hb 0284

CHAPTER 130

HB 284-FN - FINAL VERSION

AN ACT relative to additional emissions reductions from existing fossil fuel burning steam electric power plants.

SPONSORS: Rep. J. Bradley, Carr 8; Rep. Norelli, Rock 31; Rep. D. White, Hills 25; Rep. N. Kaen, Straf 7; Rep. Thomas, Belk 3; Sen. Johnson, Dist 3; Sen. Cohen, Dist 24; Sen. Below, Dist 5; Sen. Eaton, Dist 10; Sen. Larsen, Dist 15

This bill establishes caps for emissions of sulfur dioxide, oxides of nitrogen, and carbon dioxide by existing fossil fuel burning steam electric power plants. This bill permits the banking and trading of emissions reductions to achieve compliance with the caps. Compliance is not required of a plant that installs qualifying repowering technology or an eligible replacement unit.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

AN ACT relative to additional emissions reductions from existing fossil fuel burning steam electric power plants.

Be it Enacted by the Senate and House of Representatives in General Court convened:

130:1 Findings. The general court finds that the economic interests of ratepayers will be best served through the flexible implementation of an integrated, multi-pollutant emission reduction strategy as electric industry deregulation proceeds in New Hampshire. The advance knowledge of the requirements of this act, and a flexible regulatory approach used to implement them, will reduce uncertainty and risk for prospective buyers of Public Service of New Hampshire's existing fossil fuel burning steam electric power plants, thus enhancing their value at divestiture. Providing prospective buyers a significant time period in which to recover their investment will also enhance the divestiture value of these facilities. Combined, these factors will maximize recovery from the divested power plant assets, correspondingly reduce the stranded costs that must be paid over time by ratepayers, and thus allow electric rates to decline further or faster than they would otherwise.

130:2 New Chapter; Multiple Pollutant Reduction Program. Amend RSA by inserting after chapter 125-N the following new chapter:

I. The general court finds that while air quality has improved in recent years, scientific advances have demonstrated that adequate protection of public health, environmental quality, and economic well-being - the 3 cornerstones of New Hampshire's quality of life - requires additional, concerted reductions in air pollutant emissions. The general court also finds that the state's tradition of environmental leadership - setting an example for similarly feasible air pollution reductions from upwind jurisdictions - is also well served by additional emission reductions.

II. Recent studies and scientific evidence, documented in the New Hampshire Clean Power Strategy issued in January 2001 by the department of environmental services, indicates that significant negative human health and ecosystem impacts continue to be caused by air pollution. The general court finds that the substantial quantities of several harmful air pollutants that continue to be emitted from existing fossil fuel burning steam electric power plants, despite recent reductions in the emission of certain air pollutants from some of these facilities, contribute to these harmful impacts and that additional emissions reductions from these sources are warranted.

III. Specifically, the general court finds that aggressive further reductions in emissions of sulfur dioxide (SO2), oxides of nitrogen (NOx), mercury, and carbon dioxide (CO2) must be pursued. These pollutants are primarily responsible for the human health and ecosystem impacts documented in the New Hampshire Clean Power Strategy issued in January 2001 by the department of environmental services.

IV. The general court finds that, as demonstrated by recent analyses, a high quality-of-life environment has been, and will continue to be, essential to New Hampshire's economic well-being. The general court further finds that protecting New Hampshire's high quality-of-life environment by reducing air pollutant emissions returns substantial economic benefit to the state through avoided health care costs; greater tourism resulting from healthier lakes and improved vistas; more visits by fishermen, hunters, and wildlife viewers to wildlife ecosystems, and a more productive forest and agricultural sector.

V. For the above reasons and others, the general court finds that substantial additional reductions in emissions of SO2, NOx, mercury, and CO2 must be required of New Hampshire's existing fossil fuel burning steam electric power plants. Due to the collateral benefits and economies of scale associated with reducing multiple pollutant emissions at the same time, the general court finds that such aggressive emission reductions are both feasible and cost-effective if implemented simultaneously through a comprehensive, integrated power plant strategy.

VI. The general court also finds that the environmental benefits of air pollutant reductions can be most cost-effectively achieved if implemented in a fashion that allows for regulatory and compliance flexibility under a strictly limited overall emissions cap. Specifically, market-based approaches, such as trading and banking of emission reductions within a cap-and-trade system, allow sources to choose the most cost-effective ways to comply with established emission reduction requirements. This approach also provides sources with an incentive to reduce air pollutant emissions sooner and by greater amounts, promotes the development and use of innovative new emission control technologies, and specifies to the greatest extent possible performance results regarding environmental improvement rather than dictating expensive, facility-specific, command-and-control regulatory requirements. The general court acknowledges that future federal regulations may mandate some facility-specific requirements regarding mercury reductions.

