PROPOSAL OF

ANP BELLINGHAM ENERGY COMPANY IN EFSB 97-1 AND

ANP BLACKSTONE ENERGY COMPANY IN EFSB 97-2

TO MITIGATE CO₂ THROUGH ENERGY EFFICIENCY

Prepared by MacGregor Energy Consultancy

December 21, 2001

Introduction and Preliminary Description of Proposal

Pursuant to Final Decisions of the Energy Facilities Siting Board (EFSB or Siting Board) in Dockets EFSB 97-1 (ANP Bellingham) and EFSB 97-2 (ANP Blackstone), Condition B in both decisions, ANP Bellingham Energy Company (ANP Bellingham) and ANP Blackstone Energy Company (ANP Blackstone) (together, ANP) propose to mitigate CO₂ emissions from the generating facilities they have constructed in Bellingham and Blackstone, Massachusetts, respectively.  ANP proposes to accomplish such mitigation through the installation of energy efficiency measures in public buildings – mainly schools – in the towns of Bellingham and Blackstone, as well as in a regional vocational/technical high school that serves 13 towns, including Blackstone, and in other towns adjacent to or abutting Bellingham and Blackstone, as necessary to fulfill ANP’s obligations. 

After several consultations with Siting Board Staff, as described below in this Proposal, ANP has implemented suggestions of the Siting Board Staff and has coordinated the proposed energy efficiency program with the incumbent electric utility companies.  In this fashion, the Proposal takes advantage of the existing utility infrastructure of energy efficiency programs and as a result, gains in cost-effectiveness in comparison to any “grass roots” conservation undertaking that ANP might have pursued.  The consultation process required by the subject Final Decisions was initiated over one year ago by telephone inquiries in July 2000, and has been ongoing, with two meetings and several telephone conferences, since that initiation.  Based on this consultation process, ANP decided to proceed “at risk” to co-fund with the incumbent utilities a series of energy audits in order to identify potential energy efficiency investments.  Also based on such consultations, ANP has designed the instant Proposal to include monies for periodic measurement and verification (M&V) of energy savings and the associated CO₂ reductions.  Again, the proposed program gains in efficiency by “piggy-backing” on existing utility M&V efforts.

Town construction and funding decisions are required in the very near future, in some cases before year end.  This timing pressure results in the present filing.  Timing pressure also dictates the structure of this Proposal.  In this filing, ANP accordingly requests pre-approval, subject to the stipulated criteria set forth herein, of future energy efficiency investments designed to implement CO₂ mitigation.  Because scheduling audits, gaining approval from the towns, and actually installing energy efficiency measures vary by town, by facility, and by specific measures to be installed in any one facility, ANP requests approval to hold the amount of required funding for each ANP plant in a separate account, to be expended as conservation projects become “ripe” for funding under the stipulated criteria.  ANP will submit regular reports (on such timetable as required by the EFSB) to the Siting Board on the status of this CO₂ mitigation Proposal and on the remaining funds in each account.  Since investments would be made on a transactional basis, from time to time over the next three years, ANP would commit to expend total funds with a net present value equal to the Siting Board’s requirement for the “entire donation” in the first year of operation for each of the ANP plants.

As indicated above, ANP requests approval of this Proposal prior to presenting final estimates of CO₂ emission reductions in order to enable the towns of Bellingham and Blackstone to plan their construction and maintenance budgets and to contract for engineering and architectural services in a timely manner.  As described in further detail below, preliminary estimates from the completed audits are attached hereto and will be updated upon final approval of projects by the towns.  Should energy efficiency measures be installed in towns other than Bellingham and Blackstone, CO₂ estimates from those towns will be submitted, as a part of ANP’s periodic reporting, to the EFSB as available.

