Bill Text: NJ S2827 | 2024-2025 | Regular Session | Introduced
Bill Title: "Emission Reduction Innovation Act"; authorizes gas public utilities to develop and implement plans to reduce greenhouse gas emissions.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2024-02-27 - Introduced in the Senate, Referred to Senate Environment and Energy Committee [S2827 Detail]
Download: New_Jersey-2024-S2827-Introduced.html
Sponsored by:
Senator TROY SINGLETON
District 7 (Burlington)
SYNOPSIS
"Emission Reduction Innovation Act"; authorizes gas public utilities to develop and implement plans to reduce greenhouse gas emissions.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning greenhouse gas emissions from natural gas and supplementing Title 48 of the Revised Statues.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. The act shall be known and may be cited as the "Emission Reduction Innovation Act."
2. As used in this act:
"Biogas" means gas created by the anaerobic digestion of biomass, the gasification of biomass, or any other effective conversion process.
"Board" means the Board of Public Utilities.
"Carbon capture and utilization" means processes to capture greenhouse gases that would otherwise be released into the atmosphere and the use of those gases, or process byproducts, to create industrial or commercial products for sale.
"Carbon-free resource" means an electricity generation facility that, when operating, does not contribute to Statewide greenhouse gas emissions.
"Cost recovery mechanism" means the process by which a gas public utility seeks to recover the costs of implementing a utility innovation plan pursuant to this act, including the cost of capital established by the Board of Public Utilities in the gas public utility's most recent rate case, depreciation and other operating, maintenance, research, and development costs. "Cost recovery mechanism" includes, but is not limited to, existing cost recovery mechanisms administered by the Board of Public Utilities.
"Deep energy retrofit" means the installation of any measure or combination of measures, including air sealing and addressing thermal bridges that under normal weather and operating conditions can reasonably be expected to reduce the building's calculated design load to ten or fewer British Thermal Units per hour per square foot of conditioned floor area. "Deep energy retrofit" does not include the installation of photovoltaic electric generation equipment, but may include the installation of a solar thermal project.
"District energy" means an interconnected infrastructure network for heating and cooling that uses the constant temperature of the earth or underground aquifers as a thermal exchange medium to provide thermal energy or cooling to a dedicated subset of buildings that may vary in use, size, and number.
"Gas public utility" means a public utility, as that term is defined in R.S.48:2-13, that distributes natural gas to end users within this State.
"Greenhouse gas" means the same as the term is defined in section 3 of P.L.2007, c.112 (C.26:2C-39).
"Hybrid energy system" means the installation of a system for the combined use of electric and gas end-use equipment in a building application where the installation (1) will result in a net reduction in Statewide greenhouse gas emissions over the life of the equipment, inclusive of the consideration of the carbon intensity of the electricity used and calculated in a manner consistent with the Department of Environmental Protection's current methodology for measuring and reporting greenhouse gas emissions, as compared to the most efficient commercially available natural gas alternative, and (2) is installed and operated in a manner that improves the customer's electric public utility's load factor.
"Innovative resource" means the use of biogas, renewable natural gas, power-to-hydrogen, power-to-ammonia, carbon capture and utilization, or the deployment of a hybrid energy system, microgrid, on-site generation, district energy, or energy efficiency project, or any other emerging innovative resource proposed by a gas public utility that reduces lifecycle greenhouse gas emissions.
"Lifecycle greenhouse gas emissions" means the greenhouse gas emissions of an energy generation system, considering the emissions produced by the production, processing, transmission, and consumption of energy associated with the system over its entire useful life.
"Microgrid" means an interconnected infrastructure network for energy delivery that distributes energy to a dedicated subset of buildings that may vary in use, size, and number.
"On-site generation" means the use of equipment that generates necessary energy for a customer at their premises, including, but not limited to, combined heat and power, micro combined heat and power, fuel cells, and backup generators that displace source emissions.
"Power-to-ammonia" means the creation of ammonia from hydrogen created via power-to-hydrogen using a process that has lower lifecycle greenhouse gas intensity than conventional geologic natural gas.
"Power-to-hydrogen" means the use of electricity generated by a carbon-free resource to create hydrogen.
"Renewable energy certificate" or "REC" means a certificate representing the environmental benefits or attributes of one megawatt-hour of electric power generation from an electric power generation facility that produces renewable energy.
