PROVIDENCE – Does it make sense to pull money out of a state energy efficiency program that is among the most lauded in the nation and spend it instead on Rhode Island’s policymaking efforts around climate change?
Environmental advocates are questioning the proposal put forward in Gov. Dan McKee’s spending plan for the next fiscal year to fund the Executive Climate Change Coordinating Council, the state panel in charge of developing climate policy.
While they support McKee’s intent to secure a long-term funding source for the climate council at a time when its task is taking on greater urgency, they say an alternative is needed.
They argue that the move could undermine programs that include insulating old homes and upgrading to high-efficiency appliances – initiatives considered essential to reining in greenhouse gas emissions as required by the Act on Climate.
“This is an accounting trick, not climate action,” Amanda Parker, of Green Energy Consumers Alliance, said at a recent House Finance Committee hearing.
Gov. Dan McKee, shown here delivering his State of the State address Jan. 17, has proposed again this year the siphoning of $4.5 million from $139 million in energy efficiency incentives ordinarily paid to Rhode Island Energy and using it instead to shore up the state's efforts to reduce greenhouse-gas emissions.
The McKee administration counters that the $4.5 million it proposes siphoning from the $139-million efficiency program is money that goes to Rhode Island Energy, the state’s dominant electric utility and sole natural gas supplier, purely as an incentive for managing the program. None of that money is devoted to efficiency projects.
“Any narrative that says the utility won’t properly administer the state energy efficiency programs if they lose the shareholder incentive … is false,” Chris Kearns, commissioner of the state Office of Energy Resources, said at Tuesday’s hearing.
Concerns about some Rhode Islanders paying more than others
This is the second year McKee has put forward the plan to create a dedicated funding stream for the climate council. Since passage of the Act on Climate in 2021, the panel has taken on a more prominent role in state government. The law signed by McKee requires steady cuts in carbon pollution, with an ultimate goal of reaching net-zero emissions by 2050.
The funding proposal died in the legislature last year amid the same objections that are being raised this session.
They include questions about equity raised by Attorney General Peter Neronha and others. While the energy efficiency program is funded in large part by an electric surcharge paid by all Rhode Islanders (totaling $102 million), the other big chunk of money ($37 million) comes from a smaller subset of households and businesses that heat with natural gas. Users of heating oil, propane or firewood don’t pay a fee for efficiency, so they bear a disproportionately smaller share of the burden for the state program.
It means that some Rhode Islanders would be paying more for climate responses that would be designed to benefit everyone in the state, from increasing the number of electric cars on the road to replacing outdated heating systems with electric heat pumps.
Those bearing a greater share of costs would be concentrated in urban and some suburban areas in the central and eastern parts of the state. That’s because the underground system of pipes that deliver natural gas doesn’t extend to rural areas in the west and south, where residents rely more on heating oil and propane.
There are also inconsistencies related to transportation.
“I have an EV. I would be paying more into this fund than someone who is driving a giant SUV that’s gas-powered,” said Sue AnderBois, climate and energy program manager for The Nature Conservancy.
Could a ban on new natural gas hookups?Regulators have it on the table.
McKee says funding is needed for climate programs
This budget maneuver is designed to be revenue-neutral, meaning there would be no additional costs to taxpayers.
It also makes sense because the money now goes to Rhode Island Energy’s shareholders purely as profit, say members of the McKee administration. They say that other states have successful efficiency programs without paying incentives. And Rhode Island has other energy programs that Rhode Island Energy administers without getting remuneration.
As part of the budget provision on the table, the state would issue a solicitation to see if there’s interest from others in managing the efficiency program.
“What’s the harm in putting out a competitive RFP and evaluating the results for ratepayers?” Kearns said.
Not surprisingly, Rhode Island Energy opposes taking away the incentive. Nicholas Ucci, Kearns’s predecessor in the energy commissioner’s office, who now works as a lobbyist for Rhode Island Energy, described the governor’s proposal as “short-sighted" and “unsustainable.”
“To the extent it might weaken our programs, it could lead to less energy consumption cost-savings, shrinking innovation and fewer emissions reduced,” said Ucci, who was on the other side of the issue a year ago when he defended the proposal.
Department of Environmental Management Director Terry Gray, who also heads up the climate council, said the funding in the near term would go towards developing a strategy to reduce emissions that the Act on Climate requires be reduced by 2025. Longer term, the money would pay for programs currently supported by federal grants, such as the efforts to increase purchases of electric vehicles and heat pumps.
“I think people realize the amount of work to meet the mandates in the Act on Climate is going to need some money,” Gray said. “If not this, then what is the source of money?”