Gov. Rendell this week proposed an $850 Million Energy Independence Program funded by a new tax on electric use that would provide financing for renewable energy resource development, promoting energy conservation and provide a transition to competitive electricity markets when price caps end in 2010.

He said his proposal would save residential, commercial and industrial consumers $10 billion over 10 years.

Also on the issue of climate change, Gov. Rendell said, “I think everyone now understands that you cannot deal with energy policy without addressing global warming. It is the largest environmental problem we face and Pennsylvania needs to do something about it.”

“The efforts I am announcing today to save energy and produce more clean energy are a good first step, but they are only a first step,” said the Governor. “In the next 90 days I will present a comprehensive strategy to make Pennsylvania a leader in addressing climate change.”

The elements of Gov. Rendell’s energy proposal will be contained in four pieces of legislation that are expected to be made available next week. The major components of the Energy Independence Program include--

Increase Clean Energy Capacity

$300 million in project funding would finance clean energy projects (working capital, machinery and equipment purchases, construction and LEED certification programs) for non-profit, local government and for-profit projects.

$200 million would be made available in a new “Pennsylvania Sunshine” program to jumpstart the market for installing solar electric panels and to attract solar manufacturers to Pennsylvania managed by DEP and the PA Energy Development Authority. DEP hopes to save $10 million per year in electric costs.

$150 million would fund low interest loans and grants for site preparation and infrastructure needs related to clean energy projects overseen by the PA Energy Development Authority.

$56 million would be given to the Ben Franklin Technology Partners to invest in commercializing promising clean energy technologies.

$50 million would fund construction and improvement of clean energy project through an Energy Independence Capital Assistance Program administered by the Governor’s Budget Office.

$50 million would be made available through the Ben Franklin Technology Development Authority to match with professional investors to invest in clean energy companies at the seed and growth stage.

The types of projects proposed to be funded include: biofuels, solar, wind, clean coal and energy conservation projects.

Reducing Electricity Demand

New proposed legislation would require electric distribution companies to show that increased electricity demands in their service areas could not be met by increasing energy conservation and demand management programs economically, before new traditional electric generating capacity is allowed to be built.

The proposal would also require electric distribution companies to offer smart metering programs that charge customers based on the time of day demand for electricity. Electricity would cost more during periods of peak demand and less at other times.

$44 million would be spent on a new “Cool Appliances Swap” program that would provide $100 rebates to residential and small business customers who replace inefficient room air conditioners and refrigerators managed by DEP and the PA Energy Development Authority. DEP hopes to save $13 million in electric costs per year.

Electric Rate Cap Transition

Gov. Rendell noted that recent experience with electric competition in other states where electric rate caps expired showed dramatic increases in electric costs from 40 to 72 percent. To avoid these rate shocks, the governor proposed several steps—

· Require the acquisition of power through a “least cost portfolio” that includes renewables (similar to House Bill 3030 last year);

· Require the option of phasing in competive electric pricing over three years;

· Provide the option of long term contracts to help lock in electric rates; and

· Promoting the use of “microgrids” where power plants serve small areas.

Gov. Rendell would not support a continuation of the current electric rate caps that are due to expire in most areas of Pennsylvania in 2010.

Alternative Energy Portfolio Standards

Gov. Rendell also proposed changes in the Alternative Energy Portfolio Standards program enacted in 2005 that requires electric distribution companies to offer electricity from renewable energy sources.

Under the proposal, distribution companies could meet the portfolio standards not only by buying electricity from renewable energy sources in Pennsylvania, but also throughout the PJM or other regional electricity grid.

Renewable Transportation Fuels

The Governor also proposed the “PennSecurity Fuels Initiative” that will require that we grow and use one billion gallons of clean and renewable fuels. The initiative would mean that every gallon of gasoline sold in Pennsylvania would include 10 percent ethanol, and every gallon of diesel would include an increasing amount (up to 20 percent) of soy or other renewable oil.

Cost to Consumers

The proposed $850 Energy Independence Fund would be financed by floating bonds paid for by a new tax on residential and commercial electric customers.

The new “systems benefit surcharge” would cost the average residential customer $5.40 annually, for the average commercial customer $36.36 annually and the average industrial customer $882 per year.

However, Gov. Rendell said expected energy savings from his plan would save $73 for every $5 of cost to consumers.

Here’s a sampling of reactions to Gov. Rendell’s proposal.

"Every year around Feb. 2 I lament how we focus more attention on a groundhog than to addressing energy woes that make winter a season of desperation for too many citizens," said Rep. George (D-Clearfield), Majority Chair of the House Environmental Resources and Energy Committee. "This year, we can greet the groundhog knowing that we no longer are content to being slapped around by Mother Nature, OPEC, the oil industry or man-made catastrophes."

"Some of the proposals will be problematic, including the suggested surcharges and voluntary electric-payment increases to allay monstrous, electric-rate increases," Rep. George said. "However, the governor's initiatives regarding ethanol, bio-fuel and alternative energy will return Pennsylvania to its historic status as an energy powerhouse, which is a welcome change from its more-recent history of resorting to whimpering and wishing on woodchucks."

"The governor is asking consumers to fund government mandates in the form of an electric tax," said Gene Barr, PA Chamber Vice President of Political and Regulatory Affairs. "The Pennsylvania Chamber supports alternative energy use, but within the framework of a free market system, not through more mandates. This is especially true when other recent costly mandates are taken into consideration."

Barr said the electric utility industry, as well as consumers, already face a $1.7 billion price tag to comply with a state-specific mercury reduction rule for which there is no discernable benefit to human health and the environment beyond the established federal law.

"The Pennsylvania Chamber cannot support an electric tax or additional mandates without first evaluating the cost impact of other recent regulations," Barr stressed.

NewsClips: Rendell Outlines New Energy Plan, Proposes New Fee

Rendell Offers $850 Million Energy Fund Strategy

Rendell Outlines Energy Plan, Proposes New Fee

Rendell Pitches Pay a Little Now, Save a Lot Energy Plan

Electricity Fee Would Fund Rendell Plan

Broad Plan Aims to Avert Electricity Price Spikes

DEP Awards Grants to Help Small Business Energy Efficiency

Fuels of Future Today

Editorial: Global Warming

Editorial: Climate Change Also Heralds the Crack of Doom

Editorial: Politics of Global Warming Heating Up

Bill Nye Talks About Climate Change

PA Again Ranked as Leader in Green Power Use

U.S. Dept. of Energy Looking for Model Cities for Solar Power

Large Energy Users in PA Lobby for Continued Competition

Kane School District Looking at Using Alternative Energy

2/2/2007