1.       The CO2 Mitigation Requirement

Condition B of the Final Decision in EFSB 97-1 (ANP Bellingham) reads at page 171 as follows: 

In order to mitigate CO₂ emissions, the Siting Board requires ANP to provide CO₂ offsets through a total contribution of $620,690, to be paid in five annual installments during the first five years of facility operation, plus a contribution of $35,100 in the first year of facility operation as an offset for on-site tree clearing, to a cost-effective CO₂ offset program or programs to be selected upon consultation with Siting Board Staff.  If the Company chooses to provide the entire donation within the first year of facility operation, the CO₂ offset requirement would be total contribution in the amount of $503,040 to a cost-effective CO₂ offset program or programs to be selected upon consultation with Siting Board Staff.

Condition B of the Final Decision in EFSB 97-2 (Blackstone) reads at pages 240-241 as follows:

In order to mitigate CO₂ emissions, the Siting Board requires ANP to provide CO₂ offsets through a total contribution of $620,691, to be paid in five annual installments during the first five years of facility operation, plus a contribution of $34,560 in the first year of facility operation as an offset for tree clearing to construct the gas and electrical interconnects, to a cost-effective CO₂ offset program or programs to be selected upon consultation with Siting Board Staff.  If the Company chooses to provide the entire donation within the first year of facility operation, the CO₂ offset requirement would be total contribution in the amount of $549,298 to a cost-effective CO₂ offset program or programs to be selected upon consultation with Siting Board Staff.

2.    Staff Consultation Process

On July 6, 2000, ANP initiated the required consultation process with Siting Board Staff by telephone conference with the Executive Director.  ANP was then advised to avoid reliance on collateral reductions associated with the purchase of NOx offsets, to plan on only a portion, if any, of its funding for local seedling programs due to concerns about persistence of reductions, to contact other power developers and other proponents of renewable projects for potential projects for subsequent consultation with Siting Board Staff, and to put aside some part of the total funding for measurement and verification of the CO₂ reductions claimed.

Thereafter, ANP talked with other power or renewable developers and observed the November 30, 2000 CO₂ Mitigation Plan filing by U.S. Generating Company in EFSB 96-4.  On January 25, 2001, ANP again consulted with the Executive Director and at her suggestion, contacted Ms. Sonia Hamel of the Siting Board regarding the latter’s view on the role of energy efficiency as a CO₂ mitigation alternative.  Shortly thereafter, seeking suggestions on how to implement an energy efficiency alternative, ANP also contacted Ms. Carolyn O’Brien, a representative of the Environmental Federation of New England, Ms. Nicole Wobus, a representative of the Massachusetts Energy Consumers Alliance, Mr. Steven Schaedel, a representative of Energyguide.com, and Mr. Robert Zimmerman, Director of the Charles River Watershed Association.

On April 24, 2001, an ANP representative met in Boston with the Siting Board Staff to discuss in further detail the general criteria to be used in selecting a CO₂ mitigation program and the ways an energy efficiency program might be designed to enhance cost-effectiveness as a CO₂ mitigation program.  Ms. Wobus also attended that conference.  Suggestions offered by the Siting Board Staff to enhance the cost effectiveness of an energy efficiency CO₂ mitigation program included “piggy-backing” on existing utility energy efficiency programs, concentrating on commercial or institutional customers for the reliability and ease in measuring savings and considering a revolving “no-interest” loan fund approach.

Soon after the April meeting, ANP followed another suggestion of the Siting Board Staff and engaged an energy efficiency expert to assist in constructing a program consistent with applicable precedent and the foregoing consultation process.  That expert met again with the Siting Board Staff on June 20, 2001, to explore further an energy efficiency program coordinated closely with the incumbent utilities serving the towns of Bellingham and Blackstone where local benefits would be most evident.  A follow-up memorandum, attached hereto as Exhibit A, was submitted to the Siting Board Staff on October 11, 2001, describing the progress made to date by ANP in working with the utilities and the towns in question.

3.    Non-Conservation Alternatives Screened and Considered

During and after the consultation process described above, ANP considered a number of alternative strategies, including tree-planting, before settling on the Proposal included herein. 

