cw: Why does National Grid make a portion of your salary contingent on meeting a company carbon-reduction target?
king: National Grid is committed to taking a leadership role in addressing climate change and ensuring emissions management is integrated into all operational decision-making. We believe in it and want to lead by example.
cw: What’s the company’s carbon-reduction goal this year and how much of your salary is riding on meeting that goal?
king: As a company, we have a goal to reduce our carbon emissions by approximately 8.7 million metric tons of CO2 this fiscal year. Our company-wide goal is to reduce 80 percent of our carbon footprint by 2050, and we are currently at roughly a 40 percent reduction achieved. The percentage of my compensation at risk if we fail to reach our annual carbon reduction targets is 5 percent.
cw: Does the carbon-reduction mentality at work spill over into your private life?
king: Yes. Everything from switching out incandescent light bulbs in favor of compact fluorescents to energy demand reduction to having my family’s entire carbon footprint measured, including home, cars, air travel, etc. Once calculated, I then purchase carbon offsets to ensure my family’s carbon footprint is offset completely. This provides funds to support renewable energy, energy efficiency and reforestation.
cw: Do you favor a national tax on carbon?
king: To help us effectively reduce our carbon emissions, as well as help drive investment in new and cleaner technologies, we do need a cost on carbon. Some believe that a carbon tax may be the best way to introduce carbon cost. We prefer a legislative solution that incorporates a market-based system to reduce carbon emissions that is fair and equitable for our customers.
cw: The power you want to buy from Cape Wind is a lot more expensive than the current cost of electricity. Why do you think the deal is a good one?
king: We cannot keep relying only on a fossil or a carbon-fueled economy. The Gulf oil spill is a reminder of that. We negotiated what we believe was the best possible price for this project. It is not the lowest cost renewable resource, but it also is not the highest either. Large-scale projects can’t get financed without long-term contracts. The Cape Wind project has many attributes that are extremely attractive from the perspective of the environmental and other non-price objectives: (1) it places Massachusetts in a leadership role, (2) it will be the first project of this scale, and (3) it will place Massachusetts with a formidable source of lower-carbon energy, creating significant carbon credits that will create value under a carbon tax or a cap and trade mechanism.
cw: Why does National Grid deserve an annual fee worth 4 percent of the Cape Wind contract just for signing the deal?
king: Utilities will have to hold the contracts for a long term, creating contract risk as energy markets fluctuate, and the accounting rules require that we place the contract on our balance sheet as a liability, increasing our risk profile. The Legislature recognized this and specified this remuneration in the law to address this risk and make it more attractive for a utility to put its balance sheet at risk to ensure large resources of renewables are developed.
cw: Massachusetts is implementing most of its energy initiatives through investor-owned utilities and paying for those initiatives with charges on customer bills. Do you think your customers are aware that a growing chunk of their bills is going to pay for these state policies?
king: I am not confident that all customers understand all aspects of the bill. Utility bills are complicated, and we need to do more to ensure customers understand bills; we do need to simplify them. National Grid’s costs are but a fraction of the bill, with the larger part comprising commodity cost and other energy policy-related costs. As an example, on our electric bills, RECs (environmental certificates) and RGGI (carbon trading) costs are not listed in detail, and are environmental costs in energy or power supply costs. In contrast, we do show the energy efficiency charge—and as you know these costs are changing due to implementation of new, consolidated, comprehensive statewide programs—so that customers can see how they are paying for energy efficiency. Each utility’s bill structure is derived through regulatory direction, so to improve the bill structure and understanding we need to work on this together with all stakeholders.
cw: Do you think states like Massachusetts should be leading the fight against climate change, or should they wait for the federal government to set national policy?
king: Absolutely, we should lead. It’s inspiring to see Massachusetts in a lead role. We don’t have federal energy and climate legislation, so it’s right that individual states move forward in this area. We really can’t afford to wait.
