 It is my great pleasure to moderate the first part of this conversation, which is some remarks by Katie Dykes, who is no stranger to Washington. She was here in Washington working as the Deputy General Counsel for the White House Counsel on Environmental Quality, CEQ, and before that at the Department of Energy, but we did not overlap. She was there a couple years after I was working as a legal advisor to the General Counsel. Today Commissioner Dykes is not only the Deputy Commissioner for Energy in the Connecticut Department of Energy and Environmental Protection, deep. That's great. I like that. But she's also the incoming chair of Reggie, and it's going to talk a little bit about what we can expect from the nation's first mandatory market-based emissions reduction program in the Northeast. I think you're on your third three-year compliance period, raised about $2 billion that's getting recycled into the economies up in the Northeast. So a lot of interesting things to talk about both in the history of that program and what we can expect going forward. After the Commissioner's remarks, we'll take some questions, have a little bit of a discussion, and then we've got a panel who's going to be moderated by one of our senior associates, John Larson, who is a principal at the Rodeum Group. We like to do work together and very glad to have him here to moderate that discussion with a panel of experts that he's going to introduce. So thanks again for joining us. It is on the record. It's being webcast live, so if we do engage in Q&A, please do use the microphone so that everyone will be able to hear you. So without further ado, Commissioner Dykes. Great. Well, thank you so much, Sarah. Thanks so much for having me here today, and thanks to all of you for this great turnout. I know I'm just very pleased to see the interest in Reggie and what we've been doing, especially, you know, with the expected Clean Power Plan final version coming forward this summer. We're all going to be very busy, and so look forward to the discussion this morning, and I know, like all of you, I'm really excited about the panelists that we have gathered, John, Jordan, and Gabe, and I'm looking forward to that part of the discussion as well. So, you know, I just wanted to start today by giving you a quick snapshot of the Reggie program. Today, the nine States in Reggie represent 16 percent of the U.S. economy and generate a total gross domestic product of $2.4 trillion. In Reggie's seventh year of operation, the cap stands at $88.7 million allowances with an adjustment to account for banked allowances reducing it to $66.8 million. And so far, the Reggie States have raised over $2 billion in proceeds for reinvestment in state economies through 28 successful auctions, and we're expecting another successful one, or it was yesterday, which have shown no signs of any anti-competitive conduct or market manipulation. These auctions and the reinvestment of auction proceeds have become hallmarks of the Reggie program's success. Reggie completed its second control period, the three-year period from 2012 to 2014. We're just closing the books on that now, and the average emissions during that time were 88 million tons, representing a 40 percent decline in emissions since 2005. Our recently released report about the second control period compliance found that 96 percent of the Reggie units have met their compliance obligations. So just from that snapshot, we have a lot to be proud of in the implementation of our program. We're here today to discuss Reggie's future, and to set the stage, I think it's useful to begin with a look back at how we got here. In 2003, this idea of a multi-state program to reduce GHG emissions was really just that, an idea under discussion between Northeast and Mid-Atlantic State governors. It's really funny for me, because I arrived in Connecticut in 2012, and 2003 doesn't seem that long ago, but for those veterans of those early discussions, it is really exciting to hear how this concept involving all these multiple jurisdictions came to become a reality in the program that we see today. By 2004, an extensive stakeholder process was underway, and the States began setting the technical groundwork, including gathering comprehensive emissions data, modeling energy and economic scenarios, and consulting with experts in program design. And I think you see that reflected in the MOU that the States signed in 2005. The MOU laid out the foundation and framework of Reggie. It set out the broad goals, which included discussing the risks that climate change posed to human and ecosystem health, the importance of creating a CO2 allowance mechanism that would incentivize the development and use of clean, efficient, and renewable energy technologies. And the MOU also emphasized enhancing the region's economy by augmenting regional energy security and by retaining energy spending and investments within the region. So after the MOU came the development of the Reggie Model Rule, and the Model Rule serves as the design template that each State uses when implementing the Reggie program within each State's authority. It's something one of my colleagues calls sort of synchronized swimming. And as complicated as it sounds, we've been very successful in maintaining consistency in the implementation of the program across various States through the use of this Model Rule. So let me talk just quickly about what the primary goals of Reggie were when it was established. First, it was to establish each State and their industries as world leaders in the sustainable use of energy. And second, to stabilize carbon emissions from the power sector and then achieve a 10% decline by 2018. So how well have we done in achieving those goals? Well, first with respect to the goal related to emissions and generation, power sector carbon emissions have declined 40% since 2005, while the regional economy has grown 8% adjusted for inflation. In 2013, half of the Reggie State's total generation was sourced from clean and renewable facilities, such as nuclear and renewables. And from 2005, the Reggie State saw a 63% increase in non hydropower renewables, a 34% increase in natural gas generation, a 63% decrease in coal generation, and a 93% decrease in petroleum generation. Those figures, I think, are incredibly significant, particularly as we have engaged with all the other States in this dialogue about how achievable are the targets that the EPA has proposed in the Clean Power Plan. We have a track record that we can point to in the Reggie region of making significant shifts in a very short period of time in the generation mix and where we are sourcing our energy in the Reggie region. The EIA data shows that since 2005, the Reggie States have decreased the carbon intensity of our generation twice as fast as the rest of the nation. In 2012, the carbon intensity of the generation in the Reggie States was less than 750 pounds per megawatt hour. So this is not to say that Reggie alone is responsible for these changes, and I'm sure that will be part of the discussion with the panelists' leader. But Reggie, we believe, is a part of a package of complementary state policies, such as our RPS standards, energy efficiency resource standards, or efficiency investment programs that are driving many of the changes I just described. And these, along with market dynamics, such as changing fuel prices, the lower cost of natural gas versus coal and oil, and lower costs for renewable deployment, are helping to Reggie to accelerate some of this transition to a cleaner, cheaper, more reliable energy future in the region. While all of these pieces are working together to drive down emissions, it's really important to emphasize that Reggie captures all of these forces, increasing cost effectiveness while also serving as a backstop with specific emission targets. Exactly that's exactly what you would expect from a market based emissions cap and trade type reduction program. Now, let me talk about the second goal a little bit with respect to economic benefits. The analysis group conducted an independent analysis of the economic impacts of Reggie's first control period from 2009 to 2011. That report tracked the path of Reggie-related dollars following them as they left the generators who buy Reggie allowances as they were reflected in electricity prices and in customer bills, and as they were then invested by the Reggie States into the economy, into a clean energy economy. The report found that Reggie is generating greater economic growth in every one of the States that participated in Reggie than would occur without a carbon price. The analysis group concluded that the Reggie program has resulted in $1.6 billion in net economic benefits during the first control period, with $1.3 billion in energy savings to customers, and reduced demand for fossil fuels keeping more than $765 million within the local economy. I'd love to see all the pens moving. These are great figures that we are very proud of. This doesn't include, of course, the other benefits that are difficult to quantify, including health benefits and economic benefits due to reducing or mitigating climate change impacts. Through 2013, the Reggie States have invested over $1 billion in energy efficiency, clean and renewable energy, and other strategic energy programs. More than 3.7 million households and 17,800 businesses are participating in programs that are funded from Reggie proceeds for clean energy. The majority of these investments are directed towards energy efficiency and supporting clean and renewable energy programs. Over their lifetime, these investments are projected to save participants $2.5 billion on their energy bills. We track all of these metrics in our proceeds report that come out each year. So I do encourage you, if you want to see more of particularly state-to-state, how the Reggie proceeds are being reinvested in a clean energy economy, you should definitely check out the Reggie website where you can find some more on this. Now let me talk a little bit about the lessons learned from Reggie implementation over the past few years. I think Reggie really serves as a model for how States and jurisdictions can work together to achieve our mutual climate goals. Being the first to adopt a market mechanism to reduce regional greenhouse gas emissions, naturally, when you are the first ones out of the gate, there are going to be challenges as well as successes that you can draw from. We are very excited to be open and transparent about those to provide a learning experience and a base for other jurisdictions to learn from. The Reggie States are very diverse economically from the standpoint of our energy mix as well as our politics. We have seen administrations come and go, changing party, and yet the consistency of the Reggie program continues. We also straddle three different ISOs, and so there are some variations within market rules that apply to the various generation sectors that are covered by Reggie. So we have had some different bumps in the road, but we have managed to work together, and I think that is the most important takeaway. One thing that has been really successful is that we have had a unified commitment to program goals and consistency, at the same time allowing for flexibility and for State-specific customization where that is appropriate, such as in the limited use of set-aside accounts and especially in providing flexibility for how States direct the reinvestment of their proceeds. I can just tell you, through the different program reviews that we have had in Connecticut, just to speak from our experience, this is something very interesting to me when I came to Connecticut from D.C., which is when we needed to make changes to our Reggie implementing regulations to follow changes in the model rule after program review, those have to go to our legislative committee in Connecticut before they can become enacted. And so when we thought about the path to implementation of some of the changes from the 2012 program review, it is a little daunting to think that you need to go back through a political body to get those enacted. But my personal experience from this has been that the spotlight that is created by being part of a regional program puts even more pressure on legislators to maintain participation at the standard that all of the Reggie States have agreed on and keeps that commitment going even when other programs that may just be within the