The five (5) Projects  investigated and rejected by the Millennium Power Partners, L.P., (Millennium) and named in Millennium’s filing to the EFSB (Exhibit B to the Millennium November 30, 2000 filing), which include the planting of trees in Guatemala and Malaysia, were similarly rejected by ANP as inadequate and to some degree speculative.  CO₂ sequestered by these types of projects cannot be guaranteed, nor easily monitored.  In contrast, the projects proposed in this filing will provide measurable, verifiable, ongoing savings of energy and its associated CO₂ for at least the length of time the ANP plants are in operation and beyond.  Furthermore, while ANP readily concurs with the Siting Board’s February 9, 2001 approval of the CO₂ mitigation project chosen by Millennium, ANP believes that further investment in that project, although considered by ANP, would not contribute as strongly as the instant proposal to the Siting Board’s designs for surplus, measurable, and verifiable reductions.

ANP considered investment in renewable technologies such as wind and solar power.  ANP did not conduct project specific analyses.  However, ANP felt confident in rejecting such alternatives as less cost-effective, less certain of implementation, less coincident in timing and with fewer local benefits, than the energy efficiency program described in this Proposal.  ANP reached this conclusion based on the fact that this program adopts, as a component of its electric cost-effectiveness standard, as set forth below, the requirement that each energy efficiency measure meet applicable Massachusetts Department of Telecommunications and Energy (DTE) cost-effectiveness standards.  This is a straightforward consequence of the program’s coordination with  existing utility programs.  Furthermore, it is commonly recognized[1] that the New England candidate renewable resources, including the increasingly more economic wind resource, are more costly than the conventional methods of generating electricity (i.e., using fossil fuels) with which conservation is compared pursuant to the DTE standards for cost effectiveness.   CO₂ reductions associated with a saved kilowatthour and a kilowatthour generated by a non-fossil resource such as wind would be substantially equivalent.  Electricity generated from wind costs, on average, $0.05-to-$0.06 per kWh.  The electric energy efficiency measures proposed herein would save electricity at an estimated average cost of $0.0112 per kWh.  Therefore, ANP concluded that energy efficiency measures are more cost-effective as CO₂ mitigation investments than like dollar investments in a specific renewable generating project such as a wind farm.  Moreover, renewable energy projects are never certain of implementation and can often fail due to permitting problems.  Even if successful, such projects would likely come on line long after the conservation measures proposed as a part of the ANP CO₂ Proposal in this filing.

4.      Preliminary “At Risk” Conservation Activities

Over the course of the last several months, ANP met with representatives of the incumbent utilities, Massachusetts Electric Company and NSTAR Electric, to determine the feasibility of entering into partnership to co-fund electric energy efficiency measures primarily in the municipal buildings of the towns of Bellingham and Blackstone (implementing the Siting Board’s “piggy-backing” suggestion).  The electric companies were supportive of the proposal and agreed to contact auditing firms that they work with regularly to conduct audits of town buildings to assess efficiency opportunities.  ANP held several meetings with representatives of the two towns, the auditors, and the electric companies, facilitated by Theo MacGregor of MacGregor Energy Consultancy.

5.      Summary of  ANP CO₂ Mitigation Proposal

In order to meet its CO₂ mitigation obligation, ANP proposes to (1) co-fund with Massachusetts Electric Company and with NSTAR electric efficiency measures in the schools and other municipal buildings, and  (2) fully fund non-electric energy efficiency measures.  Such latter measures include the conversion of oil burners to natural gas or dual-fuel burners in the heating plant of the Blackstone-Millville Regional High School, and installation of natural gas or dual-fuel burners instead of oil burners in the new middle school in Blackstone and a ground source heat pump in the new public library in Blackstone.  Any measures installed are subject to approval by the relevant towns.  Summary tables of the conservation projects proposed to date, by location and type, along with audit and estimated project costs and estimated CO₂ reductions, is presented at Exhibit B attached hereto. When audits are finished and costs and CO2 reductions are finally estimated, all projects funded by ANP will meet the criteria set forth in this filing.