VII. The general court also finds that energy conservation results in direct reductions in air pollutant emissions. Thus, incentives for energy conservation are an important component of an overall clean power strategy. The general court recognizes that energy conservation expenditures made by utilities using system benefits charge funds can benefit all citizens and ratepayers.

I. "Affected sources" means existing fossil fuel burning steam electric power plant units in this state, specifically Merrimack Units 1 and 2 in Bow; Schiller Units 4, 5, and 6 in Portsmouth; and Newington Unit 1 in Newington, excluding any of these units that may be repowered.

II. "Allowance" means a limited authorization to emit one ton of SO2, one ton of NOx, one pound of mercury, or one ton of CO2 during a specified year.

III. "Commissioner" means the commissioner of the department of environmental services.

V. "Discrete emission reduction" or "DER" means an emission reduction generated over a discrete period of time, and measured in weight (e.g., tons).

VI. "Ozone transport region" means the ozone transport region as established by section 184(a) of the Clean Air Act, 42 U.S.C. section 7511c.

VII. "Person" means any individual, partnership, firm or co-partnership, association, company, trust, corporation, department, bureau, agency, private or municipal corporation, or any political subdivision of the state, the United States or political subdivisions or agencies thereof, or any other entity recognized by law as subject to rights and duties.

VIII. "Renewable energy" means energy derived from hydro, geothermal, wind, solar thermal, photovoltaic, biomass, methane waste, tidal, or other source approved by the department.

IX. "Repowered unit" means an affected source that has installed qualifying repowering technology as defined by 40 C.F.R. part 72, or has replaced a unit by a new unit, provided the new replacement unit:

(a) Is on the same or contiguous property as the replaced unit, regardless of owner;

(b) Has a maximum power output rate equal to or greater than the maximum power output rate of the replaced unit; and

(c) Is designed to control, or is equipped with best available technology to control, emissions of multiple pollutants simultaneously, and in conformity with the emissions rates and reductions used to establish RSA 125-O:3.

X. "System benefits charge funds" or "SBC funds" means revenues collected by Public Service Company of New Hampshire (PSNH) (currently at a rate of 1.8 mills ($0.0018) per retail kilowatt-hour sold as set by the general court in 2001, 29:14) to fund energy efficiency and conservation and load management programs approved by the public utilities commission.

I. The department shall implement an integrated, multi-pollutant strategy to reduce air emissions from affected sources.

II. The integrated, multi-pollutant strategy shall be implemented in a market-based fashion that allows trading and banking of emission reductions to comply with the overall statewide annual emission caps established under RSA 125-O:3, III. Allowances, up to the amount of these caps, shall be allocated to each affected source based on the output of each affected source. The department shall make publicly available all allocations prior to the effective date of such allocations.

III. The strategy shall include implementation of the following statewide annual emissions caps:

(a) 7,289 tons annually applicable to total sulfur dioxide (SO2) emissions from the affected sources;

(b) 3,644 tons annually applicable to total oxides of nitrogen (NOx) emissions from the affected sources;

(c) An annual cap applicable to total mercury emissions from all affected sources burning coal as a fuel, to be recommended by the department not more than 60 days following the U.S. Environmental Protection Agency's proposed regulation establishing a Maximum Achievable Control Technology (MACT) standard for mercury emissions from utility boilers, but in no case later than March 31, 2004, with timely consideration by the legislature expected by July 1, 2005; and

(d) 5,425,866 tons annually applicable to total carbon dioxide (CO2) emissions from the affected sources until December 31, 2010, and after December 31, 2010, a lower cap to be recommended by the department no later than March 31, 2004, with timely consideration by the legislature expected by July 1, 2005.

I. The owner or operator of each affected source shall file a compliance plan with the department describing the technologies, operational modifications, market-based approaches, or other methods that will be used to comply with the emission caps established under RSA 125-O:3, III. Compliance plans shall also include a report of the mercury content analysis program results required under RSA 125-O:4, II and a report of the stack testing results for mercury emissions from Merrimack Units 1 and 2 and either Schiller Unit 4, 5, or 6 required under RSA 125-O:4, III. An initial compliance plan shall be filed no later than one year after the effective date of this section. Amended compliance plans shall be submitted to the department 45 days prior to the implementation of any change to the plan.