footprint of our single State can come under more scrutiny. There is just this sense about Reggie that as the longer we go with Reggie, the more established it is that there is less of a question about the integrity of the program or what the program does. And this is in part reinforced by those compliance entities for whom Reggie is now a known quantity, there is regulatory certainty and predictability about it, and that I think is reflected in the fact that we didn't have any problem getting this through our regulatory review process at the State level with changes and updates to our regulation. But another thing that we found really helpful with the Reggie program is that we have had these periodic technical and comprehensive program reviews, and we have involved stakeholders and experts in that process as well. And I think you will be hearing from some stakeholders who have already been presenting some ideas for us to consider as we look ahead to the next program review, which we will be entering into very shortly. And this has really given us the opportunity to react to some of the unintended outcomes of the Reggie program, such as the very significant reductions in emissions that we were seeing in the region that led us to tighten the cap in the last program review. And so I think that that we have invested a lot in modeling. I think that has been a tremendous advantage for the States, particularly as we have been reviewing the draft CPP. We have a base of knowledge to be able to estimate what the impacts of building blocks, various regulatory paradigms will be, which has helped us feel prepared for some of the different regulatory outcomes that we could see in the final plan. But even with the best modeling, of course, there are things that will happen, changes in market circumstances that we will need to adapt to. And that is where this regular program review I think is a really important facet of Reggie. Another lesson learned, too, I think is one of the advantages of being in a region that has been proactive in trying to make a transition and making a transition to a clean energy economy, is in the strength of those programs, the efficiency programs, renewables programs that we can invest the proceeds in. So having the overall Reggie structure in place is critical, but having a place for those proceeds to go where we are going to see tremendous impact and be driving it even more and more cost-effective savings just amplifies the success of the Reggie program within each States boundaries. In that regard, we have had a long history in Connecticut and in the New England region, particularly around investing in energy efficiency programs. Ours are utility administered. We have a long track record and base for strong evaluation of those programs, as well as a very ambitious renewable portfolio standard. And we are continuing to innovate on those programs, as well. In 2011, we developed the nation's first green bank, something we are really proud of, and we have been investing a portion of our Reggie proceeds in renewables programs and also efficiency programs that the green bank is developing, particularly around developing and supporting financing programs to support clean energy development. And this is part of our effort broadly in Connecticut to stretch our program dollars, including our Reggie proceeds by using them to leverage and attract private capital so that we can really expand the impact and the savings that we are seeing. And so through things like commercial pace, through residential financing that is paired with rebates and grants that are directed through our utility efficiency programs, this green bank model has been a true success. And a lot of that is credited back to the funding source of Reggie. So there is this great sort of feedback loop that is occurring there of innovation and investment that I think is part of the that we see replicated in all of the Reggie States and is a critical foundational piece of Reggie's success. So looking forward to the Clean Power Plan, I know today's event is not just about Reggie, but also about what we can expect from EPA coming up this summer. The Reggie States submitted comments on the draft plan last year, and we applauded the EPA in those comments for setting the nation on a clear path towards achieving significant carbon emission reductions from our largest source sector. The Reggie States support the Clean Power Plan's general framework for a system-wide and cost-effective way to achieve the best system of emissions reduction. And we welcome the EPA's recognition of market-based programs like Reggie as a cost-effective approach to achieving compliance with the rule. It is not lost on those of us in Connecticut, of course, that our former Commissioner, Gina McCarthy, is now at the helm of EPA and obviously her deep involvement in Reggie we see reflected in a lot of the work at EPA. And so beyond serving as a compliance mechanism, I think Reggie's experience helps to demonstrate that the Clean Power Plan's overall aims of reducing emissions while supporting the economy and grid reliability are achievable. EPA has projected that the Clean Power Plan would reduce carbon emissions 30 percent from 2005 by 2030. The Reggie States have, as I mentioned, already surpassed that emissions reduction percentage. And we expect that our emissions in 2020 will be almost half of what they were in 2005. So experts have consistently found that regional plans provide more cost-effective solutions for Clean Power Plan compliance than single-state plans. Our experience demonstrates why that is so. Multistate initiatives can take advantage of the regional nature of the electricity grid. They can implement simple, transparent, and verifiable tracking and compliance systems. They help to maximize opportunities for cost-effective solutions. And they spread risk across a larger market. Just a few words on reliability as well. In my day job as the Deputy Commissioner for Energy at Connecticut Deep, grid reliability and resiliency is paramount. And our States in the Reggie region have been leaders in implementing energy efficiency and reducing demand on the grid. I think it is really significant. I think this was most recently highlighted in DOE's Quadrennial Energy Review that climate change is one of the most significant risks as far as reliability. It is already costing the U.S. economy from $18 billion to $33 billion a year. So I think in all the discussion about the potential reliability impacts of the Clean Power Plan, I think it is important for us not to lose sight of the fact that a no-action alternative in this context is already costing us a tremendous amount. I have seen that borne out in Connecticut in 2011, 2012. We were impacted by several severe storms, Superstorm Sandy. We came very close to losing substations all along our coast. We have been very proactive in trying to set up new resiliency centers to look at investments in making our grid more reliable. And I will tell you, when you are sitting in those meetings with utilities and they come in and they show you a plan for what it would take to harden, to elevate some of the existing substations along Long Island Sound, and you look at the dollar amount that is attached to that, you become very grateful that we have programs, our efficiency programs, for example, that are helping to reduce our demand for electricity, that are helping us to right size our investment in some of the traditional utility infrastructure. I think we also, in New England, because we have made such a very rapid transition to natural gas fire generation, we have some work to do to get gas pipeline infrastructure developed in order to serve that gas generation. But there, it is interesting that the experience of working together through Reggie has actually provided a good foundation for the New England States to start coordinating on how to get that infrastructure built out to serve our gas fire generation. That is something I have been very much involved in from a reliability perspective. And incidentally, we are looking to solve that gas infrastructure problem, not just through building out new pipeline capacity, but in Connecticut, we just have legislation passed that will help us contribute our share to building out that infrastructure, not just from gas infrastructure, but also from transmission to interconnect more renewables and large-scale hydro power, as well as broader investments in energy efficiency and even energy storage that can help us right size our investment in that infrastructure. So I think that we very much see that clean energy and reliability, those goals are integrated and we can achieve the most cost-effective solutions in terms of a grid that is adapted to the future impacts of climate change. When we have programs like Reggie that are helping us invest in that grid of the future. So just a few things, like everyone else, our States are awaiting the release of the final Clean Power Plan in part so that I can start making my vacation plans or canceling them, as it were. And we're going to be spending a lot of time analyzing and digesting the rule. I mentioned the projected 30% decline by 2030 from the proposed rule. One question that we have as Reggie States is whether the Clean Power Plan does enough to recognize early actors and whether there are opportunities for other States to achieve more, especially those States that may not have taken advantage of cost-effective emission reduction strategies, such as energy efficiency. So while we recognize there's the moral imperative for us all to do everything that we can to address our climate emergency, and we hope that the rule that comes forward will be making that demand of all of the States to do their part. We've provided suggestions in our comments to strengthen the rule, including a ramp of the energy efficiency building block, and for the rule to recognize the rule of new natural gas, not just the redispatch from fossil fuels to existing gas capacity. And since the Reggie States used a capped, mass-based approach, which includes both new and existing sources, we're going to be very interested in how the Clean Power Plan will ensure equivalency between the rate-based targets and mass-based targets. And of course, we hope that the final rule and compliance process will enable States to use mass-based approaches and multi-state approaches and not create any unintended obstacles to that. And we've been very pleased with the dialogue and engagement that the EPA has been having with us, with all of the stakeholders on this, and when we look forward to continuing that as the final rule comes out. I will go ahead and address the question that may come up. We've been getting a lot lately, which is whether there are the possibility of new States joining Reggie. With Reggie's track record of success and recognition by the EPA, there's been a lot of speculation about which States might be next to join the program. And some have suggested that other States might see Reggie as a good plug-and-play option for Clean Power Plan compliance. But there's also the possibility of other multi-state initiatives and compliance pathways that may be similar to Reggie or build on Reggie's success. And so the Reggie States have said on several occasions that we're happy to work with any State that's interested in learning more, whether that's with an eye towards joining our program or towards setting up their own regional program. We've learned that while there are certain core elements of the Reggie program that need to be consistent, there is also considerable flexibility in the implementation, for example, in the timing of adoption and how each State decides to invest their Reggie proceeds. So just to conclude, there are several different scenarios that can play out, and it's really all contingent on the release of the final rule. So we hope that we can be very nimble and adjust as necessary to help support a future in which emissions reductions are achieved. I'm just very proud to say that we've made great achievements already in the Reggie region towards clean generation, improved energy efficiency, consumer benefits, economic growth, and reduced emissions. And we hope to continue those successful trends into the future. So thank you. Thanks very much for those comments. You know, you said at the outset 2003 isn't actually a long time ago, but it does feel like a long time ago for those of us who were sort