Mitt Romney 

Governor 

Kerry Healey 

Lieutenant Governer 

Beth Lindstrom 

Director, Office of Consumer Affairs 

and Bussiness Regulation 

David L. O'Connor 

Commissioner 

VIA FACSIMILE 

June 30, 2004 

COMMONWEALTH OF MASSACHUSETTS 

OFFICE OF CONSUMER AFFAIRS 

AND BUSINESS REGULATION 

DIVISION O F ENERG Y RESOURCE S 

100 CAMBRIDGE STREET, SUITE 1020 

BOSTON, MA 02114 

Internet: http://www.mass.gov/doer 

E-mail: energy@state.ma.us 

TELEPHONE 

(617)727-4732 

FACSIMILE 

(617)727-0030 

(617)727-0093 

Robert T. Donaldson 

Massachusetts Department of Environmental Protection 

Bureau of Waste Prevention 

One Winter Street, 8 

Boston, MA 02108 

th floor 

Re: Proposed Amendments to 310 CMR 7.00 and 310 CMR 70.00 

Dear Mr. Donaldson: 

The Division of Energy Resources (DOER) appreciates the opportunity to provide 

comments to the Department of Environmental Protection (DEP) in this rulemaking. As 

you know, DOER is an agency responsible for state energy policy in several areas that 

could be affected by these regulations. 

First, DOER has unique and exclusive jurisdiction over the implementation and 

regulation of the Renewables Portfolio Standard (RPS) (See G.L. C.25A, section 1 IF and 

225 CMR 14.00 et seq.). The development of new renewable energy projects is critical 

to the implementation of that program. Because certain RPS-eligible technologies1 will 

be required to comply with these new emissions regulations, it is critical that these 

standards do not unintentionally hinder their development. Such a barrier can have two 

consequences: (1) a removal of the positive impact on air emissions as compared to 

emissions from centralized power plants, and (2) increased costs to consumers.2 

1

 Technologies eligible for certification to meet the RPS are listed in G.L. c. 25A, section 1 IF, paragraph 

(b). 

2

 Increasing the cost for renewable technologies to comply with air regulations could have a direct and 

significant impact on the Commonwealth's efforts to encourage renewable energy at reasonable cost to 
2 

Second, DOER is responsible for tracking the reliability of the electric system in 

the Commonwealth (See G.L. C.25A, section 1 IE). DOER believes the DEP should 

consider that some distributed generation (DG) will reliably run during peak times, 

reducing need for other investments to enable the system to meet peak demands, thereby 

decreasing total system costs during those periods as well as helping reduce the incidence 

of outages. A recently released report highlights the importance of distributed generation 

to reliability, stating: "Massachusetts should explore opportunities to create, through state 

and regional policy formulation and implementation, as well as system oversight, a more 

stable, more reliable electric system through investments in conservation, energy 

efficiency and distributed generation. Where institutional or regulatory barriers inhibit 

such investments, Massachusetts should seek to eliminate these barriers while protecting 

the interests of the ratepayers."3 

Third, these technologies can help advance the state's goal of climate protection. 

In the spring of this year, the Commonwealth released The Massachusetts Climate 

Protection Plan. That document places a high priority on the identification and removal 

of barriers for clean and efficient energy production. In numerous places it states the 

importance of implementing policies that will not hinder the development of beneficial 

on-site technologies used to generate electricity, naming specifically renewables, 

cogeneration, and fuel cells. Use of electricity from cogeneration is often more efficient 

than central power plants in terms of the usable heat recovered from electricity 

production through distributed generation with lower emissions. 

Finally, DOER believes economic development in the Commonwealth should be 

accorded importance in the consideration of this rulemaking. Installation of distributed 

generation can provide significant cost savings to both individual customers who install 

such measures and all electric customers through the alleviation of congestion pricing in 

the wholesale electricity market. The Commonwealth may miss a window of opportunity 

in the development of these technologies if we fail to adopt policies now which 

encourage their installation, particularly in highly congested areas such as Boston. 

Customers can exert greater control over these plants during peak periods to offset supply 

costs when electricity prices are highest.4 In addition to these cost savings and their 

indirect impacts in terms of greater competitiveness and productivity to local firms, a 

properly configured rule can increase job-creating investments by DG manufacturers and 

installers located in the Northeast.5 

consumers. Indeed, certain technologies may not be developed due to these costs. To the extent that 

renewable technologies are too expensive and therefore are not developed, the supply of renewable energy 

certificates (RECs) will be reduced. Retail customers will then bear the cost of higher REC prices, since 

retail suppliers must still demonstrate compliance with the RPS regulations. 

