Maryland regulators are considering exemptions for a proposed Calvert County power plant and other generators from a regional auction of carbon credits that is designed to reduce greenhouse gas emissions.
The idea of granting free carbon credits to potential polluters had rankled some environmentalists and state lawmakers, but Maryland's projected energy shortage is so acute that many now support the idea as a way to get new electricity online and to head off potential rolling blackouts.
Gov. Martin O'Malley's administration has been working to address the state's energy needs while revamping environmental laws, and the concession is the latest nod to a balancing act that officials say is required among economic, corporate and ecological concerns.
The Democratic governor signed several environmental and energy bills yesterday, including legislation that sets out how to spend the regional auction proceeds, limits development near the Chesapeake Bay and establishes "green" building standards for new schools. O'Malley also signed a bill ratifying an agreement with Constellation Energy Group that provides $170, one-time rebates to residential customers of Baltimore Gas & Electric Co.
"The imperative is to create a more sustainable future for our state in terms of the land, the air, the water that we use and also therefore the energy that we use," O'Malley said during the bill-signing ceremony in Annapolis.
The administration won approval during this year's General Assembly session of proposals intended to reduce the state's reliance on fossil fuels and costs for consumers.
Carbon credit auction proceeds, for example, will go to energy efficiency and conservation programs meant to lower electricity usage and bills. Another bill O'Malley signed yesterday will increase grants for solar energy and geothermal heat pump systems for homes.
The new laws also set out a number of long-range goals. They aim to reduce the state's energy consumption 15 percent by 2015 and to double the amount of renewable energy that power companies must provide for sale to customers to 20 percent by 2022.
The Constellation settlement is valued at $2 billion and ends a legal battle with the state. In addition to the credits, consumers would no longer be obligated to pay $1.5 billion in future costs for dismantling nuclear power plants in Southern Maryland, as had been stipulated as part of the state's 1999 deregulation plan.
The settlement also gives the state some assurance that the company will build a nuclear power plant here. In exchange, the company avoids regulatory inquiries into certain costs consumers paid as part of the state's move to a deregulated energy industry.
Some lawmakers said the changes in energy and environmental policy will add to consumer costs.
"This all happens at a time when people are paying more for gas and more for groceries, and the national economy is going down," said Sen. Allan H. Kittleman, a Republican representing Howard and Carroll counties.
Separately yesterday, regulators said that the Department of the Environment plans to promulgate rules by January to set aside up to 5 percent of carbon credits under the regional auction for cleaner energy generators that come online before the summer of 2012. That would potentially include the planned Southern Maryland plant. The agency set out the time frame in a letter to lawmakers this month, said Shari T. Wilson, the state secretary of the environment.
"Maryland has a reliability challenge," said Malcolm Woolf, director of the Maryland Energy Administration.
Competitive Power Ventures Inc., the Silver Spring-based company, plans to build a natural gas-fired power plant in Charles County. The 640-megawatt plant would provide electricity to about 600,000 homes in Washington and Central Maryland.
Under the Regional Greenhouse Gas Initiative - a cooperative effort of 10 northeastern and Mid-Atlantic states to fight global warming - carbon-dioxide emission "allowances" are to be auctioned this year. The cap-and-trade system in Maryland is expected to raise $80 million to $260 million a year.
Sharon Segner, a director at the company, said the set-asides would level the playing field for new power plants competing for energy contracts with generators in neighboring states such as Pennsylvania and Virginia, which are not part of the regional auction. She also said that the credits would have cost tens of millions of dollars and noted that the exemptions would be limited to the first six years of the system.
Sen. George W. Della, a Baltimore Democrat, said he had concerns about exemptions. "If you're going to make a law," he said, "you would assume that it would apply to everybody, good or bad, and there would be no exemptions."
But Brad Heavner, director of Environment Maryland, said that other states have created similar set-asides, and that "there has not been any big objection." He added: "As long as cleaner fossil-fuel plants are replacing dirty fossil fuel plants, it's a plus for the environment."
Sen. Thomas "Mac" Middleton, Finance Committee chairman, said company officials knew the plant would be subject to the auction when they agreed to build the plant and that they also knew the state was "in dire straits" in terms of energy shortfalls.
"It's a tough balancing act," Middleton said. "The only way I would support this is if it's tied to reliability."