of thinking about these issues back then. And I think perhaps one of the things that you talked about that is the most impressive and important things to look at, especially as we're looking at other States but other localities around the world that are thinking about having this kind of program is the bumps in the road, as you've called them, and the ability to work through some of those things that really sort of, I think on the, perhaps it's not nearly as sexy, but on the day-to-day level gives the program the kind of legitimacy that makes it replicable elsewhere. So I wanted to, we're going to take questions from the audience. So please, when you raise your hand, name yourself and your affiliation and please put your question in the form of a question if you can and wait for a microphone. But one of the things I wanted to ask you, just to get it out there, I think maybe some of the folks in the audience may or may not know, what does it mean to be the chair of Reggie? Like what is your function and what is on your sort of personal list for the things you'd like to accomplish in that role? It means being on a lot of conference calls. That's one of the downsides of regional work is that you end up talking to yourself in offices with, you don't get to be face-to-face that often with the people you're working closely on this with. But actually, it really is, it's interesting because we have so many folks who were involved in the program from its inception. We have a lot of, there's been a number of administrations that have changed over just in this past election cycle. So there are new faces coming in. And I've been in Connecticut since 2012 and participating in a lot of the conference calls that go on. And so in many ways, it's not that different. It's more sort of just helping to mediate and facilitate the dialogue among the States because it really is, the strength of this program is in very active participation all the way from the commissioner level down to the staff level on very frequent conference calls, committees. There are so many people and staff that are behind this program and that have been, believe in it and have been contributing to its success all along the way. And so in many ways, it's just trying to not, trying to continue to facilitate that dedication and that work going forward. That said, we are, it's a very exciting time to sort of be at the helm as we do have the Clean Power Plan coming out this summer. So we are going to be very engaged in that and we're going into program review, our next round of program review. So these two things are coinciding at a really opportune time. And so I'm looking forward to, in my chairmanship to the opportunity to engage a lot with stakeholders and think through how we can adapt our program to work with a multi-state implementation plan and really just to continue to demonstrate that this is doable and to build on the successes of our program to date. And you mentioned the program review process that you're about to go through. Are there issues that you anticipate sort of, you know, having to deal with within that process and can you talk a little bit about what those are and how you're thinking about them? I think it's a little, it's probably premature to say just yet until we see the plan coming forward. But, you know, we are already hearing from, I think we'll hear a little bit today about some of the ideas that stakeholders have. Of issues that we should be focused on as we go into the next round. So, you know, we're, we'll know a lot more later this summer. I'd like to open up for questions. We've got one right there in the back. And then we'll go up to you. Hi, Tom Simchak with the British Embassy. Insofar as we know just based on the proposed rule, what will be needed logistically in terms of using Reggie as, you know, the various, several SIPs? I mean, certainly you talked about some of the emissions reductions that are already happened, but you'll probably lose some of those as there'll be early action. And it seems certainly that Reggie is broader in terms of emissions reductions categories. So what has to happen if to a first state just to copy and paste over Reggie or anything more than just reporting requirements? What'll have to happen there? Yeah, that's the question that's on all of our minds and not, you know, again, it's a little hard to say. I mean, we've been trying to, we've been gaming this out and getting ready for various eventualities. I think one of the things that is going to be critical is how the translation is going to be done from a rate-based to a mass-based target. I think that that will be really critical for the States. I think there's other issues in terms of enforcement, of course, enforceability of the plan, how that will work. You know, there's just, it's really, it's early to really be able to respond in detail to the question, but there's a number of things, including some things we put in our comments that we're already thinking about and getting prepared for. And of course, then there's the timeline of implementation. I've seen some of the Gantt charts that the staff are putting together about how our program review will align with submission of a plan, a multi-state plan, and of course, all the things that that entails for each individual state. So, you know, it's going to be, it won't be an insignificant amount of work, but we're really excited to take it on and we think it can be done. Hi, Tom Tyler with the Environmental Council of the States. You've kind of touched on this, but can you just summarize for us what were Regi's top three or five asks or recommendations for EPA when you commented on the 111D plan so that when we're all scrambling through it right when it comes out, we can think, oh, they really responded to Regi, or gosh, Regi won't be so happy with this or that. Thanks. Well, I think the overarching comment is that, again, that we see this as a real moral imperative to act. And while we recognize that there will probably be some variation in targets that will be necessary from jurisdiction to jurisdiction, you know, we want the work of the early actor states not to be reflected and incorporated. And we really hope that the rule that comes forward is going to ask from those who haven't acted yet, who have opportunities for fruit that's hanging lower than in some of our states to really do as much as they can because we think that there is such a tremendous economic benefit from the investment in a clean energy economy that those states can realize. And so we are hopeful that the plan will really be a nudge for those states to move aggressively in that direction. But again, just to summarize, we recommended a real significant ramp in the energy efficiency building block. We talked about ways to incorporate new natural gas because that, just incidentally in Connecticut, I mean, we've seen a tremendous amount of new gas generation being cited and built in a short period of time. And so trying to figure out how those things will work together, I think we'll help to optimize the options that are available to states. Those are just a few, but in general, we appreciate the EPA's support for a multi-state compliance pathway. And we're going to be looking to continue to hopeful that the final rule will come out in a way that will enhance and support the ability of the Registrates or other states in their own regional collaborations to comply through a multi-state approach. Thank you. I'm Michelle Melton with the CSIS Energy Program. Thank you for your comments. I've found it really fascinating. I have a ton of questions, but I'll limit myself to three. You can pick whichever ones you want to talk about. Obviously, you have a lot on your plate for the immediate future, but I wanted to look out a little bit farther into the future. I'm wondering if there's ever been any talk about moving into other sectors. Obviously, Reggie is historically a very, very electricity sector-focused program, and probably will remain so in the near term, but just wondering if there's been ever any talk about either expanding Reggie or using Reggie as a model for other sectors and what that means with the Clean Power Plan coming into play and using Reggie as a compliance option for the Clean Power Plan, whether that constrains the ability to shift Reggie towards a more economy-wide program. The second question is also sort of a longer-term question, but at some point there's a limit to the gains you can reap from the electricity sector, and I'm wondering whether you've ever talked about or considering an expansion of offsets, especially international offsets within Reggie. And then the third question is just more on a personal level. What you think about is the key ingredient for Reggie's success so far, whether you think it's leadership, whether it's planning, whether it's been the review structure that was set into place initially, or whether it's shared Northeastern cultural values. I mean, if there's anything in particular that you think really has, if you think there are shared cultural values, whether there's anything that you think has really made Reggie a model for success or if it's all those things put together. Thank you, huh? Those are great questions. I'll just try to go quickly. As far as other sectors, I can't really comment on that from a Reggie perspective. So let me take that question from a Connecticut perspective. We have a Global Warming Solutions Act that was enacted in Connecticut several years ago, and that puts forward an 80% reduction goal by 2050. And so we have, while the Reggie program is providing us great benefits in terms of electric sector reductions, we also recognize that there's a lot of opportunities for reductions in other sectors. And in 2011, our department was completely overhauled in part to help us be better prepared as an institution to try to meet those goals. We merged our Public Utility Commission in with our Department of Environmental Protection. So now we have energy and environment under one roof. And we also were given new strategic planning responsibilities writing a comprehensive energy strategy every three years, which has to include discussions around emissions reductions from the transportation sector, for example, as well as buildings, waste, et cetera. So this is part of the everyday culture, the everyday work that we're doing within the Department of Energy and Environmental Protection. It made the name a lot harder to say. But it has co-located the staff and therefore sort of merged a lot of our work to be more holistic. And so we are looking forward in the next comprehensive energy strategy that we're writing today or over the next couple of months to ways that we can secure some of those reductions in those other sectors. And I point to a lot of multi-jurisdictional work that is supporting that, including the ZEV-MOU that we're a signatory to and a whole range of other types of multi-state approaches that are on efficiency and renewables that are supporting us in those goals. So I think, again, and then maybe this is sort of towards your last question a little bit, the key ingredients, it is so hard when you talk about trying to get multiple states to sign on to one MOU around a climate goal. And I think the fact that that happened has created optimism and possibility. I can't tell you how often I'm in meetings where we're talking about, wow, we really, this is a, this problem is bigger than our state can solve. We need to solve this with the other states who are in our same ISO or other states who share our transportation corridor or whatever it might be. And the conversation doesn't end there because we can say, and we did work with those guys on Reggie. So maybe, let's call them up and we know who to call and where those relationships have been built. And I think that that's a really, another really important part of Reggie is that you have energy commissioners and you have air regulators on the same calls. And so to the extent that, for example, the Clean Power Plan has brought up this conversation about reliability again, this idea of environment talking with energy and how these different systems will integrate is not, this is not the first time we've started, we've already been having that conversation for quite a while and there's a lot of understanding of the goals and objectives and the regulatory missions of those two different sides of the house that Reggie has promoted. So I