3

 The Governor's Task Force on Electric Reliability and Outage Preparedness: Status of the Electric Grid in 

Massachusetts - Status of the Electric Grid in Massachusetts March 2004, page 45. 

4

 Many studies have documented these benefits. Recently, in September 2003, the Congressional Budget 

Office produced a study, "Prospects for Distributed Electricity Generation," documenting these cost 

advantages. See ftp://ftp.cbo.gov/45xx/doc4552/09-16-ReportWithCover.pdf. 

5

 "Index of the Massachusetts Economy," 2003, Massachusetts Technology Partnership Corporation. 

http://www.mtpc.org/2003Index/index_2003.pdf 

T:\Tm-MktDev\DistGen\DEP_DG\DEP_Comments_063004.doc 

i 
3 

For the above reasons, DOER supports distributed generation, particularly when 

that distributed generation is provided by renewable or highly efficient technologies. The 

proposed rules should be revised prior to adoption so as to further these energy, 

environmental and economic objectives. Therefore DOER requests the DEP make 

several revisions to the proposed rules before they become final. 

Combined Heat and Power 

In the Background Information Document for these proposed regulations, DEP 

requested comments identifying incentives for Combined Heat and Power (CHP) 

technologies. DEP specifically referenced the RAP Model Rule, explained the agency's 

rationale for not including the scheme that rule sets out for CHP, and asked for comments 

providing alternative appropriate incentives. DEP has stated it does not favor the RAP 

Model Rule "credit" approach to CHP because, by being able to subtract the emissions of 

a displaced thermal system, the emitting installation then "nets" out of Best Available 

Control Technology (BACT). Netting out of BACT is a longstanding state and federal 

prohibition. However, where all used energy output is taken into account, BACT is still 

being applied to the facility; the emissions are still the same for the useful energy created. 

In this respect CHP technology is unique. Counting all useful output against the 

regulated emissions does not set the precedent of future units netting out of BACT.

 6 

Furthermore, the emissions standards in the proposed rule may not always be BACT. 

The RAP Model Rule materials point out that "the model rule also differs from BACT in 

that it set standards for technology that have not yet been achieved; BACT, in contrast, 

requires compliance with performance standards that have already been demonstrated and 

is determined on a case by case basis."7. 

If DEP is still not sufficiently convinced that the RAP Model Rule approach to 

calculating emissions from CHP will work for Massachusetts, there are appropriate 

alternative methodologies that account for the full energy output for CHP. We believe 

these methodologies would both address DEP's concern, and level the playing field by 

acknowledging the true energy output of these facilities. The DEP's proposed rules treat 

only primary electrical production as "output" from the installation, regardless of whether 

the facility is designed exclusively for electrical production, or is a CHP installation. 

Therefore, the rule as proposed is not a true "output-based" rule, and disadvantages more 

efficient technologies.8 At least two regulatory working groups,

 9 a federal agency, 10and 

6

 As opposed to Lowest Achievable Emission Rate (LAER), from which a facility can "net out" by shutting 

down or curtailing operation of another unit on the site. 

7

 Model Regulations for the Output of Specified Air Emissions from Smaller-Scaled Electric Generation 

Resources, at page 8. 

8

 A true output-based rule would also account for the line losses that occur between generation at the 

central plant and use at the customer facility. Distributed generation avoids both the transmission and 

distribution system losses that occur in the transport of energy from central plants. Hence, limiting the 

emissions at the measured output of a DG unit is equivalent to limiting the emissions at a central plant 

times a loss factor. For example, assuming a line loss factor of 5%, a central plant would have to generate 

105 MWhs to deliver 100 MWhs to the customer; a DG unit at the customer site, by contrast, would only 

have to generate 100 MWhs. If emissions levels are equally applied to central plants and DG units, they 

unnecessarily favor central plants and penalize DG. 

T:\Tm-MktDev\DistGen\DEP_DG\DEP_Comments_063004.doc 
4 

several other states11 have issued guidance or are in the process of adopting rules that 

recognize the used process heat as well as electricity production as qualified output from 

the facility, and thereby provide a more accurate basis for an output-based emissions rate. 

