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New Greenhouse Regulations Will Drive Up Costs for Employers

Posted by Bob Rio on Aug 11, 2017 11:29:19 AM

The Baker Administration will today introduce new regulations that set specific limits on sources of greenhouse gases, the emissions linked to climate change. State officials indicate that the regulations could increase costs to electric ratepayers by as much as 2 percent.

Electriclinessmall.jpgThe new rules aim to reduce the state’s carbon emissions 25 percent below 1990 levels by 2020, as required by state law.

Robert Rio, Senior Vice President of Government Affairs at AIM, issued the following statement:

“The 4,000 member employers of Associated Industries of Massachusetts are extremely disappointed with the Baker administration’s new electricity sector regulations. The administration openly admits that these rules will increase Massachusetts electric rates that are already among the highest in the nation.

“The increases produced by the proposed rules, when combined with other pending cost increases, could raise the electric bills of Massachusetts employers some 10 percent in the next year alone.

“These regulations are ultimately unnecessary. The administration could have chosen to work with the legislature to change the Global Warming Solutions Act to allow for alternative ways for the electricity sector to meet these obligations.  Instead, the administration has turned a blind eye to the corrosive impacts that high electric rates are having on struggling Massachusetts companies.

“The cost increases produced will harm consumers as well through higher rents, taxes and other costs of doing business.   

“AIM supports clean energy and is a leader in working with the administration to transition the power sector to cleaner sources.  These regulations are a setback to that effort."

Topics: Massachusetts economy, Environment, Energy

A Better Idea to Reduce Carbon Emissions...

Posted by Bob Rio on Jun 19, 2017 8:30:00 AM

Massachusetts could reduce carbon emissions far more significantly by streamlining existing greenhouse-gas reduction initiatives than by implementing a bureaucratic new carbon tax.

trafficsmall.jpgThat’s why Associated Industries of Massachusetts will oppose a carbon-tax bill and offer an alternative strategy during a Beacon Hill hearing tomorrow.

An Act Combating Climate Change would establish in its first year a carbon tax of 10 dollars per ton of carbon dioxide emitted, rising steadily to 40 dollars per ton in year seven on all fossil-fuel use (gas, diesel, natural gas) in transportation (on and off road vehicles, trucks, recreational and commercial vehicles, including buses, trains and vans) and residential and business heating and process.

Fuels used to generate electricity would be exempt because there is already a carbon tax on those sources.  

The money generated – almost $600 million dollars the first year and rising to $2.4 billion in year seven - would be returned as rebates to residents and business by a mechanism to be developed by the state Department of Energy Resources (DOER). Rebates would be made in rough proportion to what each sector pays. Based on current usage, approximately 60 percent of the funds would come from the transportation sector.

AIM opposes the carbon-tax bill because the rebate mechanisms is expensive and overly bureaucratic. Collecting and rebating money to nearly 7 million residents and 250,000 or more businesses will be an enormous administrative burden that will cut into the rebates.

AIM estimates that the average payer will get back through rebates only 50-60 percent of the amount paid into the tax. Certain groups could get more than they paid.    

Rather than establish an entirely new program, AIM suggests fixing the current programs; and if a carbon tax is desired, replace the current funding for the existing programs with the proceeds of a carbon tax.

Massachusetts already surcharges both residential and business electricity and natural gas users to support programs that reduce greenhouse-gas emissions. Those surcharges generate almost $2 billion dollars per year.

These programs could be more efficiently managed through the one source of revenue envisioned in this legislation.

Our recommendations include:

  • All carbon emissions, including the electricity sector, should be subject to the carbon tax.
  • The carbon tax should replace the carbon tax instituted under the state’s participation in the Regional Greenhouse Gas Initiative (RGGI).
  • All current programs that deal with energy efficiency and renewable energy that are funded by ratepayers or taxpayers should be eliminated, including those currently directed at the transportation sector.

With all programs eliminated, the single funding source would be overseen by a new advisory council – the Carbon Reduction Advisory Council - made up of a diverse group of stakeholders. Under the direction of this advisory council, the funds would be channeled to programs that would compete to provide the best carbon-reduction strategies.