think that that's one really exciting thing about the program. It's just a track record of regional coordination on a really tough issue and it's brought energy and environment together, working towards a common goal. And I think that to the extent that there are other states, Rhode Island, Massachusetts, I'm just speaking from my parochial New England corner of the world, but we share, I mean, the Atlantic states that are participants in this program as well have very aggressive goals on clean energy. I think there are going to be opportunities for us to continue to support each other in achieving those goals, even beyond the electric sector and just the track record and the muscle memory of working together on Reggie, I think has some unquantifiable impacts in other areas. I think we've got time for one more question, but I just wanted to add on to that for a second, is how important do you think it has been the effectiveness of the spending of the revenue that's generated by the actions? I mean, I think that was something that I think several years ago, there's a huge amount of focus on is where that money was going and how effectively it was being spent. Is that something that you think in is there have been significant lessons learned about that as well that has been part of building the credibility of the program? Oh, absolutely. And I think that, again, going back to the experience of getting our legislature to sign off on the updated regulation for Reggie a couple of years ago, those programs have a face. Those programs are very familiar to our legislators. And we've had the ability, the autonomy within our implementation of Reggie to decide where to invest our proceeds so that we can focus them on the programs that make sense and have salience within Connecticut. And that sort of cooperative regionalism, if you will, has really created a lot of political buy-in to the program and has created a lot of on-the-ground awareness and understanding of the importance of this program from everything from folks who've gotten a C-PACE loan to help to reduce a company's energy bills to a beneficiary of a low-interest loan for residential solar. And then when you say, oh, and this is in part due to Reggie, that really brings it home to folks. We'll take this question right here, and then I think we're going to wrap up. Fad Huderman with EIA. One thing that's been intriguing to those of us kind of watching the 111D and the evolutionary process, the mention of the folks who are interested in Reggie has been intriguing to some of us who've been around for a while. And without naming names, which I know you can't do, in your response to the preceding questioner, you mentioned the thinking about, geez, we need to have people in our ISO or people in our transportation corridor involved in this. Could you maybe illuminate some of your thinking about who makes a logical new Reggie member? PJM reaches way, way, way across the broad expanse of the middle of the country, if you wanted to be ambitious. So without committing yourself to something that would be embarrassing in Connecticut or Reggie, you're thinking. Well, I did have my coffee this morning, so I will remember to say that I can't really... We've just been an informal discussion here and there with stakeholders, with other states. I mean, we've heard from a lot of folks who may think that joining Reggie makes sense for a particular jurisdiction, but those have really just been informal discussions at this time, so can't name any names. But again, we're so excited about our track record and what we've proven that we can do. And for us, it's really about supporting those jurisdictions, either if joining Reggie makes sense or if taking the Reggie experience and the lessons learned and maybe parts of our model and building on that to develop their own multi-state compliance pathway. We just think it's worked well for us, and so to the extent that it makes sense to others, we're happy to reach out and be supportive. Well, listen, I just want to say thank you very much for taking the time to be with us today. Thank you. We're happy to try and pull you out of Connecticut for some more New England kind of weather down in D.C., but we're happy to have you here. I hope you can stay for the discussion and just please join me in thanking Commissioner Dykes for being here. Thank you, John. Okay, I'd like to invite John, John, Jordan, and Gabe to come on up, and Jonathan will do an introduction to the panel and lead us through a discussion. Thanks. Thanks, Sarah, and thanks, Katie, for a really great start to all of this and for Katie for getting such a great crowd here. I think that's most people we're here for to hear what you had to say, and now the reactions, I think, are going to be even really build on that. I'm John Larson. I'm a senior associate here at CSIS, and I'm pleased to introduce a great panel to act as a, to build on Katie's comments. We've got Jonathan Ramser from the Congressional Research Service. He literally wrote the history on Reggie for the U.S. Congress in a recent note, and we'll be talking a bit about where Reggie's come from over the past decade or so. Then from there, we're going to move on to Jordan Stutt, a policy analyst at Acadia Center, who has, he and his organization been looking a lot at kind of, not just the performance of Reggie to date, but where it can go next. We'll be hearing some thoughts from him. And then Gabe Basiniak, who is from the Georgetown Climate Center and an adjunct, Professor at Georgetown, who's been working with States for a long time on the question of climate change policy, most notably of late with the 111D questions, and has helped to hurt a lot of cats to provide cooperative comments on the, on the Clean Power Plan during the comment period. And Gabe's going to talk a little, maybe broaden the discussion a bit kind of to where States are. Lovely cats, John. Oh yeah, I mean, lovely cats. And we'll hear from him about the broader kind of national, the discussion across the country at the state level on the Clean Power Plan. So we're going to hear about 10 minutes or so, 15 from each of the panelists, and then we'll come back over for questions. So John, Jonathan, please get started. Sure. Yeah, and use, you can use the arrows right here if you want to bring that up or whatever works for you. Okay. Oh, great. Okay. Well, good morning. My name is Jonathan Ramsour. I work on environmental policy issues at the Congressional Research Service. For those of you who don't know, that's a legislative branch agency who supports congressional staff, congressional offices, congressional committees. I work on climate change issues, mainly in some oil spill policy issues as well. I was asked to provide a brief overview of the Regional Greenhouse Gas Initiative, or REGI. So I will cover some of the nuts and bolts of the program and highlight a few select topics. So REGI is a cap and trade system that covers carbon dioxide emissions from power plants and currently nine Registrates, which involves 168 facilities or sources. Almost half of those are located in New York State. Based on 2011 data, the CO2 emissions from these sources accounted for about 20 percent of all the greenhouse gas emissions in the Registates. As we have heard earlier, the Regi discussions began at least back to 2003. These culminated in a memorandum of understanding that was signed by some of the Regi governors in 2005. And that MOU outlined the basic framework of the program. In 2008, the Registrates issued a model rule of cap and trade regulations that the States could use to establish and implement their own programs. Some of the design elements of the model rule include three-year compliance periods, unlimited emission allowance banking, use of offsets, which is limited to some very specific project types, although to my knowledge I don't think offsets have been used so far in the Regi program, but they may come into play as Regi goes forward. Emission allowance auctions, approximately 91 percent of allowances have been sold through the quarterly auction process, and as many of you may know from the Waxman-Markey debate back in 2009, emission allowance value and its distribution was a very hot topic during that debate, and if something like that were to come forward again, I am sure that would be the same. So Regi's distribution of allowance auctions emission allowance auctions through the auction is a very interesting thing of note for its program, and also not just the way that the allowances are sold or divvied out, but their value, how it is distributed. So far in the Regi program, a lot of that has been focused on energy efficiency projects in the States, as well as greenhouse gas abatement projects, renewable energy, and direct assistance to consumers. And a new design feature was added in 2014 after the design review, the Cost Containment Reserve. This mechanism provides additional allowances to be sold at auction if certain price thresholds are met. The March 2014 auction triggered for the first time the Cost Containment Reserve and an additional 5 million allowances were sold, all of which were purchased. Unlike some allowance systems and other programs and other Federal proposals, the allowances in Regi's reserve are not borrowed from future years, so effectively the cap is increased if the reserve is triggered. Okay. All right. So I am going to talk just a little bit about the original Regi cap. So when Regi States crafted the first emission cap, the initial objective was to stabilize the emissions for several years, starting in 2009 through 2014, at projected 2009 levels and then require gradual reductions through 2019. This is the red line you see in the figure. Regi designers anticipated that the CO2 emissions would gradually increase. This is back in the 2005 time period, so that actual levels would eventually match the 2009 cap, which was set at 188 million short tons. As illustrated in the slide, the actual emissions did not meet these projections, but decreased substantially for a variety of reasons, some of which I will mention in a bit. But the figure also shows the decline in the cap and the emissions when New Jersey left the program in 2011. And of the 10 states in 2011, New Jersey ranked third in terms of CO2 emissions, so it was a pretty substantial departure in terms of emissions. So the revised cap, following a scheduled 2012 design review of the program, the Regi States amended the model rule in 2013, substantially reducing the emissions cap by about 45 percent to 91 million tons. That level was based on projections of 2012 levels made at the time. The revised cap took effect in January 2014, and the emissions cap is set to decrease by 2.5 percent between 2015 and 2020. And there is no cap right now established beyond 2020. So we will be talking a little bit about that, I think. In addition, the Regi States decided to further adjust the new cap to account for the banked allowances that occurred between 2009 and 2013. In 2014, the designers determined that these banked allowances accounted for about 140 million short tons, a considerable amount compared to the 91 million cap of 2014. Thus, the adjustments were applied each year in 2014 through 2020. And you can see that in the graph of the dotted green line. As the figure illustrates, I think you can see that there is going to be probably a difference between the original cap, which was art overallocated compared to this cap, which is certainly much closer to actual emissions going forward. All right, so this slide just illustrates how Regi's electricity portfolio has changed over time. I think you have heard some of these stats from the commissioner earlier, but I just want to put that in a figure form. Arguably the most substantial change is the shift from coal to natural gas electricity generation. As the figure indicates, the coal has decreased by about 65 percent between 2005 and 2014. Natural gas increased about 40 percent over that time period. As many of you, I am sure, know natural gas fired electricity produces about half of CO2 emissions per unit of energy compared to coal fire. Electricity generation. Also note the sharp decline in petroleum generation and the modest increase in arguably modest renewable energy sources. These shifts in electricity generation portfolio in the region at least partially explain why the substantial decrease in CO2 emissions occurred from 2002 through 2014. I am sure economics