All of the public schools, a public library and most of the other municipal buildings in Bellingham and Blackstone were (or will be) audited for lighting savings, and several were audited for energy savings beyond lighting.  To date, ANP has invested in the audits on an “at risk” basis in advance of the approval requested from the Siting Board in this filing.  Costs of the audits were shared between the electric companies and ANP when there were electric savings to be achieved, and the audits were fully funded by ANP when the savings would derive from oil, gas, or other non-electric measures.

Most of the audited buildings provide some efficient lighting opportunities, and several provide the opportunity to switch the heating system from oil-fueled to dual-fuel or completely natural gas, depending on whether the system must be retrofit or will be in a new building.  Other measures include ventilation changes, premium efficient motors, variable speed drive motors, and insulation.  Details of completed audits for Bellingham and Blackstone are set forth in Attachments 1 and 2, respectively.  As further audits are completed and projects proposed, they will be submitted to the EFSB.

6.      CO₂ Mitigation

The energy efficiency measures as described in the attachments and proposed herein will reduce electricity generation and its associated CO₂ emissions, as well as the direct combustion of oil in the replaced burners and its associated emissions.  Calculation of CO₂ emission reductions from non-lighting measures has been included in Attachment 1 at page 1  Calculation of CO₂ emission reductions from efficiency projects described in both Attachments 1 and 2 are included in the summary tables, Exhibit B.  Total CO₂ reduction from all projects to be completed under this proposal cannot be estimated at this time but, as shown in Exhibit B, the non-weighted average cost of a ton of CO₂ reduced from projects in Blackstone can be estimated at $15.62, while that for Bellingham is $13.63.  Final estimates of CO₂ reduction will made when the towns agree on specific measures to be installed and a timetable for installation.  Although the towns must agree to the specific measures, ANP will control funding in accordance with criteria set forth below.   Those criteria include (a) compliance with DTE cost-effectiveness standards, where applicable; (b) adherence to the CO₂ cost per ton “cap” described below in Section 7; and (c) consistency with all applicable Siting Board standards for CO₂ mitigation  programs described in Section 8.

Consistent with the suggestions of Siting Board Staff, an integral part of this Proposal is to provide for ongoing measurement and evaluation of energy savings (and the concomitant CO₂ savings) during the first three years after installation, and a persistence study several years after that. The schedule for evaluations will be determined based on the obligations of the electric companies to perform such evaluations in order to report savings to the DTE and to DOER.  Concurrent with the electric companies’ evaluations, ANP will evaluate the oil and natural gas measures for continuing operation as designed.

7.      Cost per Ton of CO₂ Mitigated

While the cost per ton of CO2 to be mitigated through energy efficiency can be construed as higher than the cost from planting trees or from methane destruction (as proposed by Millennium in its November 30, 2000 compliance filing), the value to the local communities and to New England as a whole to be gained from mitigating CO₂ through energy efficiency is much higher.  Benefits include the following:

·        economic development from local job creation and the multiplier effect of spending significant sums in the communities;

·        lowering pressure on electricity demand on the margin, thereby reducing energy costs for all electricity customers;

·        reducing emissions on the margin, not only of CO₂, but also of NOx, SO₂, and particulates, thereby cleaning the regional environment;

·        lowering energy costs to the towns involved, thereby freeing money for other necessary services such as education, snow-plowing, and myriad other expenses; and

·        providing increased comfort, better lighting, and increased productivity to students, teachers, town employees, and visitors to the treated buildings.