This would be a bold change to the way Massachusetts operates these programs. But a bold change is needed. Many of the existing programs have become hidebound and uncoordinated. New ideas that could help our collective carbon-reduction goals are not instituted because they do not fit into current silos.

This new thinking is not only better but necessary to attain the commonwealth’s greenhouse gas reduction commitments.

Please contact me at 617.262.1180 or a rrio@aimnet.org if you would like more information or updates on the carbon tax.

Q & A on the Carbon Tax

Topics: Regulation, Environment, Carbon Tax

Take Action to Limit Electricity Rate Hikes

Posted by Bob Rio on Jul 22, 2016 11:57:57 AM

Employers concerned about the rising cost of electricity in Massachusetts take note – it’s time to contact members of a legislative conference committee hammering out an energy bill that could make your current electric bill look like child’s play.

Electriclinessmall.jpg The message: Pass a bill that follows the detailed recommendations of a four-page letter sent by AIM earlier this week.

The Legislature and Governor Charlie Baker have made it a priority to secure passage of an energy/electricity bill prior to the end of the session on July 31. 

AIM supports the commonwealth’s efforts to transition its economy to non-carbon fuel sources and attract new businesses to Massachusetts.  At the same time, the complex House and Senate energy bills now in conference will have far-reaching and irreversible impacts upon employers and citizens alike during the next two decades. 

One fact is clear: The final bill will raise electric rates.  Under virtually any scenario the above-market costs passed to ratepayers in the form of rate hikes could be larger than any utility rate hike in history. Massachusetts could end up buying up to 40 percent of its electricity from high-priced renewable energy sources.

The disparity between electric rates in Massachusetts and those in competing states is hindering the ability of employers to attract and retain jobs. The list of internationally known companies that have moved out of Massachusetts just in the last year is long and includes Polartec in Lawrence; SABIC in Pittsfield; Kraft Foods in Woburn; General Mills in Methuen; General Foods in Woburn; and Notini and Sons in Lowell.

Traditional companies located in Gateway cities are at particular risk. These companies are not beneficiaries of the new economy, but still provide good paying jobs, tax revenue and spin-off spending to their communities. 

Other Massachusetts employer groups also sent a letter to the conference committee this week urging lawmakers to factor in costs to ratepayers.

Contact the Energy Conference Committee

 

Topics: Electricity, Energy

Senate Advances Energy Bill

Posted by Bob Rio on Jun 27, 2016 9:47:25 AM

The Senate passedan  energy bill last week that would require utility companies to buy almost half of the electricity used in Massachusetts from renewable generation sources. AIM remains encouraged by some elements and concerned about others.

WindTurbinesSmall.jpgThe Senate measure (S. 2372, An Act Relative to Energy Diversity) would commit the commonwealth to purchasing 2,000 megawatts of electricity generated by offshore wind and about 1,400 MW from other sources, such as large hydropower and onshore wind. Other sections add requirements for energy labelling on buildings and mandatory energy audits. 

AIM’s response to the Senate proposal is the same as its reaction to an earlier bill passed by the House -  employers support the concept of buying electricity from clean-energy resources, provided the following guidelines are followed:

  • Any contract must be cost-effective for Massachusetts ratepayers (i.e. the benefits of any contract to the ratepayer must be greater than its costs);
  • The procurement process must be competitive and decision-makers must have an ability to refuse any bids that do not meet standards (i.e. no carve-outs for favored technologies);
  • Any above-market or below-markets costs of the contract must be allocated fairly among  all customers;
  • The clean energy procured must qualify to be used for compliance with the state’s Global Warming Solutions Act (GWSA), which requires a 25 percent reduction in statewide greenhouse gas emissions by 2020 and an 80 percent reduction by 2050.

The significant amounts of clean-energy solicitations contained in the Senate bill are a matter of concern for employers who already pay some of the highest electricity bills in the country. While the bill provides “off-ramps” allowing utilities to decline contracts deemed unreasonable or not cost-effective, the initiative could be economically damaging if wind and hydro power are priced higher than the electricity we current buy from other sources.

