation Rules for Climate Policy in the Electricity Sector, Resources for the Future, July 2007 • Economic and Energy Impacts from Maryland's Potential Participation in the Regional Greenhouse Gas Initiative, Center for Integrated Environment Research , University of Maryland, January 2007 • New England Electricity Scenario Analysis: Exploring the economic, reliability, and environmental impacts of various resource outcomes for meeting the region's future electricity needs, ISO New England, August 2007 • Updated Reference, RGGI Package - 10/11/06, PowerPoint posted on RGGI web site, May 2007 • Who Gains And Who Pays Under Carbon-allowance Trading? The Distributional Effects Of Alternative Policy Design, Congressional Budget Office, June 2000

  6. New Hampshire: Carbon Dioxide Allowance Prices (Base and High Price Cases)

  7. Should NH Join RGGI? • Yes, NH participation is lower cost overall to NH than not joining regardless of carbon allowance price RGGI Costs ($2007 Millions)

  8. Policies Evaluated • Wide Range of Policies Considered: • 100% Rebate • 100% Energy Efficiency • Mixture of Rebate and Energy Efficiency • 25% Rebate/75% Energy Efficiency • 50% Rebate/50% Energy efficiency • 75% Rebate/25% Energy efficiency • 100% of allowances given to existing RGGI impacted power generation units • 100% to Corporate Tax “Relief” • NH does not join RGGI

  9. Net Cost to Utility Ratepayers- All NH Utilities

  10. Discussion of Utility Customer Impacts • PSNH customers are impacted differently by RGGI • Lower costs for PSNH customers than the other NH utilities if NH does not join RGGI • Higher costs for PSNH customers than the other NH utilities if NH does join RGGI • 100% Energy efficiency was the only scenario that resulted in savings on electricity bills for all utility customers • Directing allowance revenue to corporate taxes had the highest cost to utility customers of all scenarios • Grandfathering had the next highest cost of all scenarios • However, there are some benefits to direct allocation of allowances to PSNH • Reduced Transaction Costs & Volatility

  11. Estimated Impact of RGGI on Business

  12. Not Joining RGGI Increase to Average Monthly Bill

  13. Potential Mitigation of Monthly Business Electricity Costs Net change from Investment in Energy Efficiency Compared to Not Joining RGGI

  14. Sensitivity Analysis • Two Scenarios analyzed still supported NH participation in RGGI • Low Energy Efficiency- High Price • High Transaction costs for PSNH • Energy Efficiency highly sensitive to: • Average cost of energy efficiency investment • Lifetime of energy efficiency investment

  15. Overall NH Economic-Wide Impact NH RGGI-REMI Econometric Modeling Results Not participating in RGGI would have a slight negative impact on the overall NH economy NH participation in RGGI has a small positive impact on employment and the overall NH economy if allowance revenue goes towards reducing corporate taxes and/or energy efficiency Rebating of allowance revenue causes almost no change in the NH economy

  16. Overall NH Economic-Wide Impact by 2018NH RGGI-REMI Econometric Modeling Results

  17. Conclusion • It is in the economic interest of the state of New Hampshire to participate in the RGGI • Electricity costs will increase in New Hampshire even if New Hampshire were not to participate in RGGI due to the regional market. • If New Hampshire does not join RGGI, it would not receive the economic value from allowances.

  18. Questions?

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