For Immediate Release Contact: Jason Brown RGGI, Inc

. 212

- 417

- 3179 Friday

, March 7, 2014 jason.brown@rggi.org



## CO 2 

## Allowances Sold at $ 4.00 at 2 3 rd 

## RGGI Auction

First Auction with New RGGI 2014 Cap

NEW YORK

— The nine Northeastern and Mid

- Atlantic s tates participating in the Regional Greenhouse Gas Initiative (RGGI), the nation’s first market

- based cap

- and

- trade program to reduce greenhouse gas pollution , today a nnounced the results of their 2 3 rd auction of carbon

dioxide (CO 2 ) allowances.

23,491,350 CO 2 allowances were sold at the a uction at a clearing price of $4.00

. Allowances

sold include the 18

, 491,350 allowances offered fo r sale by the nine states and all of the 5,000

, 000 allocation year 2014 cost containment reserve (CCR) allowances. Bids for the CO 2 allowances ranged from $2.00 to $11.85 per allowance.

The CCR is a fixed additional supply of allowances that are only available for sale if CO 2 allowance prices exceed certain price levels ($4 in 2014, $6 in 2015, $8 in 2016, and $10 in 2017, rising by 2.5 percent, to account for inflation, each year thereafter)

. There are no more CCR allowances available for sale in 2014.

According to the independent market monitor’s report, electricity generators and their corporate
affiliates have won 78 percent of CO 2 allowances sold in RGGI auctions since 2008. Additional

details are available in the Market Monitor Repo rt for Auction 23

, appended and available at http://www.rggi.org/docs/Auctions/23/Auction_23_Market_Monitor_Report.pdf

.

The auction generated $ 93.96 million for reinvestment by the RGGI s tates i n a variety of
consumer benefit initiatives

, including energy efficiency

, renewable energy, direct bill

assistance

, and greenhouse gas abatement programs

. C umulative proceeds from all RGGI CO 2 allowance auctions currently total over $ 1.6 billion dollars.

“Today we received the results of the first auction held since the nine states lowered the cap on allowances and made other program changes. The results are what we expected

— there was a n increase in the allowance price, all the allowances we offered were sold, and the CCR operated as intended. These early results demonstrate R GGI is on track to reduce carbon emissions by

80

- 90 million tons through 2020 while helping states fund clean energy investments

, ” said Kenneth Kimmell, Commissioner of the Massachusetts Department of Environmental Protection and Chair of the RGGI, Inc. Bo ard of Directors.

“Our first auction under the new cap demonstrates how market

- based programs cost

- effectively reduce carbon pollution while driving investments in a clean energy economy,” said Collin O'Mara, Secretary of the Delaware Department of Natura l Resources and Environmental
Control and Vice

- Chair of the RGGI, Inc. Board of Directors. “Our recently released Regional
Investment of RGGI CO 2 Allowance Proceeds, 2012 , estimates that RGGI proceed investments will return more than $2 billion in lifetime energy bill savings to more than 3 million participating households and more than 12,000 businesses in our region.” Regional Greenhouse Gas Initiative, Inc. 90 Church Street, 4th Floor New York, NY 10007To receive announcements relating to future auctions and other RGGI news, please j oin the RGGI, Inc. mailing list at http://www.rggi.org/news/mailing_list

.

Auction 23 Results At

- A

- Glance

Auction Date March 5 , 201 4

Allowances Offered for Sale 18,491,350

2014 CCR Allowances Available for Sale 5,000,000

Allowances Sold 23,491,350

Ratio of Bids to Initial Supply 3.1

Ratio of Bids to Total Supply with CCR 2.5

Clearing Price $ 4

. 00

Reserve Price $ 2.00

Proceeds from Auction 23 $ 93,965

, 400

Total Cumulative Proceeds (All Auctions) $ 1,661,724,034.96

Number of Bidders in Auction 23 45

Percent of Allowances Purchased by Compliance Entities & their Corporate Affiliates in Auction 23 45 %

Percent of Allowances Purchased by Compliance Entities & their Corporate Affiliates in Auction s 1

- 23 78 %

Mo re data is also available at: http://www.rggi.org/market/co2_auctions/results

.

About the Regional Greenhouse Gas Initiative

The Northeast and Mid

- Atlantic states participating in the second RGGI control period (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont) have implemented the first mandatory market

- based regulatory p rogram in the U.S. to reduce greenhouse gas emissions. The 2014 RGGI ca p is 91 million short tons. The RGGI cap then declines 2.5 percent each year from 2015

- 2020.