Positive elements of the legislation include:

  • The procurement process would require the price of each solicitation for offshore wind to result in lower prices than the solicitation before it, a good requirement.   
  • The bill would define cost-effective contracts simply as cost less benefits. Inexplicably missing from the requirement is that the benefits must accrue to Massachusetts ratepayers. The Senate version still leaves open the possibility that Massachusetts ratepayers could subsidize out-of-state ratepayers by paying for benefits that accrue to other states. AIM will work with the Senate to clarify this section.
  • The bill contains a detailed tracking mechanism to ensure that clean-energy generation is used for compliance with the state greenhouse-gas requirements.
  • There is no remuneration surcharge to utilities included, potentially saving customers millions of dollars.
  • The creation of a task force to develop a new energy efficiency program starting in 2018.

AIM remains concerned about several elements:

  • The bill doubles the renewable portfolio standard, which could increase cost, particularly since the increase in the RPS is not tied to the new timetable for the contracts. The mismatch would create a shortage of renewable power in the short term.
  • The cost-allocation methodologies for accounting for above-market power is inconsistent with what we believe should be fair to ratepayers.   

 Lawmakers are expected to propose a significant number of amendments to the bill this week.

Topics: Electricity, Energy

Beacon Hill Energy Bill Won't Lower Electric Bills

Posted by Bob Rio on May 31, 2016 7:30:00 AM

Those expecting the long-awaited Beacon Hill omnibus energy bill to lower the state’s highest-in-the-nation electricity costs will be disappointed.

Electriclinessmall.jpgIn fact, the bill will likely increase energy costs for employers and consumers.

The Legislature’s Joint committee on Telecommunications, Energy and Utilities released H.4336 on May 23.  The measure now goes to the House Ways and Means Committee for review.

The bill contains only two provisions – a requirement for utilities to solicit contracts for hydroelectric power combined with onshore wind; and a similar requirement to purchase offshore wind.

AIM supports the concept of soliciting for clean energy resources, provided the following guidelines are included:

  • Any contract must be cost-effective for Massachusetts ratepayers (i.e. the benefits of any contract to the ratepayer must be greater than its costs);
  • The procurement process must be competitive and decision-makers must have an ability to refuse any bids that do not meet standards (i.e. no carve outs for favored technologies);
  • Any above-market or below-markets costs of the contract must be allocated fairly among  all customers; and
  • The clean energy procured must qualify to be used for compliance with the state’s Global Warming Solutions Act (GWSA), which requires a 25 percent reduction in statewide greenhouse gas emissions by 2020 and an 80 percent reduction by 2050.

The last guideline is important in light of a May 17 Massachusetts Supreme Judicial Court (SJC) ruling that the state Department of Environmental Protection (DEP) has not acted aggressively enough to enforce regulations to meet the GWSA emission-reduction targets. DEP must now develop new regulations that reduce emissions in Massachusetts, especially in the transportation and energy generation sectors.

The court decision complicates the omnibus energy bill because virtually all of the clean energy envisioned in the omnibus bill would be purchased from out of state and would thus not directly reduce emissions in Massachusetts.

AIM is seeking to add language in the energy bill to ensure that any emission credits received from procuring clean energy under the bill are properly credited in accordance with the SJC decision. If clarification language is not included, and further interpretation of the decision finds that greenhouse gas reduction from all this clean energy cannot be used as a compliance tool with the GWSA, billions of dollars will be wasted to “comply” with the law and policymakers will no doubt impose more Draconian limits and costs on ratepayers.

The House has the opportunity to improve this legislation.    

While the bill sets up a process to solicit hydro and offshore wind, there is no definition of “cost-effective” or “reasonable,” two standards that appear numerous times in the procurement language of the bill. A definition of those terms is sorely needed because current law classifies even expensive projects like Cape Wind as “cost-effective” even though the energy they produce is several times more expensive than other clean power.  

Legislators should also change what appears to a special status created for offshore wind at the expense of large hydro and onshore wind. The bill establishes a ceiling on the amount on amount of large hydro/on shore wind that can be procured at about 20 percent of the of the states total electric load, while establishing a minimum amount of procurement for offshore wind at about 10 percent of the state electricity load.