also played a role as well. Okay, my last slide just talks a little bit about the auction revenue and auction prices that we have seen over the years. As I mentioned, as a group, the Registrates have auctioned about 91 percent of all their emission allowances between 2008 and 2014. Some of the offered allowances were not sold and were subsequently retired. Others were sold at fixed prices or distributed to various entities to support a variety of objectives. But as I mentioned, that is only a very small percentage of the total allowance value. The auctions have included a reserve price which started at $1.86 per ton in 2008 and has increased to $2.05. This slide only covers the 27 auctions to date. The cumulative proceeds have totaled about $2 billion. Now, as you can see, the auction clearing price equaled the reserve price between June 2010 and December 2012, reflecting the abundance of the emission allowances in the market. Moreover, during this time period, about 40 percent of the allowances that were offered were not purchased and Reggie retired the vast majority of these. So during this period, some have said that the reserve price acted somewhat like a emissions fee or carbon tax. However, in 2013, the results have changed dramatically, reflecting the changes in the Reggie program. Following the design review, the emissions cap was dramatically lowered in 2014 and the clearing prices began to exceed the reserve prices. The past two auctions, that's auction 27 and 26, resulted in clearing prices over $5 a ton, a dramatic increase from 2012. But it's also interesting to note that the proceeds in the past couple of auctions have decreased even though the prices have increased. And that reflects the fact that fewer allowances are being sold at auction because the emissions cap has become more stringent. So at this point, I will pass the torch to the next presenter. Thanks, Jonathan. Jordan, you're up. So I'm Jordan Stutt, policy analyst with Acadia Center. And to give you just a brief background on Acadia Center, formerly Environment Northeast, we're a nonprofit environmental policy research and advocacy organization with offices throughout the Northeast. And we focus on a variety of energy and climate issues. And while I can't claim to have been at the initial Reggie discussions 12 years ago, members of our organization were, and we continue to look forward to the success of the program. Today, I'll be focusing on EPA's Queen Power Plan, how Reggie fits into that framework, some of the benefits of that program. And then I'll move into some potential program reforms that the Reggie States may need to implement in order to comply with those Queen Power Plan targets. And one thing I will note is that Jonathan and Commissioner Dex have already covered some of the content in this, and they did so more eloquently than I did, than I would do. So I'm going to be happy to speed through some of these slides. So the proposed rule from last June proposed to reduce emissions from the power sector by 30% from 2005 levels by 2030. And as previously mentioned, those targets were arrived at by applying a set of four building blocks to each State's energy profile. Now, those building blocks do not represent a prescriptive approach that States need to follow in developing their State plans. Instead, they have a great deal of flexibility in determining the best way for them to meet those targets. And that brings us to Reggie. So Reggie is widely considered to be a lowest cost path for reducing emissions from the power sector. That's something that we've heard from for a long time from academics. And we're starting to hear it more from sort of non-traditional cap-and-trade allies as they realize that they're going to have to do something in order to comply with the Queen Power Plan. And the lowest cost option looks like a promising one. EPA has been encouraging States to work together to develop multi-State plans. And they've also taken steps to encourage mass-based trading by converting their proposed rate-based targets into mass-based targets. And within those proposed mass-based targets, they actually include a subset of targets that would be applicable for new and existing plants. So that matches up really conveniently with the way the Reggie system is currently constructed. And the caveat here and throughout the rest of this presentation is that those targets are proposed targets at this point, and we won't know the final targets. And so we see the final rule later this summer. The emissions cap that Reggie has in place makes it clear in terms of demonstrating compliance with an EPA final target, especially now that we have mass-based targets, that there will be a maximum allowable amount of emissions. So it should prevent us from doing any complicated calculations. The flexibility of the market allows market participants, power plant owners, to seek out the lowest cost sources of emissions reductions from within their fleet within the entire region. So the fact that they have the ability to choose how and where to achieve those reductions allows them to find the lowest cost options. Revenue for reinvestment has already been covered, and that's really a key component of what makes Reggie so successful. And Reggie also preserves State control, although it is a regional program, all the States maintain the authority to implement and enforce the program. States also have their control over the revenue, and they can spend it as they see fit. And last, Reggie is not a theoretical means to meet Queen Power Plant targets, but instead it's a program that's been in place for six and a half years and has a proven track record of success. So the first marker of that success is the declining emissions, which have already been covered. But what I'd like to draw the attention to is the reduction from that initial Reggie cap at 165 million tons, excluding New Jersey, all the way down to 91 million tons. And that really signals the intent of the Reggie States to continue driving down emissions, even though it looked like there was a trend that they would already be decreasing to kind of keep that pressure on. And we've seen that that's been successful. One common concern with Reggie and pricing carbon in general is that when you put that additional price on the market, power plant owners are able to pass that price through to ratepayers. And while that's a legitimate concern, what we've seen from 2008, the year before Reggie began to last year, prices have actually decreased across the region. And there are a number of factors that contribute to that. But one of those major factors is the strategic reinvestment of auction revenue in energy efficiency and queen energy, particularly in regards to energy efficiency. When we achieve greater energy efficiency savings, we reduce demand. And when that regional demand is reduced, prices come down with it. Here we see the results of that 2011 analysis group report, which Commissioner Dykes alluded to, as well as a figure from Reggie Inc.'s spring report detailing the impacts of Reggie investments through 2013. So as you can see, again, energy investments to date are expected to result in $2.9 billion in energy bill savings and over 10 million tons of avoided CO2 emissions. And this is contributing to a trend of breaking the old link between economic growth and emissions growth. What we see here, the dark blue line indicates that economic growth in the Reggie region has outpaced that of the rest of the region, while at the same time, something by the dotted blue line, emissions have fallen much more dramatically in the Reggie region than the rest of the country. And the last benefit of Reggie that I'd like to discuss are health benefits. So although Reggie targets CO2 emissions, measures taken to reduce CO2 also result in reducing other pollutants, which have more localized impacts like sulfur dioxide, nitrogen oxides, and mercury. So from 2009 through 2013, what we saw is that avoided sulfur dioxide emissions resulted in over $10 billion in health care savings. And as we look forward, we project that from 2014 through 2020 those avoided sulfur dioxide emissions will result in additional $1.5 billion in savings. So it's easy to say based on those numbers that Reggie has been a great success so far. And one of the other key drivers of that success is that the Reggie States agreed to come together for scheduled program reviews. So that gives the States an opportunity to discuss potential improvements to the program to model those policy options and to bring in stakeholder support. And we've been grateful to be able to get involved there. The 2012 program review resulted in reducing that cap by 45 percent, and that really reinvigorated the allowance market. And it's increased the incentive to generate electricity from cleaner resources. So looking forward to this upcoming 2016 program review, in addition to just general strengthening of the Reggie program, there's going to be a focus on complying with the Clean Power Plan. So we've laid out three key reforms that we expect maybe necessary in order for the Reggie States to comply with the Clean Power Plan. And again, noting that these are projected targets, and we won't know the final targets until that final rule is released this summer. So those reforms are extending the Reggie cap, adjusting the trajectory of that cap, and revising the structure of the cost containment reserve. So, as you can see from the solid orange line, the Reggie cap ends in 2020, and we need it to extend out to 2030 to match up with EPA's final targets. Some of the Reggie States have in their regulations that the 2020 cap levels will be held constant into future years. And as you can see with that dotted line drawn across, that's not going to be stringent enough to meet EPA's targets. The second reform, and this is where it gets a bit more technical, is changing the trajectory of the Reggie cap. So the orange line is the way the cap is currently structured. The blue line is the way the cap was originally structured, and the way we think the cap should be structured going forward. So the orange line declines each year by 2.5%, and each year that we go forward when you hold the percentage constant, the actual quantity of emissions of allowances decreases. Whereas the blue line is based on a 2.5% reduction from a 2014 baseline. So the difference in 2030 when EPA's final target comes into play is about 6 million tons, and that could be significant in demonstrating compliance. But that gap grows as we look out further to 2050 when a number of the Reggie States have greenhouse gas emissions reductions targets, economy-wide targets. And as you can see, the current trajectory would allow for four times the amount of emissions as the adjusted approach. So it's important to get on the right track soon. Lastly, we have the cost containment reserve, which Jonathan explained. So there are additional allowances that become available for purchase if price thresholds are met. And this becomes an issue if in 2030 when the Reggie States need to demonstrate compliance, all 10 million of those allowances become purchased. Even if the Reggie States decide to move to that fixed quantity reduction, the blue line, those 10 million allowances would still vault the allowable emissions over EPA's proposed mass-based target. So our solution to this is that the Reggie States could adopt the California mechanism for cost containment, by which instead of minting additional allowances on top of the cap, that cost containment reserve is sourced by emissions from within the cap. So that even if all of those cost containment reserve allowances are purchased, the maximum allowable amount of emissions remains at that blue line. And that's it for the key reforms that we see going into this program review. And based on the 2012 program review, we have a whole lot of confidence in the Reggie States and Commissioner Dykes that they will take the necessary measures in order to ensure the strength of the program and the effectiveness of the program going forward. So one last slide that I'll touch on before handing it over. We've done a little bit of analysis to look at what Reggie might look like for other States. Don't take this as a suggestion that we know what Governor McAuliffe anybody else is thinking, but just if Virginia in this example, this hypothetical example, were to adopt a cap structured in the same way as the current Reggie State