June 5, 2002

Jean E. Vernet, Esq.

Office of Policy and International Affairs

Office of Electricity and Natural Gas Analysis

PI-23, [Attention: Voluntary Reporting Comments]{.underline}

U.S. Department of Energy

Forrestal Building

Room 7H-034

1000 Independence Avenue, S.W.

Washington, D.C. 20585

Re: [Voluntary Reporting of Greenhouse Gas Emissions, Reductions, and
Carbon]{.underline} [Sequestration]{.underline}, 67 *Fed. Reg.* 30370
(May 6, 2002)

Dear Ms. Vernet:

Cinergy Corp. respectfully submits the following comments in response to
the above referenced notice of inquiry (NOI) and request for comment
from the Department of Energy (DOE). Cinergy welcomes the opportunity to
submit comments on the issues raised in the NOI. The NOI raises a number
of important issues that will be difficult to address in the short
timeframe allotted. We hope that there will be additional opportunities
for discussion and input as DOE develops proposed revisions to the
existing Energy Policy Act (EPAct), section 1605(b) voluntary reporting
guidelines.

Our comments concerning the revision of EPAct section 1605(b) voluntary
reporting guidelines are as follows:

# [Purpose of the Registry]{.underline}

-   The revised registry should be designed to record entity-wide and
    facility-wide greenhouse gas (GHG) emissions, to record GHG
    reductions and offsets, and to provide a registry for transferable
    GHG emission credits. The enhanced registry needs to accommodate the
    reporting of GHG emissions, reductions, and offsets in a reliable
    and transparent manner.

-   The current guidelines issued under section 1605(b) of EPAct should
    continue to form the nucleus for reporting and DOE will issue
    revisions of those guidelines for a revised GHG emissions,
    reductions, and offsets registry.

-   The revised registry should be developed to enable robust reporting
    giving reporting entities flexibility on the choice of baselines and
    methodologies for estimating the emissions reductions, and allowing
    entities to self-certify or validate their report. In all cases, the
    reporting requirement would be focused on full disclosure providing
    detailed documentation to support the information reported in the
    registry. This will require that the minimum reporting requirements
    be expanded beyond the current reporting standards.

-   The registry should continue to be housed in the Energy Information
    Administration (EIA), and should be the only national registry under
    Federal management.

-   Reporting of GHG emissions, reductions, and offsets by private and
    public entities should continue to be voluntary.

-   The registry should provide a single database showing all activities
    being done to reduce GHG emissions. The registry should serve as the
    official government listing of recognized emissions and reductions
    for all voluntary reduction programs run by federal agencies.

-   The registry should be the only registry that records the data used
    for determining credit/recognition for transferable credit, baseline
    protection and credit for past actions.

-   The registry should preserve the value of transferable credits by
    reducing the risks and uncertainties in the estimated reductions and
    by increasing the likelihood that reductions are not penalized under
    a future climate policy (safe harbor).

-   The registry should provide uniform procedures that would aid those
    seeking credits by eliminating the need to be subjected to multiple
    verification processes each time GHG credits are sought.

-   The registry should enhance the attractiveness of U.S. GHG emission
    reduction in transnational and international trading markets.

## Entity-Wide Reporting

-   Entities should only have to report GHG emissions that are produced
    within the boundaries of the U.S. Entities should have the option of
    reporting entity-wide emissions or facility-wide emissions.

-   If an entity chooses to report entity-wide for transferable credits
    and /or baseline protection, the entity should be required to report
    emissions for all business units regardless of the industrial
    activity. However, this should not preclude an entity from reporting
    on a project basis for transferable credits and/or baseline
    protection for the project as long as there is not leakage or double
    counting.

-   The guidelines must be developed to take into account joint
    ownership, acquisitions, and divestitures so that different years'
    data may be directly compared.

-   Entity-wide reporting should consider what can be easily measured
    and recorded as to not unnecessarily burden the reporting entity and
    discourage voluntary participation. For example, if a certain
    activity represents less than 5 percent of the entities emissions,
    it should be exempt from having to report those emissions as long as
    the entity is reporting more than 90 percent of all its GHG
    emissions (de minimis levels). Allowing the exclusion of de minimis
    sources will diminish the reporting burden on entities where the
    reporting of data exceeds the potential value of the information
    that would be captured.

-   Reporting entities should have the flexibility to report one or all
    of the GHGs (CO~2~, CH~4~, N~2~O, HFCs, PFCs, and SF~6~) as long as
    they are reporting in excess of 90 percent of their GHG emissions.

## Direct and Indirect GHG Emissions Reporting

-   The reporting of direct and indirect GHG emissions should assign
    appropriate responsibility for the GHG emissions, create incentives
    for GHG emission reduction actions, and avoid duplication of
    reporting.

-   Utilities should be required to report their direct GHG emissions
    associated with the generation and delivery of electricity to its
    customers. However, the reporting entity should also have the option
    of reporting their direct emissions by categories (e.g. at the
    discretion of the reporting entity, the entity could report both its
    direct GHG emissions and to break those GHG emissions into emissions
    related to native load and emissions associated with the sale of
    wholesale electricity, and the emissions associated with the
    purchase of wholesale electricity used to serve both its retail and
    wholesale customers). This information might be subject to
    confidentiality disclosure.

## Transferable Credits 

-   The concept of transferable credits needs to be part of an enhanced
    1605(b) voluntary reporting program that would be managed by DOE. A
    transferable credit is a claim to a GHG emissions reduction or
    offset that can be reassigned from the originating entity to another
    entity. An entity would have to show clear ownership of the
    reduction or offset. The reduction or offset would be the result of
    an action to reduce, avoid or sequester GHG emissions or other wise
    reduce GHG emissions intensity from its facilities in the U.S., or
    international projects, or other means demonstrated by the entity.

