On October 3, 2019, Pennsylvania Governor Tom Wolf issued Executive Order No. 2019-07 titled Commonwealth Leadership in Addressing Climate Change through Electric Sector Emissions Reductions.  The Executive Order requires the Department of Environmental Protection (DEP) to develop and present to the Pennsylvania Environmental Quality Board by July 31, 2020, a proposed rulemaking package to “abate, control, or limit carbon dioxide emissions from fossil-fuel-fired electric power generators.”  The Executive Order further provides that the proposed rulemaking should “establish a carbon dioxide budget consistent in stringency to that established by the RGGI participating states” and ensure that allowances can be traded with holders in the RGGI states.  The Executive Order requires “robust” public outreach working with the business community, energy producers, energy suppliers, organized labor, environmental and other groups.

Reactions from members of the  General Assembly varied.  Most Democrats expressed support for the Governor’s actions, while Republican responses ranged from full opposition to conditioned support for establishing carbon dioxide goals.  Republicans also argued that the Legislature has the primary role in setting Pennsylvania’s strategy for greenhouse gases.  Senate President Pro Tempore Joe Scarnati and Senate Majority Leader Jake Corman articulated four principles on behalf of the Senate Republicans:

1. Maintain the diversity of PA’s current energy portfolio and the jobs it sustains;
2. Protect the interests of PA consumers by keeping energy rates affordable and low;
3. Require the current members of RGGI to utilize all aspects of PA’s robust energy portfolio;
4. Implement any carbon reduction plan in PA through an appropriate legal manner.

House Republican Leadership focused their initial public statement on the legal and policy reasons why the Governor should not unilaterally pursue RGGI entry without the General Assembly’s approval.  In response to the Governor’s announcement, multiple Republican Senators and Representatives have indicated their intention to sponsor legislation addressing RGGI.  This is in addition to the already existing pieces of legislation sponsored by Republicans and Democrats that address carbon emissions.

RGGI is somewhat of a new term for Pennsylvania consumers and there will be significant debate and discussion about RGGI in the coming months.  The current RGGI states developed a “Model Rule” requiring initial and continuing carbon dioxide reduction requirements.  Since 2005, the RGGI states have collectively reduced power sector carbon dioxide emissions by over 45%.  In the same time period, Pennsylvania reduced carbon dioxide emissions by 37%, with further substantial reductions anticipated when the coal-fired Bruce Mansfield generating plant retires before the end of 2019.  From 2020 to 2030, the Model Rule requires participating states to further reduce emissions by 30%.  This would require Pennsylvania to shed over 21 million metric tons of carbon dioxide, which is the equivalent of two or three coal plants the size of the Bruce Mansfield plant.

If Pennsylvania is to join RGGI or implement a different carbon dioxide reduction strategy, Pennsylvania leaders will have many important details to resolve, including:

• What is the energy cost impact on Pennsylvania’s consumers?
• What safeguards will be included to ensure that the program costs or requirements do not become unreasonable?
• How will the anticipated $400 million in annual auction revenues be used by the Commonwealth?
• Will a substantial portion of the proceeds be used to directly offset the cost impact on  consumers, including energy intensive consumers?
• Will end use customers with behind the meter or other generation resources be exempted from securing carbon dioxide allowances because such cogeneration and combined heat and power facility owners already provide environmental and energy efficiency benefits?
• What other activities will qualify to create carbon dioxide offsets, such as demand response, energy efficiency, etc.?
• Can the RGGI rules be modified to better reflect the energy diversity and interests of Pennsylvania?

The Executive Order promises a robust opportunity for stakeholders to provide input at DEP and through the Governor  It also is highly likely that the legislature will actively debate this issue, with opportunities for constituents to comment.  Our team at McNees has been engaged in discussions on RGGI and  will continue to do so.  We will endeavor to provide updates as this issue progresses through the political and regulatory process.