"Renewable natural gas" means biogas that has been processed to be interchangeable with conventional natural gas and have lower lifecycle greenhouse gas intensity than conventional geologic natural gas.
"Total incremental program cost" means the sum of (1) the return of and on capital investments for the production, processing, pipeline interconnection, storage, distribution, or other costs associated with the development of innovative resources included in a utility innovation plan approved pursuant to this act, (2) the incremental operating costs associated with capital investments in infrastructure for the production, processing, pipeline interconnection, storage, distribution, or other costs associated with the development of innovative resources included in a utility innovation plan approved pursuant to this act, (3) the incremental cost to procure innovative resources from third parties, (4) the incremental costs to develop and administer programs included in a utility innovation plan, and (5) incremental costs for research and development, including support for market transformation activities, related to innovative resources approved pursuant to this act, minus the sum of (1) any value received by the gas public utility upon the resale of an innovative resource or its byproducts including any environmental credits included with the resale of renewable gaseous fuels or value received by the gas public utility when an innovative resource is used as vehicle fuel, (2) any cost savings achieved through avoidance of conventional natural gas purchases, including, but not limited to, any avoided commodity purchases or avoided pipeline costs, and (3) any other revenues received by the utility that are directly attributable to the utility's implementation of a utility innovation plan pursuant to this act.
3. a. A gas public utility may file a utility innovation plan with the board on or after the effective date of this act. The plan shall describe or include, as applicable, the following components:
(1) the innovative resources the utility plans to implement to advance the State's greenhouse gas emissions reduction goals established by the "Global Warming Response Act," P.L.2007, c.112 (C.26:2C-37 et al.), within the requirements and limitations set forth in this section;
(2) any recommended research and development investments related to innovative resources the utility plans to undertake as part of the utility innovation plan;
(3) the total lifecycle greenhouse gas emissions that the gas public utility expects to reduce or avoid pursuant to the plan;
(4) the lifecycle greenhouse gas emissions of each innovative resource project or pilot in the plan;
(5) any pilot program proposed by the gas public utility related to the development or provision of innovative resources, including an estimate of the total incremental program costs to implement the pilot program;
(6) the cost effectiveness of innovative resources proposed in the plan, as compared to other innovative resources that could be deployed to reduce or avoid the same greenhouse gas emissions targeted by the utility's proposed resource;
(7) for any pilot program not previously approved as part of the utility's most recent innovation plan, a third-party analysis of the estimated lifecycle greenhouse gas intensity of any innovative resources proposed to be included in the pilot program;
(8) for any proposed pilot program not previously approved as part of the utility's most recent innovation plan, a third-party analysis of the forecasted lifecycle greenhouse gas emissions reductions achieved or the lifecycle greenhouse gas emissions reduced or avoided if the proposed pilot program were implemented;
(9) an explanation of how the utility calculated the lifecycle greenhouse gas emissions avoided or reduced by each pilot program, including descriptions of how the utility's method deviated, if at all, from the carbon accounting described in section 4 of this act;
(10) whether the recommended plan supports the development and use of waste products, waste reduction, reuse, or anaerobic digestion of organic waste, or the recovery of energy or greenhouse gas emissions from wastewater, and, if so, a description of where those benefits will be realized;
(11) a description of third-party systems and processes the utility plans to use to (a) track the proposed innovative resources included in the plan so that RECs or other environmental attributes, if applicable, are used only to reduce lifecycle greenhouse gas emissions or to improve the cost effectiveness of innovative resources of the plan for customers, or both, and (b) verify the environmental attributes, if applicable, and greenhouse gas intensity of proposed innovative resources included in the plan;
(12) a description of estimated local job impacts and the steps the utility and its innovation plan-related suppliers and contractors are taking to maximize the availability of construction employment opportunities for local workers;
(13) a description of any steps the gas utility is taking to enhance reliability or resiliency as part of the utility innovation plan.