-   Transferable credits would be the result of a specific project-based
    action, below a baseline level that could other wise be permissible
    under current federal, state or local law or regulations.

-   The entity seeking credit for the GHG reduction must demonstrate its
    claim to the reduction through ownership or control of the source of
    the GHG emission or the sequestration, the project-based action, or
    some other measure (e.g. a claim resulting from a contractual or
    financing agreement).

-   The qualification of a transferable credit would be determined by
    DOE through the establishment of specific minimum criteria for the
    determination of a transferable credit. The sale of these credits
    and the determination of their transferability would be left to the
    market place in a voluntary program. The intent of such a program
    would be to provide baseline protection and safe harbor for
    voluntary actions to reduce GHG emissions in the event of a possible
    future change in climate policy.

-   The reporting of GHG emissions reductions seeking to qualify for
    transferable credits could form a subset of the registry, based upon
    the specific reporting guidelines established for transferable
    credits.

-   DOE should not try to make the registry of transferable credits
    consistent with other international GHG reduction registration
    programs. There are a number of international programs in place or
    being developed which are not necessarily compatible or consistent
    with each other. Applying specific elements of these other programs
    to U.S. transferable credits would be burdensome, duplicative of
    existing processes and data sources, and expensive. The result of
    such actions would be a disincentive to participation in a U.S.
    voluntary reporting program. However, credits received as a result
    of review or issuance by an international program should be
    considered for registry within the enhanced U.S. voluntary reporting
    program.

-   The reporting guidelines can improve the robustness and transparency
    of the reporting for all types of GHG emissions reduction actions,
    including those seeking designation as transferable credits. The
    reporting of transferable GHG emission reductions should not be
    subjected to independent third party review. Such a review will be
    an unnecessarily expense, and a disincentive for entities to
    register transferable GHG emission reductions.

-   The process for validation and verification of transferable credits
    for GHG emissions reductions should reflect the U.S. experience with
    self-certification and voluntary compliance actions within a
    well-established governmental framework, and a robust base of
    environmental information. The electricity sector already operates
    in a very transparent manner. The use of third-party validation and
    verification procedures for the reporting of GHG transferable
    credits in the U.S. imposes additional burdens while providing
    little or no added-value.

-   Guidelines need to be developed that provide detailed acceptable
    assumptions and methodologies to be used in estimating and reporting
    GHG emissions reductions. The guidelines need to address the
    establishment of a baseline, additionality, permanence, and leakage.

    -   Baseline -- (see discussion below.)

    -   Additionality -- can be addressed through the reporting of
        detailed documentation of the baseline.

    -   Permanence -- can be addressed through periodic monitoring and
        reporting. Not all actions will have the same degree of
        permanence. However, all types of GHG emissions reductions are
        important, and those of a less permanent nature should not be
        discounted.

    -   Leakage -- can be addressed through robust case-by-case
        documentation and justification.

## Baseline Protection

-   A baseline is the starting point for measuring GHG emissions
    reductions that would qualify as transferable credit. The guidelines
    for reporting transferable credits should allow flexibility for the
    establishment of one or more baselines, static or dynamic, provided
    that a prescribed methodology is followed for the selected baseline.

-   It is not known if or when there may be a mandatory program to limit
    GHG emissions in the U.S. To stimulate voluntary GHG emission
    reductions, the enhanced reporting program should provide baseline
    protection for companies that have taken voluntary actions to reduce
    their GHG emissions. These entities should be assured that they
    would receive credit for their voluntary GHG reductions in a later
    mandatory program.

-   From various reports and reviews it appears that the Executive
    Branch does not have the authority to assure that current efforts to
    reduce GHG emissions will receive credit under a future law. If a
    baseline protection program is to have binding effect, it must be
    authorized by law to provide greater assurances to companies that
    baseline protection will extend beyond the present Administration.

## Transfer of Previous 1605(b) Reported Reductions

-   The NOI does not address how previously reported GHG emission
    reductions and offsets will be treated in the enhanced reporting
    program. Previously reported GHG emission reductions and offsets
    reported under the current 1605(b) program should be eligible for
    inclusion in the enhanced reporting program if the previously
    reported emission reductions and offset meet the enhanced 1605(b)
    reporting program criteria for GHG emission reductions and/or
    transferable GHG emission credits. It would be up to the reporting
    entity to provide the necessary data to verify that the GHG emission
    reductions and offsets reported under the current 1605(b) program
    meet the enhanced 1605(b) reporting criteria.

## Confidentiality of Reported Data

-   The NOI requests comment on whether the revised guidelines should
    include a provision requiring reporters to waive the protection
    provided under EPAct if they wish to obtain a certificate of
    emission reductions for potential use in connection with
    transferable credits or baseline protection. Such a requirement
    would be counter productive to the purpose of the voluntary
    reporting program and would discourage participation. The ability of
    an entity to be able to protect information from public discloser is
    to protect a trade secret or commercial and/or financial
    information. If DOE's rationale is based on a need for certain
    transaction information, DOE could appropriately provide for the
    private collection of that information and its dissemination in
    aggregated or gross form, stripped of commercial, financial, or
    proprietary information that could be associated with particular
    private reporters.

Cinergy Corp. appreciates the opportunity to submit these comments
concerning the revision of the voluntary 1605(b) reporting mechanism for
GHG emissions, emission reductions and offsets. Cinergy looks forward to
future opportunities for comment and discussion with DOE and EIA on
these matters.

Sincerely yours,

### Eric C. Kuhn

Eric C. Kuhn

Sr. Environmental Policy Analyst

Environmental and Public Affairs

Cinergy Corp.

ECK:mot