II. The owner or operator of each affected source burning coal as fuel shall conduct a mercury content analysis program. This program shall consist of monthly fuel samples and analyses for at least 12 consecutive months and the submittal of a final report to the department no later than one year after the effective date of this section.

III. Stack testing for mercury emissions from Merrimack Units 1 and 2 and either Schiller Unit 4, 5, or 6 shall be completed using a department approved test method no later than one year after the effective date of this section. The owner or operator shall submit a test protocol to the department at least 45 days prior to the commencement of stack testing.

IV. Compliance with the emission caps established under RSA 125-O:3, III may be demonstrated by making emission reductions at the affected sources, using compliance market-based approaches, or other methods acceptable to the department.

(a)(1) Affected sources may use SO2 allowances from federal or regional trading and banking programs and incentive programs established under this chapter to comply with the SO2 emission cap established under RSA 125-O:3, III. In addition, allowances or credits from other programs may be acceptable as determined by the department.

(2) Affected sources shall transfer to the department all annual allocations provided under the federal acid rain program. Affected sources shall receive from the department SO2 allowances equivalent to the cap established in RSA 125-O:3, III. Additionally, in order to promote local reductions, for each year after the compliance date that combined SO2 emissions from affected sources are below the annual average emissions for the previous 3 years, affected sources shall receive additional SO2 allowances in a combined amount equal to the difference between the current year emissions and the average annual emissions for the previous 3 years.

(3) Further, in order to encourage reductions in upwind emissions and thereby provide greater benefit to air quality in New Hampshire, for each 0.80 allowance purchased by an affected source under the federal acid rain program and utilized for compliance with the provisions of this chapter which originates from within the ozone transport region, the affected source shall receive an additional 0.20 allowance from the department.

(4) The combined sum of all allowances received by the affected sources under subparagraphs (a)(2) and (a)(3) shall not exceed 20,000 in any given year, and shall be credited to the affected sources' accounts in the year following each annual compliance period.

(b) Affected sources may use NOx allowances from federal or regional trading and banking programs, or other programs acceptable to the department, and NOx discrete emissions reductions by affected sources other than Merrimack Units 1 and 2 from state trading and banking programs, to comply with the NOx emission cap established under RSA 125-O:3, III. NOx discrete emissions reductions may only be used to comply with that portion of the NOx emission cap established under RSA 125-O:3, III which does not apply to emissions between May 1 and September 30 of any calendar year.

(c) Affected sources may use CO2 allowances from federal or regional trading and banking programs, or other programs acceptable to the department, to comply with the CO2 emission cap established under RSA 125-O:3, III. Early reductions of CO2 may be banked for future use in regional or national trading programs or to meet the emission caps established under RSA 125-O:3, III.

(d) Future mercury allowances or other emissions reduction units or mechanisms secured from other sources shall only be acceptable in meeting that portion of the emission cap established under RSA 125-O:3, III, (c) that is more stringent than federal requirements. Early reductions of mercury may be banked for future use or to meet the mercury emission cap established under RSA 125-O:3, III.

V. The owner or operator of each affected source shall be allowed to recover all prudent costs associated with compliance in a manner consistent with RSA 374-F, RSA 369-B, and the Agreement to Settle PSNH Restructuring, dated August 2, 1999, Revised and Conformed in Compliance with NHPUC Order No. 23,549.

125-O:5 Energy Efficiency, Renewable Energy, and Conservation and Load Management Incentive.

I. In order to encourage energy efficiency, energy conservation, renewable energy, and the reductions in local emissions which result, the integrated multi-pollutant strategy shall promote energy efficiency and conservation through conservation and load management programs.

II. Public Service Company of New Hampshire (PSNH) may utilize SBC funds equivalent to the unencumbered amount, if any, rolled over from the prior program year for energy efficiency projects at facilities owned and operated by PSNH, provided that the company made a good faith effort in the prior program year to meet the goals approved by the public utilities commission for its core energy efficiency programs, and provided that the SBC funds used by PSNH shall not exceed 2 percent of all SBC funds collected in the prior program year. PSNH may utilize these funds to implement approved core energy efficiency initiatives or measures at PSNH's facilities that are cost effective and which enhance the efficient use of energy at PSNH facilities. Any energy savings resulting from the use of these funds by PSNH at its facilities will not be included in the calculation of PSNH's energy efficiency program goals, any shareholder incentive, or any other incentive program. In any year that PSNH utilizes SBC funds, PSNH shall submit a report to the public utilities commission and the department detailing how these funds were utilized, and will make the report available to interested parties. Any party may request that the public utilities commission schedule a hearing to review these reports and the expenditure by PSNH of rolled over SBC funds at its facilities.