The language is puzzling. It puts a limit on what may be the cheapest sources of power (large hydro/wind), while encouraging virtually unlimited amounts of the highest-cost power (offshore wind). The inevitable result will make Massachusetts dependent upon high-cost energy sources at multiple times the cost of conventional power.  

A recent analysis performed through the AIM Foundation found that Massachusetts employers and consumers already pay more than $800 million in additional costs on their electric bills to support renewable energy. Add carbon taxes for power plants (passed on to the ratepayer) and energy efficiency surcharges and the cost balloons to $1.5 billion, not including the cost of the actual electricity.

Businesses pay nearly 55 percent of these costs. More importantly, business that have used the AIM Energy Calculator have found that these hidden costs can add up to 25 percent of a total electric bill.

AIM is working with the House Ways and Means Committee to ensure that these items are addressed.

Topics: Electricity, Massachusetts Legislature, Energy

It's Time for Massachusetts to Buy Local

Posted by Bob Rio on Apr 20, 2016 7:30:00 AM

It seems everyone these days wants to buy from local sources.

Farmers_Market.jpg“Buy local” has become a familiar battle cry in restaurants, retail stores and roadside stands among consumers who prefer to know where their favorite products are made. These consumers want to be confident that the items they buy are made sustainably and that their purchases support local jobs.

But why does the concern for locally made products in Massachusetts seem to stop at the farmers market? Why have scores of Bay State companies, some household names, and the thousands of local jobs they provided, disappeared with virtually no notice or outcry from state officials? And why has our commonwealth not resolved the problems that drove these companies away?   

Do you own a Polartec jacket for hiking (or to make it look like you hike)? The company, formerly known as Malden Mills, was started in 1906 and was miraculously able to recover after a devastating fire in 1995 nearly bankrupted the business. Polartec recently announced the closing of its Lawrence manufacturing facility, putting 350 unionized employees out of work and moving production to New Hampshire and Tennessee.

Use salad dressing on that locally sourced lettuce? Cain’s products, started in Boston 1914, is closing its Ayer plant, putting another 100 people out of work. The company is moving production to Pennsylvania, Georgia and Kentucky.

The list goes on. General Mills in Methuen, makers of Yoplait yogurt since 1993 closed, sending 144 jobs to other states. Kraft foods, located in Woburn for some 95 years, is putting another 200 people out of work. Sunny Delight is cutting 50 jobs in Littleton. Notini and Sons in Lowell, 100 jobs lost after 125 years. Courier Corp, a printer founded in 1824 and recently sold to an out-of-state firm, is shutting down its Westford plant putting 200 people out of work.

And those 1,144 jobs lost are just the ones that have been publicly announced in 2015 and 2016.

The reason for these closings are varied and complex. Some companies were sold to out-of-staters, while others cited high costs in Massachusetts for labor, housing, health insurance or energy. Some just used the euphemism “competitive realignments,” which probably includes a little bit of everything.

But all of the announcements have one thing in common – these companies and brands are not coming back and their employees and suppliers who depend on them are looking for jobs.

Massachusetts takes a back seat to no one in its ability to brag about the reason companies locate here – our universities, our educated work force, our innovation industries. General Electric’s announcement in January that it will move its corporate headquarters to Boston unleashed a euphoric wave of valedictories about the innovation ecosystem that GE hopes will help it to create the industrial Internet.

But the state seems strangely unconcerned with the reasons that companies leave. It’s disheartening, especially for the hard-working people who lose their jobs and their livelihoods. How can we make the Massachusetts economy successful for everyone if we don’t know why companies come or go?

The 4,500 member employers of Associated Industries of Massachusetts believe that the acceleration in business closings has much to do with the persistently high cost of health care and energy in Massachusetts.

Health-care costs in Massachusetts remain 36 percent more than the national average. Between 2005 and 2014, increases in health insurance premiums have outpaced income gains, consuming more than 40 percent of family income growth over the past nine years.