RGGI is composed of individual CO 2 budget trading programs in each state, based on each sta te’s independent legal authority. A CO 2 allowance represents a limited authorization to emit one short ton of
CO 2, as issued by a respective state. A regulated power plant must hold CO 2 allowances equal to its emissions to demonstrate compliance for each three

- year control period. RGGI’s second control period began on January 1, 2012 and extends through December 31, 2014. For more information visit

www.r ggi.org

About Regional Greenhouse Gas Initiative, Inc.

Regional Greenhouse Gas Initiative, Inc. (RGGI, Inc.) was created to provide technical and administrative services to the states participating in the Regional Greenhouse Gas Initiative. RGGI, Inc. is a 501(c)(3) nonprofit organization. For more information, visit: www.rggi.org/rggi

.

The RGGI auctions are administered by RGGI, Inc. and run on an on

- line platform provided by World Energy Solutions, Inc.

###

## M ARKET 

## M ONITOR 

## R EPORT

FOR 

## A UCTION 

## 23

Prepared for:

RGGI

, Inc., on behalf of the RGGI Participating States

Prepared By :

March 7, 20 14Page 2

This report was prepared by Potomac Economics (the contractor) in the course of perform ing work contracted for and sponsored by RGGI

, Inc. on behalf of states p articipating in RGGI ( Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode

Island , and Vermont ). The opinions expressed in this report do not necessa rily reflect those of
RGGI, Inc

. or any of the states participating in RGGI , and reference to any specific product, service, process, or method does not constitute an implied or expressed recommendation or endorsement of it. Further, RGGI, Inc

. , the s tates participating in RGGI , and the contractor make no warranties or representations, expressed or implied, as to the fitness for particular purpose or merchantability of any product, apparatus, or service, or the usefulness, completeness, or accuracy of any p rocesses, methods, or other information contained, described, disclosed, or referred to in this report. RGGI

, Inc

. , the states p articipating in RGGI , and the contractor make no representation that the use of any product, apparatus, process, method, or othe r information will not infringe privately owned rights and will assume no liability for any loss, injury, or damage resulting from, or occurring in connection with, the use of information contained, described, disclosed, or referred to in this report.

The Regional Greenhouse Gas Initiative (RGGI) is the first mandatory market

- based regulatory program in the U.S. to reduce greenhouse gas emissions . RGGI is a cooperative effort of

Northeast and Mid

- Atlantic states to reduce emissions of carbon dioxide (CO 2 ) from the power

sector.

RGGI, Inc. is a non

- profit corporation created to provide technical and administrative services to

the states participating in the Regional Greenhouse Gas Initiative

.Market Monitor Report for Auction 23

Page 3 

## M ARKET 

## M ONITOR 

## R EPORT FOR 

## A UCTION 

## 23

As the Market Monitor for the RGGI CO 2 allowance market, Potomac Economics monitors the conduct of market participants in the auctions and in the secondary market to identify indications of market manipulation or collusion. We also review the administration of the auctions by

Wor ld Energy Solutions. This report summarizes our findings regarding RGGI Auction 23, which was held on March 5, 2014.

We observed the auction as it occurred and have completed our review and analysis of its results.

Based on our review of bids in the au ction , we f ind n o material evidence of collusion or manipulation by bidders

.

The Cost Containment Reserve (“CCR”) was used for the first time in Auction 23. The demand

for CO 2 allowances from bids submitted above the CCR Trigger Price of $4.00 exceeded the Initial Offering of 18,491,350 allowances and was sufficient to purchase all 5 million 2014 CCR allowances. After the CCR was exhausted, the auction cleared at a price of $4.00 per ton. There

are no other CCR allowances available for sale in 2014.

Fo rty

- five bidders participated in the offering of CO 2 allowances for the current control period. Bids were submitted to purchase 3.1 times the Initial Offering of CO 2 allowances and 2.5 times the total available supply (including allowances in the CCR). C ompliance entities and their affiliates purchased 45 percent of the CO 2 allowances. There was no indication of barriers to participation in the auction.

Based on our review of the administration of the market, we found that :

The a uction was administered in a fair and transparent manner in accordance with the

noticed a uction procedures and limitations

. The auction results were consistent with the market rules and the bids received.

S ensitive information was treated appropriately by the auction administrato r.

There were n o indications of issues with the auction platform such as hardware or software problems, communications issues, or security breaches.

In summary, the results of our monitoring of RGGI Auction 23 raise no material concerns regarding the auct ion process, barriers to participation in the auction, or the competitiveness of the auction results. The appendix provides additional information about the market for RGGI

CO 2 allowances and outcomes of the auction.Market Monitor Report for Auction 23

Page 4 

## A PPENDIX

A. D ISPERSION OF 

### P ROJECTED 

### D EMAND

The wide dispersion of projected demand for RGGI allowances across compliance entities facilitates the competitive performance of the auction.

