Hogan steps back from clean-energy efforts, citing cost to consumers

Gov. Larry Hogan's pledge to cut taxes could curtail some of the state's biggest efforts to clean the air.

Republican Gov. Larry Hogan's pledge to cut taxes and fees has spurred his administration to step back from two of Maryland's main efforts to clear the air of pollution.

In the face of efforts by environmentalists, consumer advocates and utilities, the administration is opposing plans to expand an initiative that encourages state residents and businesses to use less electricity. And the governor vetoed a bill that sought to increase Maryland's use of renewable energy sources.

In each case, Hogan argues that while he wants cleaner air, the state cannot ask residents and businesses to further bankroll the effort. Utility customers pay monthly surcharges that Baltimore Gas and Electric Co. and others use to promote energy efficiency, and renewable sources such as wind and solar power are more expensive than energy from fossil fuels.

"The governor has demonstrated his commitments to reduced emissions and is willing to work with anybody to find ways to do that," said Matthew A. Clark, a Hogan spokesman. "But increasing taxes isn't going to be the approach he's going to agree to."

The decisions please those who supported Hogan for his platform opposing taxes and fees but have clean-air advocates questioning how the state will meet goals to cut carbon emissions by 40 percent by 2030. Hogan approved the target when he signed the Greenhouse Gas Reduction Act into law in April.

"We got this great endorsement from the governor on the Greenhouse Gas Reduction Act," said David Smedick of the Sierra Club, who leads its Maryland Beyond Coal Campaign. "Now we're seeing at least two of the pillars of that goal ... kind of under attack."

Neither initiative is defeated, but both appear at risk. The General Assembly could override the veto of the renewable energy bill when members return to Annapolis next year. If the same lawmakers who voted for the bill support an override, the measure would become law.

Meanwhile, the energy-efficiency initiative known as EmPOWER Maryland is written into state law. It directs utilities to collect surcharges from customers — about $5 per month for the typical BGE residential customer — and use the money to offer rebates on efficient appliances, free home energy checkups and bill credits for reducing electricity usage.

The Maryland Public Service Commission has directed utilities to strive for an added 2 percent savings in electricity each year, a goal that could bring proposals for higher surcharges to pay for more incentives. But the Hogan administration is firmly opposing any increase to customer surcharges.

Both EmPOWER and the state's renewable-energy program, launched under Democratic leadership over the past decade, have broad support and are credited with significant improvements in air quality.

EmPOWER began in 2008 with a goal to reduce power consumption by 15 percent over seven years. Since then, state businesses and residents have met that goal, avoiding use of more than 5 million megawatt hours of power, the equivalent of the output from two or three coal-fired power plants. Since its inception, $1.78 billion has been spent on EmPOWER programs.

The state first required utilities to buy 3.5 percent of their portfolios from renewable sources in 2006, and that share is on track to reach 20 percent by 2022. The legislation that Hogan vetoed would have increased that goal to 25 percent.

Signs of a shift by the Hogan administration appeared last fall. The Maryland Energy Administration, an agency charged with promoting energy efficiency and reducing reliance on foreign fuel, said in October that it would not endorse any budget increases for utilities' energy-efficiency initiatives.

Utilities submit plans for those programs — offering customers rebates for using less electricity or buying efficient appliances, for example — to the administration and to the Public Service Commission, which has the authority to approve or deny them because money comes directly from ratepayers. The commission is an independent body, but its members are appointed by the governor.

Last month, the energy administration for the first time did not send a representative to a PSC hearing on the EmPOWER program. That dismayed program supporters and surprised the commission's chairman, Kevin R. Hughes, a former O'Malley policy adviser who helped craft the EmPOWER legislation.

"We were disappointed they did not participate this time," Hughes said.

Energy administration officials said they expect to participate in future hearings, but they do not see a need to increase EmPOWER charges on utility bills.

"We can meet efficiency goals with current funding levels," said John Fiastro, director of government affairs for the agency. The energy administration "is committed to [considering] the impact on the ratepayer and making sure we're making smart policy decisions in the future."

A BGE spokesman said the utility considers the program in its customers' best interests and wants to see it continue as long as it remains cost-effective. Despite the cost to ratepayers — $324 million for BGE customers from 2015 through 2017 — EmPOWER makes bills cheaper than they would be if growing demand required new power plants to be constructed, the company argues.

Though the PSC largely approved utilities' plans for spending the ratepayer surcharges over the next year and a half in a recent order, the ruling was appended by a stern message from Michael T. Richard, a commissioner Hogan appointed in January.

Richard wrote that he would have preferred "immediate reductions in the EmPOWER surcharges," though he called the spending somewhat worthwhile because it supports private-sector contractors.

Though he voted in favor of the ruling, Richards called for an eventual shift away from "subsidy-based programs" to "market-based" solutions to encourage energy efficiency. He contends that the PSC should follow Hogan administration policy when it comes to the EmPOWER program, and in an interview he said he would support legislation to limit the commission's ability to levy fees on consumers.

"At this point I'm still in the minority, so I have limited ability to change it," he said of the EmPOWER program's planned growth. "I just think we should listen to our elected officials. As unelected officials, it's incumbent on us to do that."

Hughes said the PSC considers both the costs and benefits of the efficiency surcharges.

"The commission always looks at both sides of the equation, and our stakeholders do, too," he said.

Late last month, Hogan announced that he would veto legislation that would have required utilities in Maryland to obtain 25 percent of their electricity from solar and other renewable sources by 2022.

While he called it a laudable effort, he likened it to "a tax increase that will be levied upon every single electricity ratepayer in Maryland."

"For that reason alone, I cannot allow it to become law," Hogan said.

Proponents of the legislation said it would create jobs — the solar industry in Maryland alone employs 4,300 people, they estimate. A regional industry group, the MD DC VA Solar Energy Industries Association, warned that the veto "puts thousands of solar jobs and hundreds of local companies at risk."

Clark said the governor believes the opposite. In Hogan's view, Clark said, the costs added to electric bills across the state would have depressed business activity and competitiveness, counteracting any job growth in a single sector of the state's economy.

State legislative analysts predicted that the measure would add at least 77 cents and as much as a few dollars a month to residential customers' bills by 2020. The impact on commercial and industrial utility customers would vary widely depending on energy usage, from $20 to $200 or more each month.

"Every business in the state also pays for electricity; they are ratepayers," Clark said. "If you're increasing taxes on every other business in the state, that certainly harms the business community overall."

Paula Carmody, an advocate for utility customers in her role as the state People's Counsel, is among those calling for increased spending on energy efficiency despite the money it adds to consumers' bills.

She said the electricity customers use makes up about two-thirds of the typical bill, so using less electricity more than counteracts the charge.

"That has impacts not only directly for the customers who participate, but it has very strong implications for the wholesale power markets," Carmody said. Reducing the strain on power plants saves everyone money, she said.

The disagreements set up a classic challenge between long-term environmental policy and an anti-tax stance, said Mileah Kromer, director of the Sarah T. Hughes Field Politics Center at Goucher College.

Environmentalists have always struggled to persuade people to pay for something that will have a delayed payoff, she said. Hogan's staunch stance against taxes makes it that much more difficult for proponents of EmPOWER or the renewable energy standards to defend the policies, she said.

"The fundamental problem is, this is Hogan's message," she said. "He's not going to raise taxes or fees, so this will be a point of contention."

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