The relentless acceleration of health-care spending and health-insurance premiums threatens both the continued growth of the Massachusetts economy and the ability of citizens to access the commonwealth’s world-renowned medical system. It also threatens the commonwealth itself - MassHealth, the government insurance program for low-income residents, now accounts for 40 percent of the state budget at $14.7 billion annually.

Energy costs are likewise among the highest in the country – nearly double most places these companies are moving production to.

To those that care about the price of electricity – and that includes many companies outside the Boston area – our high prices are a never-ending drag on local profits. At a 5 percent profit margin – probably about right for food businesses – every dollar increase in electricity, health care, taxes or other costs that don’t contribute to increased production means another $20 in revenue is required just to break even. At some point, even the strongest fighter gives up.

The future promises little change. Despite an outcry from the business community about high electric rates, the legislature recently passed – and the governor was happy to sign - a new solar bill that will continue our highest-in- the nation subsidies. The justification - to protect solar jobs.  

While it is comforting to know that the Legislature is willing to tax some industries to support favored ones, it is also time to realize that Massachusetts is made up of several economies. The economies in the eastern part of the state have different issues than those in the central, western and southeastern areas, particularly around the bottom-line cost areas such as electricity and health care.  

Sure, companies will always realign their businesses. In some cases that may spell job losses for Massachusetts, in other cases, like GE’s, it may signal gains. But the state should not be complicit in a company’s demise by failing to respond to economic issues.

You’ll still be able to buy Polartec jackets, eat Yoplait yogurt and slather your sandwich with Cain’s mayo at the time next year. But the good jobs at good companies providing good wages we’ve depended on for decades won’t be locally sourced any more.

Topics: Health Care Costs, Economic Development, Energy

Strategies to Reduce Your Energy Costs

Posted by Bob Rio on Feb 25, 2016 10:34:14 AM

Massachusetts suffers from some of the highest electricity prices in the country – nearly double those of competitor states like North Carolina. There are lots of reasons, but the reality is that there is no end in sight for rising electricity costs.

Electriclinessmall.jpgAt a 5 percent profit margin, every $1 increase in electric rates requires additional sales of $20 just to cover the increase. For employers who also struggle with the cost of health insurance, taxes and wages, it is easy to see why controlling the energy line item is important.  

The good news is that there are at least two effective strategies employers can use not only to reduce energy costs, but also to shrink their environmental footprint and drive operational efficiency.

The first strategy is to use less electricity through energy efficiency and on-site generation (including solar or even combined heat and power). Reducing electricity use not only cuts costs, but also shrinks your environmental footprint. Massachusetts has many programs that will help with technical assistance and rebates. Take advantage of these programs since you are paying for them through surcharges on your electric bill.

The second strategy is to change the way you use electricity.

Shift your use of electricity to avoid demand charges, which are assessed at times when the electricity grid is stressed – usually on hot summer days. The utility imposes a demand charge based upon your usage on the peak day of the year. At that point you “own” that amount on the grid, even if you never reach that amount for another year.

The key, then is to reduce your power demand on these days, so you “own” less of the grid going forward. Knowing when to shift your usage through sometimes small operational changes can cut your costs dramatically, with no restrictions on future use.

And shifting use helps the environment too, even though you are using the same amount of total energy.  High demand on hot days often causes ISO New England to call upon inefficient oil plants to provide power. All ratepayers chip in to keep these rarely used plants at the ready. Reduce the need for these plants and you reduce costs and emissions – without using less electricity.  

There is no one size fits all – each company’s operations are different and strategies for improving your company’s energy management system are available, no matter what the size of your organization.

Begin to understand your energy needs and trends. Don’t focus exclusively on how much energy you are using per day, but where it is used and what times. Look at demand side management alternatives such as energy efficiency and demand response, or on-site generation, but be sure to understand the incentives your utility has available before you commit to a capital project.

At the AIM Sustainability Roundtable meeting scheduled for March 17 you can hear from experts who will share their experiences with power-purchase agreements, energy conservation, metering, and other topics.