cap is structured and then added on top so that it becomes part of the region, you'd see that compared to those EPA proposed targets, the region as a whole would be well within that compliance limit. So we've done this for a few other States and we think that it looks like a promising option for those States. That's all I've got. Great, Jordan. Thank you very much. And we'll turn it over to Gabe. Thank you, John. And Michelle and Sarah and CSIS really appreciate being invited to this event. And so I know I'm the last speaker. I'll try to be brief, but I do something a little bit different. I don't have slides. I'm going to talk a little bit about how Reggie is really informing the broader conversation about clean power plan compliance with the States. And first, a little bit of background. So I'm Gabe Pasinac from the Georgetown Climate Center. The Climate Center is based at Georgetown Law and was really founded by state leaders, including Gina McCarthy when she was a commissioner in Connecticut, to serve as a resource to the States to advance climate policy and to help inform the federal climate policy with the lessons from the States. So we've been working actually for almost like five years now. The Center is six years old thinking with States about how existing programs could operate within the Clean Air Act framework and really intensively over the last two and a half years with States and other stakeholders thinking about what compliance options might look like under the Clean Power Plan. And Reggie is playing a really important role in that broader conversation, both as a model, as something that potentially is a compliance option, certainly for the Reggie States and others, but also as a model that is informing this broader conversation. And I'm going to talk a little bit today about what some of those lessons are. And just in terms of our work, what it looks like right now is we spend a lot of time, we've hosted several convenings over the last couple of years with States and stakeholders to talk through compliance options where Deputy Commissioner Dykes and some of our colleagues have been participants. We've developed analysis to support that and take some of the insights from there. And we've also facilitated, as John alluded to earlier, comments from 14 States, including Connecticut and the other Reggie States, joint comments supportive of the Power Plan. Although I think we definitely haven't heard the States there who are more like facilitators of self-herding, lovely State representatives. But a great process and comments that weren't just supportive, but really went into detail about some of the ways in which the rule could build on existing State programs. So first maybe let me talk a little bit about where some of the broader conversation is among States for Clean Power Plan compliance. And what I'd like to say is that I think we've heard broadly across the board that States are still keeping all of the options on the table in terms of compliance. And that's in part because the rule is not yet final. So States don't know exactly what their final emission targets will be. They don't know exactly what EPA will say about the rate to mass conversion. And these are all really important things. And so it makes sense that States wouldn't know exactly what they're going to do in terms of compliance yet. I think on the positive or on the flip side we've seen that almost all States are engaging in some way to think about how they are going to comply. And that includes in their public and their formal comments to EPA. It's very notable, I think, that almost all States submitted very substantive comments. Of course, a good number of them were critical of the proposal as a whole. But the majority of them went into detail and engaged substantively with the substance of the proposal, which I think is very notable. Most States are also involved in conversations about compliance options in one venue or another, whether that's through national associations like ECOS, represented here by Tom Tyler today, or through convenings like ours or regional convenings that are taking place. I think that includes States that are already participants litigation or have indicated that they plan to be participants in litigation. So I think it's important to know that these conversations about compliance are ongoing. So what are some of the ways in which Reggie has served as an important model and kind of starting point? And I think it's really been tremendously influential just to provide some context for what some of these different compliance options are. And EPA really did hear from States across the board that flexibility is what they were asking for even before the proposed rule came out. I think in the proposed Clean Power Plan rule, we do see a lot of flexibility. I'll just say that the way I see the rule, I don't see EPA encouraging any one approach or another, whether it's a rate-based approach or a mass-based approach. So maybe I disagree a little bit with Jordan or would frame it a little bit differently. But EPA certainly heard States, including in the Reggie comments, others say that they wanted a mass-based option. And so there clearly is a mass-based option. There's also portfolio options. So States really have a lot of choice when it comes to compliance flexibility. And when I say that Reggie has really served as a model, I don't necessarily mean that States are necessarily going to rush out and say that they want to join Reggie. Although I think we have heard some States say that they're actively considering it. Deputy Commissioner Dykes has said there's been some informal conversations. So we know there are some States that are interested in considering that as an option. But I think there are also elements of the Reggie model that are going to inform other States as they develop their own approaches, either independently or in regions. I'm going to talk about several of them right now. So first, I think the fact that this is a mass-based program and that it's been so successful and effective and also relatively simple is something that has really come out in some of the conversations that we've heard and have helped facilitate. So as I said, States are keeping the option. There are options open. I think that includes rate or mass. But we have seen, I think, a number, a kind of consensus or understanding emerging that a mass-based approach or an emission budget approach where there's a limit as opposed to a rate of tons of carbon per megawatt hour or pounds of carbon pollution per megawatt hour is an approach that can be simpler because it doesn't require separate accounting for energy efficiency or renewable energy. And that's something that Reggie has proven, which I think, and that understanding, I think, has grown in part because of the Reggie experience. And I think very importantly, Reggie has also demonstrated that economies can grow even when there is a mass-based budget that doesn't increase over time. So one of the big differences between a budget cap and a rate-based approach is that if you generate more electricity, you can emit more carbon pollution under a rate-based approach. I think Reggie has shown that a mass-based program where there's a fixed limit on carbon pollution can still allow for economic growth. I know former commissioner David Cash from Massachusetts was very found of showing this graph that showed the tremendous economic growth of Massachusetts while emissions went down. Something I think you referred to as the kick-butt graph. And that story can be told for many states in the Reggie region, Reggie as a whole. Another, I think, very important lesson that has come from Reggie that has influenced the broader conversation is that it's really demonstrated how states can work together in a way that preserves a lot of autonomy for individual states. Deputy Commissioner Dykes talked about this. So in Reggie, states have their own regulations, they have their own budgets, they have their own way of using auction proceeds. There is a model rule and a memorandum of understanding, but states do have, there are individual state programs that come together under one, under a common and interchangeable approach. And I think this idea that you can have individual state programs that work together is one that has gained a lot of currency and interest among states and stakeholders. Now, there's different models of how that could work. I think Reggie's model is perhaps one of the more, you know, a more formalized flavor of that model with an MOU and a model rule. Our center and others have done some work with states and other stakeholders exploring perhaps less formal models where, as Katie referenced, not everything would have to be as closely aligned. There could be different auction mechanisms or states could use proceeds or not auction and things where it necessarily have to be as closely aligned. But I think this idea that states can have individual programs that collaborate and work together to create the opportunity for power companies to use interstate market-based tools is one that has gained a lot of currency and really reflects the success of Reggie. And I'll just note that one place to see that is in comments from states in the West and in the Midwest that submitted joint comments all calling for more flexibility in how states can collaborate. Finally, I'll point out that Reggie has provided a very important example of the benefits of complementary policies. And as part of that, the particularly the important role that energy efficiency and investments in energy efficiency can play. Even if states choose, as I mentioned, there could be lots of flavors of emission budget type policies or rate-based policies. But one of the choices that states may want to make is what kind of complementary policies do they have in place or do they invest in energy efficiency? And I think one of the tremendous aspects of the Reggie story is how effective these energy efficiency investments have been made. I've heard many people talk today about the economic benefits, the fact that it's lowering electricity bills for consumers, that it's creating jobs in the region is a very powerful message to states that are thinking about compliance. So in short, it's my sense that states are still very much keeping their options open as everyone is preparing for the final rule. And we know that some states are considering Reggie as a potential compliance pathway. But even beyond that, Reggie has really served as an important model and helped inform these broader compliance conversations. And so it may be that there aren't a lot of states that have decided that joining Reggie is the right move for them. But nevertheless, I think the success of Reggie is going to be very influential in the thinking and compliance pathways that we do see states pursue, even if those programs look very different from Reggie itself. Thanks very much. Thank you, Gabe. Thank you, Jordan and Jonathan, for a great panel. We've got some time for Q&A. So we'll get right to it. I'll reiterate the ground rules that Sarah put out before, which is please wait for the mic. Please say who you are and where you're from. And please present your question in the form of a question. And to that end, Ashley, I'll kick it off with one question for the panel. We've heard a lot today, both from Commissioner Dykes and from all three of you, about the program review process within Reggie. And in fact, the 2012 program review, it's pretty clear, produced some pretty important changes to the program from its genesis in 2009 to where we are now in 2014. We've got this next review right on the horizon here. What can we expect from that program review? Jordan, you touched on this a little bit, but I'd love to get into the next level of detail with regard to both process. We've not actually heard how these things actually work. What should we expect from procedural perspective on the review? But also, is this going to be all about the clean power plan? Is it going to be speaking to other issues within the Reggie region that are beyond that, that are going to be important to be tackled? Is this going to be the big opportunity for the Reggie states to try and woo others into the program? What are going to be the dominating features of this program review, both internally and externally? Maybe start with Jordan, but Jonathan gave and welcome your thoughts on this as well. Let's see. I'll start with