RGGI’S Second Auction: Prices Rise to $3.38

RGGI, Inc., the operators of the Regional Greenhouse Gas Initiative (RGGI) announced today that the second auction has proceeded smoothly and as planned.  All 31,505,898 allowances offered for sale at Auction 2 on December 17 were purchased at a clearing price of $3.38 per allowance.  This price is above the first RGGI auction’s clearing price of $3.07, and in line with recent prices for RGGI futures on the Chicago Climate Futures Exchange, which traded Monday at the same price. Auction 2 was the first to feature allowances from Delaware, New Hampshire, New Jersey, and New York, a factor which might have caused the increase in price.

RGGI’s market monitor Potomac Economics noted that the majority of winning bidders were compliance entities or their affiliates, as in the first auction.  So far, it seems like the concerns about market manipulation and entities taking advantage of RGGI’s 100% auction structure remain unfounded.

RGGI will release more data January 6th, including the names of the “potential bidders” who qualified and filed an intent to bid in Auction 2 (whether or not they actually bid).

Meanwhile, Governor Patrick’s office has announced that Massachusetts will spend its $14.8 million share of Auction 2’s $106.5 million total proceeds as set forth in the Green Communities Act, or more specifically:

  • $2.4 million for 2008 utility-administered energy efficiency programs
  • $5 million for start-up funds for the Green Communities program
  • $2 million for heating system replacements for low-income households
  • $400,000 for administrative and vendor costs for the RGGI auction
  • $5 million for a new program, Energy Efficiency Skills and Innovation Institute providing job training for energy auditors and seed grants for innovative delivery methods of efficiency

RGGI compliance obligations for fuel-fired generators over 25 MW begin January 1, 2009.  The next auction will be March 18, 2009.

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