I. Introduction
Earthjustice, on behalf of Montana environmental groups and other entities, recently filed a petition (“Petition”), urging the Montana Public Service Commission (“MPSC” or “Commission”) to initiate a rulemaking to require the MPSC to use social cost of carbon (“SCC”) calculations in its ratemaking and planning proceedings, along with a grab-bag of other climate related actions. The petitioners purport that a Montana District Court opinion, Held v. State of Montana, requires the Commission do so as part of an obligation to carry out the Montana constitution’s guarantee of a right to a “clean and healthful environment.”
The Petition does not want the Commission to use just any SCC value, but urges the Commission to, “at a minimum,” use the higher of the figure that either the Environmental Protection Agency (“EPA”) or the Interagency Working Group on the Social Cost of Greenhouse Gases (“IWG”) has devised and never accept a value below EPA’s latest (and largest) number. With this magic number in hand, the petitioners implore the Commission to compare the “short-term costs or direct costs of renewable energy” to the “short-term costs or direct costs of alternatives relying more heavily on fossil fuels.” With SCC providing the “costs,” the Commission would then determine what utility investments should be deemed “reasonable, just, in the public interest, prudent, or otherwise approvable.”
How precisely is the SCC—which estimates the present value of greenhouse gas emissions after accounting for potential global damages resulting from the independent actions of billions of people over the next 276 years—to be used in calculating “short-term” or “direct costs”? Would the calculation apply to the full lifecycle emissions of the generating source or only emissions in Montana? Would the MPSC consider other environmental externalities associated with specific generating sources? How should the MPSC weigh impacts from localized environmental conditions within its control against impacts from global phenomena that bedevil breakout sessions at Davos? The Petition offers no clues.
Even if those difficulties were to be resolved, there would still be several problems with this proposal. Most fundamentally, the Petition completely misreads Held. Held involved a challenge to provisions of the Montana Environmental Protection Act (“MEPA”) and explicitly finds that “[t]he PSC is exempted from MEPA as a matter of law.” There’s nothing for the Commission to follow or obey. It explicitly requires nothing of the Commission.
And even if Held did apply, the Petition’s request would be redundant. The MPSC, in the application of its organic statute, regulations, and individual proceedings already considers environmental effects including, as appropriate, climate effects—when undertaking its duties. The forum to argue that the MPSC may be falling short in these duties is in the specific proceedings in which petitioners may believe this is occurring—not the Petition’s request for a vague and poorly written rulemaking.
Furthermore, the specific SCC metrics that the Petition urges the MPSC to adopt are wrong from top to bottom and in no way represent accurate estimates of “short term” or “direct costs” that can be properly attributed to carbon emissions. EPA’s latest SCC estimate of $190 per ton of carbon dioxide emitted in 2020 is far and away the highest ever issued by either the IWG or EPA and, as explained below, is more a testament to the manipulability of the metric and the political motivations of its authors than of any real costs associated with greenhouse gas emissions. Its use in MPSC proceedings would raise the cost of energy on Montanans and offer no prospect of corresponding benefits to Montana rate payers. Increasing the cost of energy in this way would be highly regressive in its economic impact and would, therefore, hurt the disadvantaged populations that the petitioners urge the MPSC to especially consider in its ratemaking. Contrary to the petitioner’s assertions, the use of SCC figures would lead to rates that are not just and reasonable—in violation of MPSC’s statutory obligations.
As explained in detail below, the MPSC should reject the Petition’s call to initiate a rulemaking and should instead continue applying Montana law in the specific proceedings before it.
Comments on the Petition for Adoption of New Rule I and Declarations Pertaining to the Commission’s Consideration of the Adverse Climate Impacts of Greenhouse Gas Emissions
I. Introduction
Earthjustice, on behalf of Montana environmental groups and other entities, recently filed a petition (“Petition”), urging the Montana Public Service Commission (“MPSC” or “Commission”) to initiate a rulemaking to require the MPSC to use social cost of carbon (“SCC”) calculations in its ratemaking and planning proceedings, along with a grab-bag of other climate related actions. The petitioners purport that a Montana District Court opinion, Held v. State of Montana, requires the Commission do so as part of an obligation to carry out the Montana constitution’s guarantee of a right to a “clean and healthful environment.”
The Petition does not want the Commission to use just any SCC value, but urges the Commission to, “at a minimum,” use the higher of the figure that either the Environmental Protection Agency (“EPA”) or the Interagency Working Group on the Social Cost of Greenhouse Gases (“IWG”) has devised and never accept a value below EPA’s latest (and largest) number. With this magic number in hand, the petitioners implore the Commission to compare the “short-term costs or direct costs of renewable energy” to the “short-term costs or direct costs of alternatives relying more heavily on fossil fuels.” With SCC providing the “costs,” the Commission would then determine what utility investments should be deemed “reasonable, just, in the public interest, prudent, or otherwise approvable.”
How precisely is the SCC—which estimates the present value of greenhouse gas emissions after accounting for potential global damages resulting from the independent actions of billions of people over the next 276 years—to be used in calculating “short-term” or “direct costs”? Would the calculation apply to the full lifecycle emissions of the generating source or only emissions in Montana? Would the MPSC consider other environmental externalities associated with specific generating sources? How should the MPSC weigh impacts from localized environmental conditions within its control against impacts from global phenomena that bedevil breakout sessions at Davos? The Petition offers no clues.
Even if those difficulties were to be resolved, there would still be several problems with this proposal. Most fundamentally, the Petition completely misreads Held. Held involved a challenge to provisions of the Montana Environmental Protection Act (“MEPA”) and explicitly finds that “[t]he PSC is exempted from MEPA as a matter of law.” There’s nothing for the Commission to follow or obey. It explicitly requires nothing of the Commission.
And even if Held did apply, the Petition’s request would be redundant. The MPSC, in the application of its organic statute, regulations, and individual proceedings already considers environmental effects including, as appropriate, climate effects—when undertaking its duties. The forum to argue that the MPSC may be falling short in these duties is in the specific proceedings in which petitioners may believe this is occurring—not the Petition’s request for a vague and poorly written rulemaking.
Furthermore, the specific SCC metrics that the Petition urges the MPSC to adopt are wrong from top to bottom and in no way represent accurate estimates of “short term” or “direct costs” that can be properly attributed to carbon emissions. EPA’s latest SCC estimate of $190 per ton of carbon dioxide emitted in 2020 is far and away the highest ever issued by either the IWG or EPA and, as explained below, is more a testament to the manipulability of the metric and the political motivations of its authors than of any real costs associated with greenhouse gas emissions. Its use in MPSC proceedings would raise the cost of energy on Montanans and offer no prospect of corresponding benefits to Montana rate payers. Increasing the cost of energy in this way would be highly regressive in its economic impact and would, therefore, hurt the disadvantaged populations that the petitioners urge the MPSC to especially consider in its ratemaking. Contrary to the petitioner’s assertions, the use of SCC figures would lead to rates that are not just and reasonable—in violation of MPSC’s statutory obligations.
As explained in detail below, the MPSC should reject the Petition’s call to initiate a rulemaking and should instead continue applying Montana law in the specific proceedings before it.