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EPA’s Clean Power Plan: Identifying opportunities for low income communities

Mary Sprayregen -

In October 2015, the EPA published its long awaited Clean Power Plan (CPP), which sets a nation-wide goal of reducing carbon dioxide emissions from power plants 32 percent below 2005 levels by 2030. The CPP requires states to draw up plans and take action to reduce carbon dioxide emissions from their electricity sector. In an effort to be flexible about different approaches states might take, the EPA has offered several compliance mechanisms.

The Vermont Energy Investment Corporation (VEIC) has been actively engaged in the CPP rule development process and was pleased to see that the final rule included a new and innovative program targeted at providing electric efficiency programs in disadvantaged communities. The proposed program, known as the Clean Energy Incentive Program (CEIP), is a 2-year program within the CPP designed to jump start energy efficiency in low income communities during 2020 and 2021. The CEIP also contains a renewable energy component for all communities, which is not discussed here.

The CEIP establishes a pool of matching credits from which compliance entities can draw ahead of the CPP compliance requirements in 2022. For every one credit a state sets aside for an approved low income energy efficiency project, the EPA will provide two credits that can be used to meet compliance requirements. The program is voluntary and a state must indicate its (non-binding) intent in using the program by September 2016.

VEIC believes the CEIP provides an important and unique opportunity to encourage investments in communities that need it the most and are often the most affected by emissions. Nearly 30 years ago, VEIC was founded and dedicated to helping low-income people, communities, and the organizations that serve them, by reducing the economic and environmental costs of energy use. We believe that in order for the CEIP to have the greatest possible impact on communities and the environment, the final program should include the following components:

  1. When considering criteria, terms and requirements, the EPA should rely on proven results: When there is a choice between established and proven programs or providers and those still in development and testing, the criteria should favor the proven.
  2. Geographic targeting of program benefits to areas designated as low-income communities (federal poverty levels or determined from median income statistics, for example) is an expeditious way for identifying and qualifying eligible energy efficiency projects.
  3. The term Residential should include all forms of residential buildings—single-family homes and multifamily units, whether owned or rented. There is also a case to be made for going beyond residential energy efficiency programming in the CEIP. Energy efficiency benefits can accrue to all people when programming extends to other classes of utility ratepayers: businesses, institutions, commercial enterprises, industry, and manufacturing facilities. The strongest case for effectiveness can be made by extending services to small- and medium-sized businesses (SMB) and institutional facilities.
  4. The definition of low income should effectively address those who are in reduced circumstances, but who are blocked from other efficiency or assistance programs by restrictive guidelines. We propose that low-income status be defined by Census Tract, and include all households in Census Tracts that have median income levels that are at or below 80 percent of Area Median Income (AMI), the HUD definition for low income.

To complement this Census Tract approach for maximum benefit, we recommend that EPA enable low-income households or multifamily buildings that happen to be located outside low-income Census Tracts to prove eligibility via simple procedures that rely on verifiable self-reporting and / or documentation demonstrating participation in other government income-qualified programs with criteria that are at or below the 80 percent of AMI.

  1. The EPA should use deemed savings to quantify energy savings to ensure that programs have sufficient assurance of installation rates through inspections and other verification protocols.
  2. CEIP credits should be allocated in a manner that maximizes carbon savings while minimizing costs.
  3. To encourage high performance among individual states, VEIC recommends that half of the matching pool be distributed proportionally, according to a state’s total electricity generation; the second half should be allocated according to total electricity used. All unallocated allowances by a certain date can be reallocated, with proportional weight, to states performing above the median, per-capita emission reduction.

What’s next?

We expect to see a final version of the Clean Energy Incentive Program (CEIP) in the first quarter of 2016. Although states must indicate their interest by September 2016, it does not bind them to the program.

Given the potential three-pronged benefits of the CEIP (investments in low income communities, carbon emissions reductions and Clean Power Plan bonus credits), VEIC recommends states seriously consider utilizing the program.

We understand that some states may be deterred from using the CEIP because they must set aside their own matching credits to the EPA’s bonus pool at a time when the value of these credits has yet to be determined. Despite this uncertainty, VEIC believes states and impacted electric utilities should begin actively considering potential CEIP projects as they have much to gain and very little to lose.

To find out more about the CEIP and its potential benefits, please contact Mary Sprayregen, VEIC Deputy Director of Policy and Public Affairs at 802-540-7769 or Msprayregen@veic.org

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