When calculated as dollars spent by ANP for CO₂ reduced through energy efficiency, the range of costs per ton[2] of CO₂ reduced is quite wide, depending on the individual efficiency measure and whether it is installed as part of a package of measures, as well as on the type of equipment replaced, the measure life, the usage patterns of the measures, and a multiple of other considerations.  Thus, the cost can range from a negative (for instance, when a gas burner is installed instead of a more costly oil burner, the incremental cost is actually negative) to as high as $95.00 per ton.  Because the actual mix of measures has yet to be agreed upon by the towns, we are unable to present an actual average cost per ton of CO₂ to be mitigated; but, as seen in Exhibit B, we have estimated an average cost of $__ per ton of CO₂ reduced for the projects summarized in that exhibit.  In addition, ANP will commit to the principle that it will not support a project in which the average cost of a ton of CO₂ mitigated is higher than $20.00, regardless of any other benefits that might accrue from such a project (the “cap” per ton).

Alternatively, when calculated simply using DTE cost-effectiveness criteria, the cost per ton of CO₂ reduced is actually negative.  For example, if ANP and the electric companies together were to spend $1,000,000 on energy efficiency measures, and the benefit/cost ratio were 2.0 (meaning that the net present value of resource and non-resource savings over a 20-year period was $2,000,000), and assuming a conservative 20,000 tons of CO₂ saved over that same 20-year period, the cost of a ton of CO₂ reduced through the program would be negative $50.00.  Thus, for any project for which the benefit/cost ratio is greater than 1.0 (as will be all projects funded by ANP through this Proposal), the cost of a ton of CO₂ reduced will be negative.

8.      Project Selection Criteria

The Siting Board Staff set forth criteria for a CO₂ mitigation plan in a letter dated June 30, 1999, from Ms. Diedre Shupp Matthews, Director of the Siting Board, to Mr. George Aronson of CommonWealth Resource Management Corporation.  The EFSB modified the criteria as recommended by the Siting Board Staff in a meeting on November 9, 2000, when the Siting Board approved the CO₂ mitigation proposal filed by Dighton Power Associates.  The Siting Board also set forth its criteria in the Approval Letter dated February 9, 2001 in EFSB 96-4, U.S. Generating Company (as set forth above, the Millennium Project), at pages 2-3.  Based upon the foregoing, ANP used, and in the future will continue to select projects using, these six criteria to evaluate possible CO₂ mitigation projects:

1.  real – i.e., verifiable;

2.  quantifiable;

3.  surplus or incremental to what would have been achieved without participation by ANP;

4.  cost-effective (using the above cost “cap” per ton of  reductions and where applicable, the DTE approved cost-effectiveness guidelines for energy efficiency investments by electric utilities);

5.  co-incident with operation of the power plant; and

6.  of local benefit to the communities affected by the plants.

9.      Demonstration that ANP Proposal Meets ESFB Criteria

ANP believes that the instant Proposal to mitigate CO₂ emissions described herein and in the attachments meets all of the criteria set forth by the ESFB.

1.       Real and verifiable

The savings in CO₂ to be achieved through this Project are based on the fact that power plants in New England will be required to produce less electricity (therefore burning less natural gas, coal or oil), and that less oil or natural gas will be burned directly in the treated facilities’ heating plants, because of the efficient equipment to be installed.  Unlike the planting of trees where the amount of CO₂ sequestered depends on many elements such as weather, health of the trees, location, etc., reductions in CO₂ due to energy conservation are real and verifiable.  The DTE has for years accepted that energy savings from the installation of energy efficiency measures are verifiable; the associated emission reductions enjoy similar certainty.

2.       Quantifiable

Massachusetts electric utilities have been implementing energy efficiency programs of this nature since at least 1987.  Savings estimates have been developed and refined based on rigorous monitoring and evaluation overseen by the DTE.  These projects will be no exception, since they will be undertaken in conjunction with the utility companies.  The utilities will measure the electric savings and report them to the Division of Energy Resources (DOER) and the DTE as part of their annual reports to those agencies.  Through the facilities managers in the towns, ANP will monitor the performance of new natural gas or dual-fuel burners and the ground source heat pump (if installed) to ensure continued gas and oil savings.