sort of describing my expectation of how the program review will go. Deputy Commissioner Dux, please feel free to correct me. There's generally a lot of modeling that will go into it in order to assess the various policy options in terms of how to adjust the cap, what impacts that would have on the economy, on ratepayers. After all of those options are on the table, there will be plenty of time for stakeholder engagement. During the last program review, there are a number of rounds of opportunities for stakeholders to comment on the various options in play. Again, in the last program review, we're really pleased with the way that whole process worked and the outcomes from that. In terms of wooing other states, my impression is that the Reggie state leads are pretty happy with the way the program is now. As Deputy Commissioner Dux explained, they'd be happy to work with other states, but I don't know that there's an aggressive process of trying to recruit new participants. Jonathan, do you want to add anything? I don't have too much specific to add. I think it's going to be a challenge to link the 2016 program review with the Clean Power Plan, which is, as I'm sure many of you know, is a lot of uncertainty with that process. It would seem very difficult to wait to see how that's going to fall out if you're going to do your program review. I don't know. I just envision that as being a very difficult thing to link those two things together, at least in 2016. I guess one issue that arguably hasn't been completely resolved in the Reggie program going forward might be, especially now with prices going up, could potentially be leakage issues. That may be less of a problem if more states are under the Clean Power Plan framework, but just something to look out for. When you say uncertainty, you're not just alluding to what we don't know what the final rule looks like, but beyond that. I'm talking about court involvement mainly, and the new proposal for news sources as well. And I think that covered it pretty well. I could easily keep going, but I want to make sure we hear from the audience. So anybody, do we have questions? We'll start over there. Hi. Thanks so much. Spencer Schacht with American University and Citizens Climate Labby. This question's for anyone on the panel. What's the future of marketing and outreach for Reggie? It seems like a very effective program for emissions reductions and economic growth, and moving forward towards the deal we're expecting in Paris this year. How do we sell that to other states that don't have a carbon price and possibly other countries and regions that don't have a carbon price? I guess I can take the first crack at that. I would just say that you're very right to point out that Reggie is a very important example and part of the story of how the U.S. is achieving very significant emission reductions. And it's not alone. It's not just the nine states that participate in Reggie. There's also many other states that have already carbon reduction policies, including California, with its cap-and-trade program, and many states that have renewable portfolio standards and energy efficiency standards that have been a key part of driving down emissions in this country already. But the clean power plan, I think, is really the mechanism that's going to put in place carbon reduction programs in the power sector throughout the country. And I think it would be great if some states, other states, decided that they wanted to join Reggie, but it would also be equally as great if states implemented other programs under the clean power plan that reduce those emissions. I think that the key thing is that states have programs that reduce emissions. There's lots of options for market-based programs under the clean power plan. So I would say that there's a great opportunity to be involved as stakeholders in the process for developing state plans once the final rule comes out. And that's a great way to support having progress in Paris in December. Question over there. Hi. Thanks for holding this. Lee Logan with Inside EPA Newsletter. Several folks have mentioned this idea of converting the rate-based targets to mass-based targets, and how that's the key piece of all this. Does EPA need to do anything more than what they've already done in their guidance, which kind of released what they termed as examples of targets, so they need to put in default targets per se? Any thoughts on that would be great. Who wants to take the first? Jordan, jump in on that. Yes. So I mean, from our perspective, either finalizing those proposed targets or outlining a very clear, transparent, and easy to understand system for translating those rate-based targets into mass-based targets. Either way, I think we suit our needs in order to compare mass-based trading programs and existing caps to those targets. Anybody else? It's in the conversations that we've, in the comments that we've seen from states, there's some states, I think, would really prefer for EPA to have a default approach, so say this is what your mass-based target would be, if this is your rate-based target. Other states have said that they would like some flexibility, as EPA indicated in its proposed rule, for states to use perhaps different methodologies of demonstrating that their mass-based target would be equivalent to the minimum rate-based target in the emission guidelines. So it sounds like there's diversity with regard to where we'd like EPA to land here, but I'm sure they'll have an answer to that in a few months. Next question. Hi, Tom Tyler with ECOS again. Thanks. So most, if you look at the map, most state elected officials are very opposed to this, just numerically. And for most of them, the way to save money for business is to oppose new regulation. And I think what I'm hearing here is a flip side for businesses in states lobbying their elected officials might be helpful for them to hear, here in your state, pick a mythical Midwestern state that doesn't really exist, here in your state, your compliance costs under this rule, if you're under a federal plan, are going to be X. Your compliance costs under a state plan would be Y. And your compliance costs under a clever multi-state plan of any sort might be Z. And I'm wondering, are you all or are others providing that kind of information? Because we look at the roadblocks in the states, often it's executive or legislative action that might even prevent them from doing clean power plan compliance. So just to add a little background to that, with the clean power plan, states have to put together their own state plans. And that's where this conversation has been so far today. But if a state does not submit or does not get an approval plan approved by EPA, EPA will come in with its own plan for that state. And so the question is, how does that dynamic play with the other options that states could consider? Any thoughts? Start maybe with Gabe. Come across. Tom, thanks for your question. I guess it's not clear to me that it's true that both state deflected officials are opposed to the clean power plan. Certainly, we've seen robust discussion about this. But when we looked at the public comments, I think we found a large number of states whose comments weren't outward constructive and not outright criticizing the proposal or saying there was legal or had to be withdrawn. I'll note that in the ongoing litigation, I think there's about a dozen plus or minus states on both sides of the issue. There's certainly a good number of states that are very supportive at the state agency level and many other elected officials at the local levels as well. So certainly very robust debate. In terms of the benefits of these approaches, I do think that it is going to be very interesting to hear how the private sector engages in this compliance conversation. I think that they already are. I suspect that, again, there are a number of private sector companies and regulated companies that have been supportive of the clean power plan. I think that there are many others who are actively considering what compliance pathway is going to work best for them. And I do think that at least, if not outright publicly, that people do recognize some of the themes that we've heard today that tie back to Reggie that allowing the use of multi-state compliance instruments can really achieve lower cost reductions. In many cases, mass-based approaches might be simpler. Certainly, one thing is that companies that have a heavy footprint in a single power grid may want to see the same or align types of approaches in the power grids. And Reggie is a good example of how having a single compliance program across multiple states can provide those benefits. So I do think that as people dig into the final rule, they are going to be weighing in, at least privately, with state regulators about what they see are the most cost-effective compliance pathways. Go ahead, Lauren. Please. Even in many of the states where elected officials have submitted comments that were critical of the clean power plan, those states are still engaged in discussions about how they should comply. And as those discussions progress, we expect them to gravitate towards the lowest cost means of reducing those emissions, which many people think is mass-based trading. PJM conducted a study about costs of the clean power plan in that study. They compared their transmission planning case, business's usual case, to a PJM-wide mass-based trading. And the findings of that study show that under the mass-based trading, wholesale electricity prices are actually lower than the business's usual case. And while that serves as something of a proxy for Reggie, that doesn't include the benefits of auction revenue, which can be reinvested in the energy sector. So we found that to be a hugely important study and hope others see it. Do you want anything, Jonathan? Dynamics of the Federal Plan? I think Jordan alluded to it. There's been a lot of studies that have shown the difference between at least modeling results between a Federal Plan, a State Plan, and a Regional Plan, the Regional Plan being the least costly, but still having a cost. And so I think that's the key that many folks are saying, well, there's still a cost. And there's going to be winners and losers, depending on how it's set up. So I think you're still going to have an opposition to this approach if there is some cost. And then folks are saying, well, what are other folks internationally doing? Why are we imposing a cost on ourselves? It's a debate we've had for years. So I don't think that's going to go away. It's just the next chapter. Next question, I guess, Michelle. Thanks. And thanks to the panel. These were all really, really excellent presentations. Michelle Melton, again, with the CSS Energy Program. I have a couple of questions again, and feel free to answer whatever you want. I was wondering if the cost containment reserve, if there's been any discussion about the cost containment reserve also taking allowances off the market, the way that, say, the market stability reserve in the EU is proposed to do, whether you think that that would be helpful. Also, it's pretty hard. I'm pretty impressed that actually we've had this conversation and California has only been mentioned once. I was actually hoping that the panel might be able to talk a little bit about the different models and what California has learned and what Reggie has learned from California, what California has learned from Reggie and sort of whether there's been any conversation between them and benefits of having different types of models, as well as benefits of having a model at all. And then the third thing prompted by some of the conversation we've been having right now is really about how the generators feel about Reggie. I think we've talked a lot about how the environmental stakeholders and how policymakers view Reggie, but I'd really be interested to hear how generators, both within the Reggie footprint and outside of the Reggie footprint, have reacted to Reggie, how they think about Reggie, whether they have preferences for the program review moving forward, as well as this is sort of a lark thrown it out there. As more DG comes on, more distributed solar, rooftop solar, as well as distributed other generation, other distributed energy resources like storage and demand response, how that impacts or will impact Reggie and programs like Reggie moving forward. That's a lot, so thanks. That's