III. For expenditures made by PSNH independent of SBC funds for energy efficiency, new renewable energy projects, or conservation and load management, the department shall provide emissions allowances to PSNH equivalent to the amount of such allowances that could have been purchased at market prices by the same dollar amount as the expenditure made. Such expenditures shall be consistent with the core energy efficiency programs approved by the Public Utilities Commission or other programs acceptable to the department and shall, to the greatest extent practicable, result in immediate, demonstrable energy improvements.

I. Develop a trading and banking program to provide appropriate compliance flexibility in meeting the emission caps established under RSA 125-O:3, III, and to encourage earlier and greater emissions reductions and the development of new emission control technologies in order to maximize the cost-effectiveness with which the environmental benefits of this chapter are achieved.

II. Propose to the general court for legislative enactment a program to reduce emissions that impair visibility in mandatory Class I Federal Areas, including the Great Gulf Wilderness Area and the Presidential-Dry River Wilderness, if evaluation and assessment of the program established under 125-O:6, I reveals after its implementation that further reductions of emissions that impair visibility are necessary. Any program proposed under this paragraph shall be at least as stringent as that specified in the Clean Air Act, amendments thereto, and regulations promulgated thereunder.

III. Propose to the general court for legislative enactment appropriate processes to encourage pollution prevention, energy efficiency, and other methods to cost-effectively achieve emissions reductions.

I. Any violation of any provision of this chapter, or of any rule adopted under this chapter, shall be subject to enforcement by injunction, including mandatory injunction, issued by the superior court upon application of the attorney general. Any such violation shall also be subject to a civil forfeiture to the state of not more than $25,000 for each violation, and for each day of a continuing violation.

II. Any person who knowingly violates any of the provisions of this chapter, or any rule adopted under this chapter, shall be guilty of a misdemeanor if a natural person, or guilty of a felony if any other person.

III. The commissioner, after notice and hearing pursuant to RSA 541-A, may impose an administrative fine not to exceed $2,000 for each offense upon any person who violates any provision of this chapter or any rule adopted pursuant to this chapter. Rehearings and appeals from a decision of the commissioner under this paragraph shall be in accordance with RSA 541. Any administrative fine imposed under this paragraph shall not preclude the imposition of further penalties under this chapter. The proceeds of administrative fines imposed pursuant to this paragraph shall be deposited in the general fund.

(a) Notice and hearing prior to the imposition of an administrative fine shall be in accordance with RSA 541-A and procedural rules adopted by the commissioner pursuant to RSA 541-A:16.

(1) For a minor deviation from a requirement causing minor potential for harm, the fine shall be not less than $100 and not more than $1,000.

(2) For a minor deviation from a requirement causing moderate potential for harm, the fine shall be not less than $601 and not more than $1,250.

(3) For a minor deviation from a requirement causing major potential for harm, the fine shall be not less than $851 and not more than $1,500.

(4) For a moderate deviation from a requirement causing minor potential for harm, the fine shall be not less than $601 and not more than $1,250.

(5) For a moderate deviation from a requirement causing moderate potential for harm, the fine shall be not less than $851 and not more than $1,500.

(6) For a moderate deviation from a requirement causing major potential for harm, the fine shall be not less than $1,251 and not more than $1,750.

(7) For a major deviation from a requirement causing minor potential for harm, the fine shall be not less than $851 and not more than $1,500.

(8) For a major deviation from a requirement causing moderate potential for harm, the fine shall be not less than $1,251 and not more than $1,750.

(9) For a major deviation from a requirement causing major potential for harm, the fine shall be not less than $1,501 and not more than $2,000.

125-O:8 Rulemaking Authority. The commissioner shall adopt rules under RSA 541-A, commencing no later than 180 days after the effective date of this section, relative to:

I. The establishment of trading and banking programs as authorized by RSA 125-O:6, I.

II. The establishment of a method for allocating allowances and other emissions reduction units or mechanisms as authorized by RSA 125-O:3, II and III.

III. Emissions monitoring, recordkeeping, reporting, and other such actions as may be necessary to verify compliance with this chapter.

125-O:9 Compliance Dates. The owner or operator of each affected source shall comply with the provisions of this chapter by December 31, 2006.

125-O:10 Non-Severability. No provision of this chapter shall be implemented in a manner inconsistent with the integrated, multi-pollutant strategy or this chapter in its entirety, and to this end, the provisions of this chapter are not severable.