3.       Surplus or incremental

Without the instigation of ANP, these energy efficiency projects in Bellingham and Blackstone (and other towns as necessary) would not have been undertaken by the towns, or at the very least would not have been undertaken in the timeframe they will be if this proposal is approved.  In addition, the conversion from oil to natural gas or dual-fuel burners and the installation of natural gas burners in the new schools would not have been undertaken at all.  Thus, the savings to be achieved are incremental to what would have been achieved absent the participation of ANP. 

4.       Cost-effective

All projects will meet the cost “cap” per ton of CO2 reductions set forth above in Section 7 of this filing.  In addition, all of the electric energy efficiency projects proposed to be installed through this Project have been screened and meet the cost-effectiveness criteria approved by the DTE in DTE 98-100.  All of the measures were also screened for simple payback in terms of money saved on fuel or electricity by the communities versus expenditures on the measures.  Because ANP will be paying the towns’ portion of the electric measures and the full incremental cost of the natural gas measures, as well as the towns’ portion of the audit costs, there are no real costs to the towns, yet they will experience significantly reduced electricity, gas and oil costs.  Any future projects to be proposed with funds not yet committed will be screened for cost-effectiveness in a similar fashion.  No project will go forward unless it meets these cost-effectiveness criteria.

5.       Coincident with operation of the power plants

ANP proposes that these energy efficiency measures be installed in the designated schools and municipal buildings within the next three years as the towns approve construction and installation.  Most of the measures have an average life of at least 20 years (lighting somewhat shorter; heating plant much longer).  The power plants are licensed for terms of 20 years.  Thus, savings from the energy efficiency measures will be coincident with operation of the power plants.  Indeed, some of the measures, such as the gas burners, are projected to provide savings for at least 30 years.  In addition, although the lifetime of some measures such as lighting may be less than 20 years, configuration of the fixtures will ensure that when lights are replaced, they will be replaced by equally (or higher) efficient measures; thus, energy savings will continue into the future.

6.       Of local benefit to the communities affected by the plants

ANP and the electric companies have put a great deal of time and effort into locating projects within Bellingham and Blackstone to fulfill ANP’s CO2 mitigation obligation.  Because Massachusetts Electric had already retrofit many of the schools in Bellingham with energy efficient lighting, those types of opportunities were somewhat limited.  In addition, the auditors looked for opportunities which would not be funded by the electric companies or which were not anticipated to be completed in the near future.  Because Blackstone is a small community with few public buildings, ANP was forced to look beyond the two towns where the plants are located to a regional high school that serves 12 other communities that are also directly affected by emissions from the plants.  If, when all feasible projects have been accepted by these towns, there is still a gap between the required funding level and the amount that these projects will cost, ANP will look to adjacent or abutting towns for suitable projects.

10.    Monitoring and Evaluation

As mentioned earlier, savings from the proposed projects will be monitored and evaluated for at least the first few years after installation, in accordance with DTE and DOER criteria.  Consistent with the suggestions of the Siting Board Staff, ANP proposes that five percent of the installation cost of the projects be set aside to cover the cost of this monitoring and evaluation.  This proposal is reasonable in order for ANP to verify to the Siting Board the amount of CO₂ actually reduced through the energy savings achieved through these projects.  This practice is also consistent with DOER and DTE guidelines regarding monitoring and evaluation of energy savings.

Request for Approval of ANP’s Mitigation Proposal

ANP believes this Proposal to mitigate CO₂ emissions through energy efficiency installations in the towns affected by the plants satisfies the applicable criteria of the Siting Board and Condition B of the Final Decisions in EFSB 97-1 and EFSB 97-2.  ANP therefore requests approval of the Proposal as described herein. 

Because several of these projects are time-sensitive for the towns, ANP requests expeditious review and approval.  Delay could lead to lost opportunities and installation of inefficient equipment that would continue to burn more energy than necessary or advisable for many years to come.