Attend the AIM Sustainability Roundtable

Topics: Electricity, Energy, Business Costs

Infographic | The Cost of Solar-Energy Subsidies

Posted by Bob Rio on Feb 4, 2016 11:26:15 AM

Here is AIM's new ad opposing the $8 billion giveaway to solar energy developers.

AIMSolarAd.Final.jpg

Topics: Energy, Solar Subsidies

The 300 Percent Energy Solution

Posted by Bob Rio on Jan 13, 2016 11:28:16 AM

Advocates of renewable energy are fond of saying that the billions of dollars siphoned from ratepayers for mandated green programs actually save money in the long run.

The facts tell a different story.

Finance.pen.small.jpgAnalysis performed by Energy Tariff Experts, LLC, has found that the cost of state-mandated renewable energy programs has increased by a whopping 320 percent since 2010 for a typical large commercial customer in National Grid territory. These programs include solar energy subsidies, energy efficiency and carbon-reduction taxes.

Similar results occurred in Eversource territory.

It’s even worse for residential customers – the increase in costs for these same programs is more than 400 percent in five years.

And the increases are just beginning. Solar energy subsidies alone are on a trajectory that will add billions of dollars to the cost of electricity over the next decade.

Massachusetts in January 2010 had the third highest commercial and second highest industrial rates in the continental United States. Nearly six years later, after all the renewable energy initiatives, Massachusetts still suffers from the third highest commercial rates and now has the dubious distinction of having the highest industrial rates in the continental US.

Where are the economic benefits claimed by advocates? If they exist, they are clearly not flowing back to ratepayers. 

AIM supports the development of renewable energy, but believes that renewable initiatives funded by ratepayers must provide maximum benefit and efficiency for minimum cost. 

To understand how much of your monthly electric bill goes to pay for mandated renewable energy programs, download the AIM energy calculator. I also invite you to share your thoughts with me at rrio@aimnet.org

 

Download the AIM Energy Calculator

 

Topics: Energy, Business Costs, Solar Subsidies

How Much Do Energy Giveaways Add to Your Electric Bill?

Posted by Bob Rio on Jan 11, 2016 7:30:00 AM

“It will only cost a cup of coffee a month.”

We hear that phrase a lot from renewable-energy advocates seeking to justify uneconomical and inefficient government subsidy programs by arguing that they waste only a small amount of money at a time.

solarpanels.small.jpgBut put enough cups of coffee together and these programs turn into a something like a Box O’ Joe that poses a real threat to the Massachusetts economy.

The incremental costs of half-baked energy subsides add up, particularly for large customers like manufacturers and hospitals that cannot avoid them unless they reduce their electricity use to zero through onsite generation, which is not always practical. These politically generated costs are not added to the bottom lines of competitors in other states.

The subsidies avoid ratepayer outrage in large part because their cost is virtually invisible to the consumer, hidden in dark corners of electric bills. Some are tucked under the “energy” portion, some are under “distribution,” some are listed separately. Some, like solar and energy efficiency are listed under both. And don’t forget other costs that are sure to increase over the next few years, including transmission.

How much do these programs cost residential and commercial ratepayers? The state solar subsidy program checks in at $600 million per year and is headed for $1.5 billion per year. The energy efficiency program tacks on another $600 million per year. The regional greenhouse gas program, which charges electrical generators for their carbon emissions, totals another $60 million.

AIM is today unveiling an energy calculator designed to help Massachusetts employers decipher the maze of government-mandated energy subsidies. The calculator was developed with Energy Tariff Experts, LLC, and works for most customer classes (including residential), in National Grid and Eversource territories. Other rate classes will be added as necessary.

Based on trials with some members, the results show:

  • Total subsidies for state-mandated programs, most of which have been added since 2008, can equal 25 percent of a customer’s total bill.
  • Solar subsidies are so large they will likely become the largest mandated program on a customer’s bills this year. In fact, the cost nearly equals the cost for energy efficiency.

We invite you to use the AIM energy calculator. Also, if you are inclined, please save the spreadsheet and send us a copy. No identifying information is collected on our Web site or on the spreadsheet.   

Download the AIM Energy Calculator

Topics: Energy, Business Costs, Solar Subsidies

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