(14) a description of any cost recovery mechanism the utility proposes to recover its annual total incremental program costs resulting from the plan, and any steps the utility has taken or proposes to take to reduce the expected cost impact on low- and moderate-income residential customers;
(15) any steps the utility has taken or proposes to take to ensure that low- and moderate-income residential customers will benefit from innovative resources included in the plan;
(16) a report on the utility's progress toward implementing the approved proposals contained in its previously approved innovation plan, if applicable; and
(17) a report of the utility's progress toward achieving the cost-effectiveness objectives established upon approval of its previously approved innovation plan, if applicable.
b. Together with its utility innovation plan, a gas public utility shall provide the board with a sensitivity analysis for the forecasted total incremental program costs, cost per metric ton of emissions abated, and lifecycle greenhouse gas emissions associated with achieving:
(1) approximately half of the greenhouse gas reduction or avoidance benefits of the utility's innovation plan;
(2) approximately one and a half times the greenhouse gas reduction or avoidance benefits of the utility's innovation plan; and
(3) approximately twice the greenhouse gas reduction or avoidance benefits of the utility's innovation plan.
c. The board shall approve, approve with modifications, or deny a utility innovation plan submitted pursuant to this section. Modifications required by the board may include limiting the spending or size of a particular innovative resource or pilot project contained in the plan, due to its anticipated impact on ratepayers. The board shall approve an innovation plan if:
(1) the size, scope, and scale of the plan and the incremental total cost of the plan will result in net benefits under the cost-benefit review performed by the board pursuant to section 4 of this act;
(2) the plan will promote the use of renewable energy resources and reduce or avoid greenhouse gas emissions at a cost level consistent with the provisions of section 3 of this act;
(3) the plan will promote local economic development;
(4) the innovative resources included in the plan have a lower lifecycle greenhouse gas intensity than conventional geologic natural gas;
(5) reasonable systems will be used to track and verify the RECs or other environmental attributes of the innovative resources included in the plan, if applicable, taking into account any third-party tracking or verification systems available;
(6) the costs and revenues expected to be incurred pursuant to the plan are reasonable in comparison to other innovative resources the utility could deploy to address greenhouse gas emissions and considering other benefits of the innovative resources included in the plan;
(7) the costs and revenues expected to be incurred for any energy efficiency, district energy, or hybrid energy system measures included in the plan are reasonable in comparison to the costs of renewable natural gas, biogas, hydrogen produced via power-to-hydrogen, or ammonia produced via power-to-ammonia resources that the utility could deploy to address greenhouse gas emissions; and
(8) the total amount of estimated greenhouse gas reduction or avoidance to be achieved is reasonable considering the State's greenhouse gas emissions reduction goals established by the "Global Warming Response Act," P.L.2007, c.112 (C.26:2C-37 et al.), customer cost, and the total amount of greenhouse gas reduction or avoidance achieved under the gas public utility's previously approved plans, if applicable.
d. A gas public utility shall bear the burden to prove that the actual total incremental program costs to implement an approved utility innovation plan are reasonable. Prudently incurred costs incurred pursuant to an approved plan and prudently incurred costs for obtaining the third-party analyses required under paragraphs (7) and (8) of subsection a. of this section, are recoverable through the cost recovery mechanisms described in an approved plan provided that, after notice and comment, the board determines that the costs included for recovery through the rate schedule are prudently incurred. Annual adjustments shall include a rate of return, income taxes on the rate of return, incremental property taxes, incremental depreciation expenses, and incremental operation and maintenance expenses. The rate of return shall be at the level approved by the board in the gas public utility's last base rate case.
e. Upon approval of a utility's plan, the board shall establish plan cost-effectiveness objectives based on the cost-benefit review for innovative resources established pursuant to section 4 of this act. The cost-effectiveness objective for each plan shall strive to demonstrate incremental progress from the previously approved plan's cost-effectiveness objective, if applicable. In the event progress is not being made, the gas public utility shall provide context regarding the circumstances.
f. A gas public utility with an approved plan may, within any 365-day period of time within the five years of the plan's commencement, shift budgets between individual innovative resources, in the following manner:
(1) up to and including 25 percent of the total plan budget may be shifted with notification to the board and rate counsel; and
(2) greater than 25 percent of the total plan budget may be shifted with board approval.
g. A gas public utility with an approved plan shall provide annual reports to the board regarding the work completed pursuant to the plan. An annual report may include:
(1) the costs incurred under the plan;
(2) lifecycle greenhouse gas reduction or avoidance accomplished under the plan;
(3) a description of the processes used to track, verify, and retire the innovative resources and associated environmental attributes;
(4) an update on the lifecycle greenhouse gas accounting methodology consistent with current Department of Environmental Protection inventory reporting methodology;
(5) an update on the economic impact of the plan including job creation; and
(6) the utility's progress toward achieving the cost-effectiveness objectives established by the board on approval of the plan.