The following figure shows the relative shares of projected demand for RGGI allowances by compliance entit y in the current control period

. The largest compliance entity represents only 16 percent of the total projected demand for allowances. Approximately half of the projected demand is comp o sed of entities that each account for less than 5 percent of the to tal demand. Participation by a large number of entities facilitates the competitive performance of the auction.

Figure 1: Projected Demand for RGGI Allowances

Shares by Compliance EntityMarket Monitor Report for Auction 23

Page 5 

### B. D ISPERSION OF 

### B IDS IN 

### A UCTION 

### 23

In the offering of allowances for the current control period, bids were submitted by 35 compliance entities and ten other entities. In our review of the bids and the qualification process, we found no material evidence of anti

- competitive conduct or inappropriate barriers to participa tion.

The following figure s ummarize s the quantity of allowances for which bids were submitted by each bidder. Nine compliance entities and five other entities submitted bids for a large quantity of allowances (i.e., at least 2 million tons). Overall, co mpliance entities accounted for 65 percent of the quantity of allowances for which bids were submitted. The quantity of allowances for which bids were submitted was 3.1 times the Initial Offering of 18,491,350 allowances and 2.5

times the total available supply (including the 5 million allowances in the CCR). In Auction 22, the quantity of allowances for which bids were submitted was 2.7 times the available supply.

The bid quantities were widely distributed among the 45 bidders. The concentration of bid s, using the Herfindahl

- Hirschman Index (“HHI ”), was relatively low at 487 in Auction 23, down

from 557 in Auction 22. The HHI is a standard m easure of concentration calculated by squar ing

each entity’s share and then summing the squares across all entiti es (hence, the index ranges from 0 to 10,000 )

.

Figure 2 : Quantity of Bids Submitted by Entity

B y Type of Entity and Quantity BidMarket Monitor Report for Auction 23

Page 6 

### C. S UMMARY OF 

### P URCHASES OF 

### A LLOWANCES IN 

### A UCTION 

### 23

In the offering of allowances for the current control period, a wards wer e distributed across 28

bidders with five bidder

s purchasing two million tons or more and 15 bidders purchasing

30 0,000 tons or more. Compliance entities and their a ffiliates purchased 45 percent of the

allowances in the auction.

The share of allowances purchased and several other quantities are reported for two types of

entities:

Compliance Entities : This includes all compliance entities and their affiliates. In this

report, affiliated firms are firms that: (i) have a parent

- subsidiary relationship w ith a compliance entity , (ii) are subsidiaries of a parent company that has a large interest in a compliance entity , (iii) have substantial control over the operation of a budget source and/or responsibility for acquiring RGGI allowances to satisfy its com pliance obligations.

Other Entities : This includes all other entities without compliance obligations.

The following statistics summarize the purchases and holdings of allowances by compliance entities and their affiliates under the RGGI program:

In Auctio n 23, compliance entities and their affiliates purchased 45 percent of the

allowances sold

. In the first 23 RGGI auctions, compliance entities and their affiliates purchased 78 percent of the allowances sold.

Compliance entities and their affiliates will hold 74 percent of the allowances in circulation following the settlement of allowances sold in Auction 23

.

The following table shows the quantity of allowances purchased by each bidder. The identity of each bidder is masked, and the bidders are ranked according to the amount of allowances awarded, from largest to smallest.Market Monitor Report for Auction 23

Page 7 Table 1 : Quantity of Allowances Awarded by BidderMarket Monitor Report for Auction 23

Page 8 

### D. S UMMARY OF 

### B ID 

### P RICES IN 

### A UCTION 

### 23

B ids were submitted across a wide range of prices in the auction and the clearing price of $4 .00 was relatively consistent with average bid prices submitted.

The following table reports several statistics regarding the bid prices for bids submitted in Auction 23. The median and mean bid prices are weighted by the quantity of each bid.Market Monitor Report for Auction 23

Page 9 

### E. N AM ES OF 

### P OTENTIAL 

### B IDDERS IN 

### A UCTION 

### 23

In accordance with Sections 2.8 and 3 of the Auction Notice for CO 2 Allowance Auction 23 on March 5, 2014, the Participating States are releasing the names of Potential Bidders in Auction 23. The states defined poten tial bidders as: “Each Applicant that has been qualified and submitted a complete Intent to Bid .” The list of 52 Potential Bidders is as follows: