Climate Challenge Participation Accord

DOE's Energy Partnerships for a Strong Economy

This Participation Accord describes the commitments that Public Service Electric and Gas Company ("PSE&G") and the U.S. Department of Energy ("DOE") have made to participate in the Climate Challenge Program in pursuit of the President's goals for reducing greenhouse gas emissions. The Climate Challenge Program is a joint, voluntary effort of DOE and the electric utility industry to reduce, avoid or sequester greenhouse gas emissions. The framework of the Climate Challenge Program was established in the Climate Challenge Program Memorandum of Understanding and exhibits thereto dated April 20, 1994 ("the Climate Challenge Program MOU").

PSE&G plans upon further assuring its commitments to reduce the emissions of Greenhouse Gases by entering into an additional agreement with the Environmental Defense Fund ("EDF Agreement"). The EDF Agreement would serve, among other things, as a backstop to this Climate Challenge Participation Accord.

I. Utility Commitments

A.
Consistent with Paragraph II.B.l of the Climate Challenge Program MOU, in the year 2000, PSE&G will reduce emissions of C02 by 2.5 million tons below its Baseline of 23.5 million tons. Consistent with the DOE Voluntary Reporting of Greenhouse Gases under Section 1605(b) of the Energy Policy Act of 1992, General Guidelines, the Baseline is a four (4) year annual average of C02 emissions for the years 1987 through 1990. Subject to Paragraph I.F of this Participation Accord, the Baseline and year 2000 commitment are based on C02 emissions associated with PSE&G's Native Load. Such Native Load shall be defined as the generation and purchase of power necessary to serve the electrical demand within PSE&G's service territory.
B.
In order to achieve its commitments, PSE&G plans to perform or has already received the benefits from a number of activities. Many of these activities will result in significant C02 reductions. The PSE&G activities which result in the most significant reductions of C02 emissions are as follows:

1.

PSE&G is repowering a number of older electric generating units with cleaner, more efficient generating units. The repowered units incorporate state of the art pollution controls. In some instances, systems to utilize and recover waste heat will be constructed to produce additional power thereby both increasing efficiency and reducing emissions. The new generating units result in a projected annual reduction of 3.5 million tons of C0₂.
2.
Beginning in the year 1992 and projected to continue through 1999, PSE&G will be fuel switching from coal to natural gas at certain of its generating units during the summer. Fuel switching could result in a projected annual C02 reduction of approximately 280,000 tons.
3.
PSE&G is developing and promoting electric Demand Side Management ("DSM") activities to achieve 1,052 MW peak demand savings by the year 2000. By the year 2000, DSM is projected to result in an average annual reduction of 840,000 tons of C02.

C.
PSE&G has undertaken or will be undertaking a number of other activities which, in combination, result in more than 71,000 tons per year of C02 reduction. These activities include the following: 1.
Striving to achieve a 60% alternative fuel (natural gas and electric) corporate fleet composition by the year 2000;
2.
Reducing the miles travelled on the job by 15% before the year 2000;
3.
Modifying 15% of fleet vehicles with technology to eliminate the operation of the engine while vehicles are stationary at a work site;
4.
Continuing PSE&G's participation in the USEPA "Green Lights Program" to conserve energy;
5.
Continuing the "Seal Up and Save" program, conserving energy through installing weatherizing materials in low-income households and for senior citizens through "Senior Save";

6.
Continuing to provide standardized payments for metered energy savings;
7.
Converting 5 New Jersey Transit buses to natural gas;
8.
Converting 200 New Jersey State vehicles to natural gas;
9.
The Lawn Mower Exchange Program;
10.
Replacing existing gas regulators with "Zero Emission" regulators;
11.
Continuing the beneficial utilization of fly ash;
12.
Continuing and, where applicable, expanding the PSE&G recycling program;
13.
Installing several public natural gas vehicle refueling facilities in conjunction with gasoline retailers; and
14.
Providing incentives for the conversion and/or purchase of natural gas vehicles.
D.
PSE&G is committed to reducing emissions and improving the environment. The Company is testing and installing innovative technologies and participating in pilot programs which result in significant reduction of the emissions of greenhouse gases other than CO₂. PSE&G is performing the following additional activities to reduce emissions:

1.

Testing, demonstrating and installing innovative technologies such as selective non-catalytic reduction, low NOx burners and water injection;
2.
Demonstrating the world's first in-duct selective catalytic reduction system on a wet bottom coal boiler; and
3.
Continuing to participate in emissions reduction trades and fostering the use of reductions as a method of compliance.
E.
In executing this Participation Accord, PSE&G commits to reducing CO₂ emissions. CO₂ is one of many greenhouse gases; other such gases include, but are not limited to, methane, nitrous oxide, halogenated substances and tropospheric ozone. Nitrogen oxides and volatile organic compounds are the precursors to the formation of tropospheric ozone. The reduction in emissions of any of the greenhouse gases will help attain the goal of the Climate Challenge Program. PSE&G and DOE contemplate amending this Participation Accord to reflect reductions of greenhouse gases other than CO₂, as well as the precursors to greenhouse gases.
F.
PSE&G's commitment is based upon computerized CO₂ emissions projections utilizing the best data currently available. A number of assumptions utilized to project emissions are critical to the validity of the projections. Such critical assumptions include the following: (l) nuclear generation continues to contribute approximately 40% to 45% of PSE&G's native load; (2) PSE&G's presently existing and planned, cleaner and more efficient generating units are operational as scheduled; (3) the costs of natural gas and coal remain within projected limits; (4)load growth is equal to, or less than, 0.6% annually as projected; (5) retail wheeling and other market forces do not significantly affect PSE&G's CO₂ emissions; and (6) application of new technologies do not significantly increase PSE&G's CO₂ emissions. In the event that one or more of the above-referenced assumptions prove to be incorrect, PSE&G and DOE agree to revise PSE&G's CO₂ reduction commitment as may be appropriate consistent with such newly available facts.
G.
PSE&G will report annually on activities and achievements under the Climate Challenge Program. PSE&G also commits to having CO₂ emission reduction calculations verified by an independent third party. Results achieved during each year shall be reported in a clear and understandable manner that is consistent with the guidelines adopted pursuant to Subsection 1605(b) of the Energy Policy Act and the Climate Challenge accounting protocols in Exhibit B of the Climate Challenge Program MOU. The first such report will include a description of the activities and achievements of PSE&G prior to its becoming a participant in the Program, expressed on an annual basis to the extent possible.
H.
PSE&G has identified an ambitious schedule for the reduction of CO₂ and developed annual reduction goals as milestones of its achievement of the Climate Challenge. PSE&G's milestones are as follows:

(1) 1995 reduce CO₂ emissions by 0.5 million tons below Baseline;

(2) 1996 reduce CO₂ emissions by 1.0 million tons below Baseline;

(3) 1997 reduce CO₂ emissions by 1.5 million tons below Baseline;

(4) 1998 reduce CO₂ emissions by 2.0 million tons below Baseline;

(5) 1999 reduce CO₂ emissions by 2.5 million tons below Baseline; and

(6) 2000 reduce CO₂ emissions by 2.5 million tons below Baseline.

Commencing in 1994 and annually thereafter, PSE&G will bank credits generated by reducing emissions below the milestone levels set forth above. If in any year the milestone level is not met, banked credits from prior years will be utilized to account for excess emissions.

I.
On or before December 31, 1997, PSE&G and DOE will meet to evaluate PSE&G's progress towards achieving its Climate Challenge Program goals and milestones. If warranted, the parties will agree upon possible mid-course corrections to PSE&G's goals and milestones. Such mid-course corrections may be either upwards or downwards.
J.
PSE&G and DOE believe that an appropriate CO₂ trading system is a method for economically reducing the emissions of greenhouse gases. PSE&G plans to participate in such a CO₂ trading system and, as applicable, utilize the trades to help attain its CO₂ reduction commitments.
K.
The Climate Challenge Program representative for PSE&G will be Robert P. Douglas, whose address is Public Service Electric and Gas Company, 80 Park Plaza, T17E, P. 0. Box 570, Newark, New Jersey 07101. PSE&G agrees to notify DOE prior to or in any event, no later than 30 days after any change in the contact.

A.
DOE's commitments to PSE&G are those set out in Section III of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.
B.
DOE will consider PSE&G requests to intervene in regulatory proceedings of federal, state and local commissions and boards on issues pertinent to the Climate Challenge Program. Before DOE intervenes in regulatory and other proceedings pertaining to PSE&G for purposes of addressing Climate Challenge Program issues, it will provide notice to PSE&G.
C.
DOE will provide an annual report to PSE&G describing the actions that it has taken to fulfill its commitments under Section III and Exhibit C of the Climate Challenge Program MOU and the results of those actions.
D.
The Climate Challenge Program representative for DOE, who will serve as liaison to PSE&G, will be Allan Hoffman, Office of Energy Efficiency and Renewable Energy, U. S. Department of Energy, 1000 Independence Avenue, S.W., Washington, DC 20585; (202) 586-1786. DOE agrees to notify PSE&G prior to or, in any event, no later than 30 days after any change in liaison responsibilities or personnel.

A.
Use of DOE-developed materials by PSE&G will be governed by the provisions of Section IV of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.
B.
In addition to the foregoing provisions, DOE and PSE&G agree to act in accordance with the principles set out in Section I of the Climate Challenge Program MOU and the general provisions set out in Subsections V.A-V.D, V.F and V.G of the Climate Challenge Program MOU, which are hereby incorporated by reference.
C.
Either party may withdraw from this Participation Accord or any of its activities under the Climate Challenge Program without penalty and without being subject to remedies at law or equity.

(Original signed by)
__________________________________________
Hazel R. O'Leary
Secretary of Energy
U.S. Department of Energy
February 3, 1995

Please send comments to:
Lawrence.Mansueti@hq.doe.gov