1. Economic Impact of New Hampshire Participation in Regional Greenhouse Gas Initiative University of New Hampshire Whittemore School of Business & Economics Ross Gittell, James R Carter Professor Matt Magnusson, MBA 1/10/2008

2. Overview of Presentation Overview of Presentation Overview of Methodology Summary of Findings –NH Ratepayer Impacts –NH Economy-Wide Impacts –Recommendations for Approach to Implementation Summary –It is in the long term economic interest of the state of New Hampshire to participate in the Regional Greenhouse Gas Initiative (RGGI)

3. Research Method Detailed review and updating of existing documentation and analyses of RGGI Incorporated the most current and detailed available information about NH electricity market and NH economy Input from board range of stakeholders – –received guidance and suggestions during initial research – –feedback after release of draft report …and refined the report

4. NH Electricity consumption & price forecasts based on ISO New England Specifically considered utility rate impact for PSNH & the other utilities determined using detailed spreadsheet model NH economy impacts modeled using REMI econometric model Sensitivity analysis of different key factors and assumptions Research Method

5. Examples of Studies Referenced Compensation Rules for Climate Policy in the Electricity Sector, Resources for the Future, July 2007 Economic and Energy Impacts from Maryland's Potential Participation in the Regional Greenhouse Gas Initiative, Center for Integrated Environment Research, University of Maryland, January 2007 New England Electricity Scenario Analysis: Exploring the economic, reliability, and environmental impacts of various resource outcomes for meeting the region's future electricity needs, ISO New England, August 2007 Updated Reference, RGGI Package - 10/11/06, PowerPoint posted on RGGI web site, May 2007 Who Gains And Who Pays Under Carbon-allowance Trading? The Distributional Effects Of Alternative Policy Design, Congressional Budget Office, June 2000

6. New Hampshire: Carbon Dioxide Allowance Prices (Base and High Price Cases) Allowance Price ($2007) 2009201220152018 UNH Study - Base Case $2$4$6$8 UNH Study – High Price Case $12$14$16$18

7. Should NH Join RGGI? Yes, NH participation is lower cost overall to NH than not joining regardless of carbon allowance price No RGGIRGGI Cost of RGGI to Utility Custom ers Allowance Reven ue Net Differ ence Cost of RGGI To Utility Custome rs Allowance Revenue Net Differen ce % Diffe renc e 2009($7)$0($7)($20)$17($3)-60% 2012($15)$0($15)($41)$35($6)-60% 2015($25)$0($25)($62)$50($13)-50% 2018($36)$0($36)($88)$62($26)-30% RGGI Costs ($2007 Millions)

8. Policies Evaluated Wide Range of Policies Considered: 100% Rebate 100% Energy Efficiency Mixture of Rebate and Energy Efficiency –25% Rebate/75% Energy Efficiency –50% Rebate/50% Energy efficiency –75% Rebate/25% Energy efficiency 100% of allowances given to existing RGGI impacted power generation units 100% to Corporate Tax “Relief” NH does not join RGGI

9. Net Cost to Utility Ratepayers- All NH Utilities

10. Discussion of Utility Customer Impacts PSNH customers are impacted differently by RGGI –Lower costs for PSNH customers than the other NH utilities if NH does not join RGGI –Higher costs for PSNH customers than the other NH utilities if NH does join RGGI 100% Energy efficiency was the only scenario that resulted in savings on electricity bills for all utility customers Directing allowance revenue to corporate taxes had the highest cost to utility customers of all scenarios Grandfathering had the next highest cost of all scenarios –However, there are some benefits to direct allocation of allowances to PSNH Reduced Transaction Costs & Volatility

11. Estimated Impact of RGGI on Business Business Size (based on FERC Form 1) AccountsAverage Monthly Bill (2006) Small Business81,000$308 Large350$38,000

12. Not Joining RGGI Increase to Average Monthly Bill 2009201220152018 Small $1.15$2.38$3.72$5.16 Large $142$292$458$636 % Change 0.4%0.8%1.2%1.7%

13. Potential Mitigation of Monthly Business Electricity Costs 20092012201320152018 Small Business $1.29$(0.20)$(1.90)$(4.00)$(9.78) Large Business $159$(25)$(234)$(493)$(1,205) % Change0.4%-0.07%-0.6%-1.3%-3.2% Net change from Investment in Energy Efficiency Compared to Not Joining RGGI

14. Sensitivity Analysis Two Scenarios analyzed still supported NH participation in RGGI – –Low Energy Efficiency- High Price – –High Transaction costs for PSNH Energy Efficiency highly sensitive to: – –Average cost of energy efficiency investment – –Lifetime of energy efficiency investment

15. Overall NH Economic-Wide Impact NH RGGI-REMI Econometric Modeling Results Not participating in RGGI would have a slight negative impact on the overall NH economy Not participating in RGGI would have a slight negative impact on the overall NH economy NH participation in RGGI has a small positive impact on employment and the overall NH economy if allowance revenue goes towards reducing corporate taxes and/or energy efficiency Rebating of allowance revenue causes almost no change in the NH economy

16. Overall NH Economic-Wide Impact by 2018 NH RGGI-REMI Econometric Modeling Results REMI ScenariosGSP ChangeEmployment Change 100% Allowance Revenue-Reduce Corporate taxes$100 million (0.1% GSP)673 (0.07% of employment) 100% Allowance Revenue- Energy Efficiency $63 million (0.06% GSP)815 (0.08% of employment) 100% Allowance Revenue-Rebate electricity rates $3 million (0.004% GSP)32 (0.003% of employment) Don't Join -$6.5 M (-0.006% GSP)-72 (-0.004% of employment)

17. Conclusion It is in the economic interest of the state of New Hampshire to participate in the RGGI –Electricity costs will increase in New Hampshire even if New Hampshire were not to participate in RGGI due to the regional market. – If New Hampshire does not join RGGI, it would not receive the economic value from allowances.

18. Questions?