2010.03.09-DowJonesNews-RenewedEnergyBudgetPressureEatsatStatePrograms Press
UPDATE: RENEWED ENERGY: Budget Pressure Eats At State Programs
9 March 2010
Dow Jones News Service
By Mark Peters
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Hefty budget deficits are tempting Northeast U.S. states to tap money earmarked for efficiency and renewable-energy programs.
Elected officials in New Jersey and Connecticut may divert hundreds of millions of dollars collected through electric rates into state coffers. Environmentalists are closely watching New York and Rhode Island, among other states, to see if they do the same with money raised through a regional, market-based program to cut emissions of the greenhouse gases blamed for climate change.
Many states are struggling to balance their annual budgets as the recent recession continues to hit tax revenue, with the energy funds in Northeast states looking particularly vulnerable. Unlike the federal government, no state except Vermont can run a deficit, so elected officials face tough choices as the fiscal year ends and budgets are finalized this spring.
Environmentalists warn diverting money away from renewable projects and efficiency programs is short-sighted. The move would inject uncertainty into fragile retail markets taking shape for solar panels and other renewable-energy technologies. Reduced funding could curb in-state research while scaling back popular efficiency programs that provide environmental benefits and consumer savings at relatively low costs.
"We feel very strongly this is a dangerous precedent," said Matt Elliott, global warming and clean energy advocate for Environment New Jersey.
In New Jersey, Republican Gov. Chris Christie has proposed taking $158 million from the state's clean-energy fund to help eliminate an estimated $2.2 billion budget deficit. The funding is more than half of what's collected annually through a charge on consumers' electric bills. Christie in a statement earlier this year called the steps difficult but a good opportunity to start reforming state government.
In the end, elected officials may focus on energy programs outside the state fund. Programs run by Public Service Gas & Electric Co.--the state's largest utility--are arguably more effective at achieving public-policy goals, said Ralph Izzo, chief executive of Public Service Enterprise Group Inc. (PEG), parent company of the utility.
Like New Jersey, Connecticut could see ratepayer-funded programs slimmed down. A state fund for efficiency and clean energy projects could end up being securitized to close a budget gap, resulting in the loss of about $40 million in annual funds over the next decade, said Jessie Stratton, director of government relations for Environment Northeast, a regional environmental group.
She said the money actually doesn't really belong to the state government since it comes from electricity rates, not taxes. Stratton said Connecticut could risk losing federal stimulus money for efficiency projects, which complements--rather than makes up for--state funding.
Another source of funding in the Northeast for energy programs is money raised from the Regional Greenhouse Gas Initiative, or RGGI. The 10-state, program places a limit on emissions of greenhouse gases and then auctions off permits for each ton allowed. The states have raised nearly $500 million to date through the program, with another emissions allowance auction scheduled for Wednesday.
Elected officials in New York diverted $90 million to help fund a gap in the current budget. Although Democratic Gov. David Paterson proposed closing a $9 billion gap in next year's budget without tapping RGGI funds, environmental advocates worry the money could again become tempting as budget negotiations pick up with the fiscal year ending.
"The question is what happens next round because the state is in very dire straits," said Dan Hendrick, spokesman for the New York League of Conservation Voters.
Rhode Island is another concern for advocates since, amid budget negotiations, the state hasn't released money raised through RGGI for energy programs. But Amy Kempe, a spokeswoman for Gov. Donald Carcieri, said funds from the regional program won't be redirected to general uses and will be spent on efficiency and renewable energy programs as planned.
"The governor doesn't intend to use that money to fill a budget hole," she said in an interview Tuesday.
Mark Peters
Reporter - US Energy
Dow Jones Newswires