a lot. Maybe we'll start with the cost containment reserve question. John, and then you want to maybe comment a little, since you've looked at the current structure of it. Yeah. I mean, my only comment is that it does differ from other, I guess, cost containment reserve mechanisms. I've seen other proposals than that, that if it is triggered, the cap is affected, unlike others where they borrow allowances from future years. So I presume that the reason it's there is for price fluctuations. So to that regard, it seems to be working. But we'll see how it goes forward now that the prices are moving up. And I think in the next year, it's triggered at $6 a ton, if I recall. So we'll just see. It's right now, it's only been triggered once to my knowledge. So it hasn't been a big issue. But if it's triggered at every auction or more auctions, I think it's going to be more of an issue. Jordan, did you want to add to that? You kind of called it out earlier in your presentation, how that interfaces with the EPA goals. Yeah, I just, I would agree that it makes sense to draw those allowances from under the cap rather than minting new allowances in terms of demonstrating compliance with the Queen Power Plan and just in terms of maintaining the integrity of the cap. Gabe, Michelle didn't ask this question, but is Reggie, is California going to join Reggie? Or put it in a different way. What can California learn from Reggie? You're asking me to take sides here. What I will say is that, so California has an economy-wide cap and trade program, which is very different for purposes of the Queen Power Plan. Of course, Reggie covers only the power sector. And so there may be some difference in exactly which units are covered. I think it's a very minimal difference. And so there should be a fairly straightforward path for Reggie to, for compliance. And there's some questions that were brought up earlier today about exactly what that would look like. I won't say straightforward, nothing in the Queen Power Plan is straightforward, but a pretty simple pathway. And it would be what EPA calls a power sector, or an EGU-only approach. For California, because it includes the transportation sector and the industrial sector under its cap, California is going to probably need to do something different and not use just an EGU-only approach. You'll have to demonstrate to EPA that its combination of programs, including its economy-wide cap and trade program and its very aggressive renewable portfolio standard, are going to achieve reductions required by the Queen Power Plan from the affected power plants. And so I think that that is going to require some additional demonstrations. And I think that that makes it more complex than what Reggie could do if it chose. And so I think that that would, doesn't mean that linking is not possible, if the States chose to under the Queen Power Plan, but that it would be probably more involved than just if Reggie wanted to take the most simplest route to compliance under the Queen Power Plan. I will just mention one other thing that, you know, Deputy Commissioner Dykes mentioned before in response to a question about transportation. And I think it is very notable that California does include transportation under its cap and trade program. It is a very large portion of emissions. I think in the northeast of the Atlantic states, it's the largest sector of transportation emissions now. So I think going forward, it's a very interesting question about what can be done in terms of reducing emissions. And actually one of the things that we do is we work with Connecticut and other states on the Transportation and Climate Initiative, which is one of those multi-state processes, where we are asking kind of what might be some of the options to achieve emission reductions. And then we don't have any power sector representatives on the panel, but we can all pretend we are one for a little bit here. What is the power sector's reaction to Reggie Bend over five years of experience, so far, six years? Anybody want to speculate? I will just point to something that I know is out there, which is that I believe that there is amid a Reggie power sector collaborative, which includes NGOs and power companies that are regulated under Reggie, and that that collaborative, I believe, submitted comments to EPA on the proposed rule that were supportive of allowing Reggie to be a compliance pathway. Can anyone, I'm pretty sure that I'm characterizing that accurately, but if... Yes, I believe you are characterizing that accurately. And I would just add that it comes down to the carbon intensity of a power company's fleet and the relative economics. If your power companies are more carbon intensive, you're going to face a more intense cost. So that kind of dictates who lines up where. Go ahead, Sarah. Thanks very much, Sarah. So maybe to be slightly contrarian, but also to introduce balance, there's been a lot of conversation about why people would want to join Reggie and why Reggie would want to have other states join it. But there's a lot of reasons why Reggie and other states would not want to do this as well. So in the world of Reggie speed dating, maybe what we could talk about is why there is reluctance, other than what you brought up, Jonathan, which I think is a good point, which is there is a cost, right? I mean, there's a cost to mandatory compliance. And I think CPP has changed the recipe here and that the idea that everybody's going to have a mandatory cost now makes people think about options. But there are still details of who would be a good match and who wouldn't be a good match. And could we maybe talk through a couple of those things for those of you who have thought about that? Thank you. Go for Jonathan. I think it's a state by state thing. I mean, for people that have looked into the details of the building blocks, there are certainly some states that may want to go at this by themselves. I'm thinking of perhaps not. I'm just thinking out loud, but there are four states that because of the renewable energy building block, they kind of go backwards in the methodology. Those are a lot of the wind states, mainly in the Midwest. I think Maine might be also in that mix. So I don't know if that means they want to stay by themselves because it might be an easier time to meet the clean power plan goals and our goals and final goal. Or not. California, I've seen some analysis that was done by I think their energy agency that said that they're on track to meet their mission rate targets with their current portfolio of regulations, which is quite comprehensive. So I don't know if that means that they would want to join with Western states or not to take advantage of maybe potentially more low-hanging fruits they have in their state that they could sell if they were in a market. I don't know. I think it's just going to depend on the dynamics of each state and how it all pans out with the final rule targets and what states think it's an advantage to them to join up with others or not. Want to take an exit? Sure. I can maybe talk about some of what we've heard, our considerations for states. So one of them is certainly the power grader or the independent system operator or that in which the state participates, if it does participate, so the Western states, the Southeastern states don't have RTOs, ISOs. People mentioned PJM before in the Midwest. There's MISO, the Mid-Continent Independent System Operator, which goes down a little bit further than south, so it's Midwest. So one thing to think about is how does a collaborative approach, how does that align with the electricity grid? And that might be something that people think about. Another is who are the major affected entities in the state and what other service territories or generation do they have? So you may see power companies that have service territories in multiple states that are interested in having the same kind of approach or aligned approach or probably ideally for them, the exact same administrative approach so that compliance is easiest. And I'm sure that they will be pushing or advocating for that type of multi-state compliance and states will probably be taking that into account. And then I think what Jordan talked about in terms of cost is very important. So not just cost, but also things like the general knowing how this is going to play out. And so there may already be relationships established between states, between energy environmental regulators in different states. And I think that that's a good starting point for people to talk with other states and figure out maybe what could work for all of them taking into account both economics but also political and administrative factors. And it may be the case that there are opportunities for this to change over time. So you may see that there are multi-state programs that start out smaller and perhaps could expand over time. Jordan, do you want to add anything? I can add just a couple of the quick things that we've heard discussed as potential obstacles to participating in Reggie closer geographically. So in Pennsylvania, one thing we've heard is that Pennsylvania is responsible for more CO2 emissions from the power sector than the entire Reggie region combined. But we don't really see that as a huge obstacle. It really just expands the opportunities for lower cost emissions reductions. Is there like a weighted vote within the Reggie states on this? Is that why you wouldn't want a Pennsylvania right? What else have you heard? I'm curious. The interplay between states that have been deregulated versus currently regulated states. And again, we don't see that as a huge obstacle. There are ways to pass through that cost from power plants to ratepayers and ways for load serving entities to recoup the value of those allowances and reinvest it in the electric sector. Maybe just on that very last point, though, it is kind of interesting that I think nearly every single Reggie state currently is deregulated. And so when thinking to Sarah's question about why wouldn't a state want to join, I think of two kind of intangibles that or I guess they're somewhat tangible but not necessarily technical the matter here. One is, well, their experience doesn't apply to me because I'm an integrated state and we just do things differently here, right? And that's similar to what you just said. The other is we're happy to do what we want to do. We're not going to copy whatever Massachusetts in New York are doing or California, right? There's just that like optics issue. And so, I mean, it's real. I did work back in 2009 in the Midwest in which Reggie was just getting started in Illinois and Wisconsin. We're happy to talk about cap and trade programs at the time, a very different world than where we are now. And they didn't want to talk about Reggie because that's what New England is doing. And so I wonder if you guys could comment on kind of, and Gabe, you've alluded to this multiple times already, but is there kind of ways to join Reggie without formally joining Reggie in the sense that you're kind of doing your own mass-based trading program but then you have cross recognition of credits or something like that? Are there these other pathways that kind of get you to the right point from a market and compliance cost perspective but aren't quite the same thing as what we've talked about overtly? John, in my view, the thing that's most important to focus on is the carbon reductions and the reductions in other air pollutants that would be achieved under the Clean Power Plan. And so I think that the States called for flexibility, the EPA provided lots of flexibility. We don't know exactly how that's going to play out. We do know that there are lots of options out there, including lots of different options that include market-based tools, whether that's under an emissions budget or under a rate-based option. And so it seems to me that there's lots of things that States could do that involve multi-state collaboration that could lead to emission reductions. Some of those could look a lot like Reggie. Some of them could look very different than Reggie. And I think that if they're achieving significant carbon pollution reductions, they're all good. Anyone else? Right on time here. So without any further ado, I want to again thank the panel, thank Commissioner Dykes, thanks Sarah and Michelle for bringing us all together today, and thank you all for coming for this conversation.