h. Each utility innovation plan shall be in effect for five years. Once a gas public utility has an approved innovation plan, it may file a new innovation plan within four years for implementation at the end of the prior five-year plan period.
i. For the purposes of this act, including the board's lifecycle carbon accounting framework and cost-benefit review for innovative resources carried out pursuant to section 4 of this act, whenever an analysis or estimate of lifecycle greenhouse gas emissions reductions, lifecycle greenhouse gas avoidance, or lifecycle greenhouse gas intensity is required, the analysis shall include a description of (1) avoided or reduced emissions attributable to utility operations; (2) avoided or reduced emissions from the production, processing, and transmission of fuels prior to receipt by the utility; and (3) avoided or reduced emissions at the point of end use. In no event shall the analysis count any one unit of greenhouse gas emissions avoidance or reduction more than once. An analysis or estimate may rely on emissions factors, default values, or engineering estimates from a publicly accessible source, where direct measurement is not technically or economically feasible, if such emissions factors, default values, or engineering estimates can be demonstrated to produce a reasonable estimate of greenhouse gas emissions reductions, avoidance, or intensity.
j. Any electric end-use equipment installed pursuant to an approved utility innovation plan shall be the exclusive property of the owner of the property on which the equipment is installed.
4. a. In reviewing the lifecycle greenhouse gas emissions reductions of the innovative resources within a utility innovation plan, the Department of Environmental Protection, in consultation with the board, shall review the consistency of the plan with the department's current greenhouse gas emissions inventory reporting methodology, and the State's greenhouse gas emissions reduction goals established by the "Global Warming Response Act," P.L.2007, c.112 (C.26:2C-37 et al.). This review shall conclude no later than 180 days from the date of a gas public utility's filing with the board.
b. In reviewing the cost-benefit analytic framework of the innovative resources within a gas utility's innovation plan, the board shall do so in a manner consistent with the board's existing guidelines and processes for other utility investment programs. This shall include consideration of any important additional economic costs and benefits, programmatic costs and benefits, additional environmental costs and benefits, and other costs or benefits that may be expected under a plan.
5. This act shall take effect
immediately.
STATEMENT
This bill, to be known as the "Emission Reduction Innovation Act," would authorize gas public utilities to develop and implement "utility innovation plans," which would aim to reduce the greenhouse gas emissions associated with natural gas use in the State through the use of biogas, renewable natural gas, power-to-hydrogen, power-to-ammonia, carbon capture and utilization, the deployment of a hybrid energy, district energy, or energy efficiency project, and the use of other innovative technologies proposed by the utility.
The bill would establish certain content requirements for utility innovation plans, as enumerated in subsections a. through c. of section 3 of the bill. The plans would be required to be submitted to the Board of Public Utilities (BPU) for approval. Each plan would be effective for five years, after which the utility would be authorized to submit an updated plan.
The bill would require a gas public utility to show that the costs to implement an approved utility innovation plan are reasonable. If approved by the board, the utility could recover the costs of implementing the plan through the rates it charges to its ratepayers or using another methodology. The bill would authorize utilities to shift up to 25 percent of the total plan budget between individual projects or programs, after providing notice to the BPU and rate counsel. Shifts greater than 25 percent of the total plan budget would require BPU approval.
The bill would require gas public utilities that are implementing approved utility innovation plans to submit an annual report to the BPU on the status of the plan. The bill would authorize the report to include certain items including the costs incurred under the plan and the lifecycle greenhouse gas reduction or avoidance accomplished under the plan;
Section 4 of the bill would require the Department of Environmental Protection (DEP), in consultation with the BPU, to review the methodology by which a utility innovation plan calculates the lifecycle greenhouse gas reductions associated with the plan. The DEP would be required to ensure that the methodology is consistent with its own current methodology for measuring and reporting greenhouse gas emissions, as well as that the plan is consistent with the State's greenhouse gas emissions reduction goals established by the "Global Warming Response Act," P.L.2007, c.112 (C.26:2C-37 et al.). The DEP would have 180 days to complete its review. Section 4 of the bill would also require that, when the BPU reviews the cost-benefit analytic framework of a proposed utility innovation plan, it does so in a manner consistent with the board's existing guidelines and processes for other utility investment programs.