DOER urges the DEP to treat all energy producing technologies equitably, and follow 

this same approach for CHP.12 For this reason, DOER also supports the comments 

submitted on these proposed rules by the Northeast Combined Heat and Power Initiative. 

Renewable Technologies 

We encourage DEP to adopt a performance-based standard for fuel requirements. 

The proposed amendments appear to mandate the use of Ultra Low Sulfur Diesel (ULSD) 

owing to its desirable emissions profile, but there are a variety of other fuels that can be 

fired in engines and combustion turbines, including biodiesel and bio-oil, that also have 

favorable emissions profiles. In comparison with conventional diesel, pure biodiesel, for 

example, virtually eliminates sulfur oxides and sulfates from exhaust emissions. 

Biodiesel also shows dramatic reductions in CO (50% lower than conventional diesel), 

unburned hydrocarbons (-40%), and particulate matter (-70%). Bio-diesel requires little 

or no engine modification for use. 

Bio-fuels, like ULSD, have favorable emissions profiles compared to 

conventional diesel, but bio-fuels have several advantages over ULSD that we feel make 

them preferred fuels. Bio-fuels are domestically produced renewable energy sources that 

mitigate climate change effects, increase fuel diversity and enhance energy security. As 

Massachusetts moves forward with the implementation of its Climate Protection Plan, 

bio-fuels can play an important role in reducing CO2 emissions while meeting energy 

needs and environmental goals. 

Regarding other renewable technologies, DOER supports DEP's treatment of 

landfill gas, digester gas, and other biogases which permit the proponent of a project that 

would use such fuels to seek a case by case review as an alternative to certifying to 

For this reason, DOER recommends that the DEP account for line losses in its formula in the following 

fashion: pollutant amount / MWh * (1 + line loss factor) + heat-to-electricity conversion. This formulation 

will properly account for both the efficiencies provided by heat recovery, where possible, and the 

efficiencies provided by avoiding line losses. DOER recommends that a statewide line-loss factor be 

developed to account for both transmission and distribution system losses. 

9

 The Regulatory Assistance Project (RAP) "Model Regulations for the Output of Specified Air Emissions 

from Smaller-Scale Electric Generation Resources," October 31, 2002 Review Draft, and Northeast States 

for Coordinated Air Use Management ("NESCAUM Emission Performance Standard (EPS) Model Rule"). 

1 0

 United States Environmental Protection Agency, "Output-Based Regulations: A Handbook for Air 

Regulators" Draft Final Report, April 22, 2004. 

1 1

 California, Texas, and Connecticut. DOER generally supports a consistent approach unless there is a 

reason for a difference in Massachusetts. 

1 2

 Inclusion of useful steam output as part of the calculation in an output-based emissions regulation is not a 

novelty to DEP. In the NOx Allowance Trading Program at 310 CMR 7.28, NOx allowances are allocated 

on the basis of a facility's output, including useful steam generation (310 CMR 7.28 (6) Allowance 

Allocation). 

1 3

 See EPA report "A Comprehensive Analysis of Biodiesel Impacts on Exhaust Emissions," EPA420-P02-001, October 2002. Available at URL: http://www.epa.gov/otaq/models/analysis/biodsl/p02001.pdf 

T:\Tm-MktDev\DistGen\DEP_DG\DEP_Comments_063004.doc 
5 

compliance with the emissions standards in the proposed rules. DOER encourages the 

DEP to consider the fact that these fuels are renewable when processing applications 

under 310 CMR 7.02, and that a number of social and environmental benefits will accrue 

from increased reliance on renewable fuels and technologies. 

DOER understands that DEP has received a comment that biomass installations 

should not have to meet a C02 emissions standard, based on the position that biomass 

facilities are "C02 neutral." While DOER generally agrees with this position on biomass 

C02 neutrality, the division will be facilitating more detailed policy discussion on the 

issue with DEP and other agencies in the coming year. Therefore, DOER recommends 

that DEP defer the decision regarding C02 emissions from biomass fuels in the final rule 

until such policy discussions are completed and methodologies adopted. 

Thank you again for the opportunity to comment on this important rulemaking. 

DOER stands ready to work with the DEP on any questions or issues the agency may 

have concerning this rulemaking, or the technologies it seeks to regulate. 

Cc: Robert Golledge, Commissioner 

James C. Colman, Assistant Commissioner 

T:\Tm-MktDev\DistGen\DEP_DG\DEP_Comments 063004.doc