RGGI CONSUMER TRUSTEE
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The Public Service Board (PSB or Board) has conducted two workshops to discuss the
implementation of a process to allocate Vermont’s budget of Regional Greenhouse Gas Iniative
(RGGI) carbon credits and appointment of consumer trustees under 30 V.S.A. §255. After the
first workshop, it was suggested that the Department of Public Service (PSD or Department)
convene a meeting of a sub-group of interested parties to develop a “strawman” implementation
plan for the activities contemplated by 30 V.S.A. §255. This idea was agreed upon at the second
PSB workshop on April 2, 2008 and a meeting of the sub-group was held on May 2, 2008.
In an April 18, 2008 memo, PSB staff identified several RGGI implementation issues
which they felt the sub-group should discuss. These issues included the following items:
1. Description of necessary trustee capabilities, and/or identification of potential trustee
candidates.
2. Trustee responsibilities, including:
o Participation on behalf of Vermont in the RGGI auction.
o Minimum reporting requirements.
o Disbursement of funds associated with implementation costs and the fuel
efficiency fund created under 30 V.S.A. Section 203a.
3. Degree of Board oversight necessary.
4. Other auditing requirements.
5. Provisions beyond standard contract provisions that may be necessary.
6. Automatic periodic review of initial structure.
Much of the discussion at the May 2nd sub-group meeting focused on possibilities for the
structure of the consumer trustee which would be responsible for representing Vermont in RGGI
auctions. The Department initiated the discussion by proposing that Vermont could rely on
RGGI, Inc as the consumer trustee with clear direction from the Public Service Board or a
separate Board appointee or appointees. Concerns with this approach were both legal and
practical. The legal concerns related to whether RGGI, Inc could function as a trustee given its
fiscal responsibilities. Practical concerns were raised over whether RGGI, Inc could indeed
serve as the trustee if action is needed on discretionary matters where the interests of
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participating states may not align. After some discussion, two structural models for the trustee
enjoyed some level of support from members of the sub-group.
Model I – Consumer Trustee with Oversight Board
The first option considers the establishment of a consumer trustee that includes an
oversight board. The oversight board would include representatives from interested parties
(including the PSD, ANR and PSB). The oversight board would provide direction for the trustee
entity consistent with the objectives of 30 V.S.A. § 255(c)(2). The trustee would be allocated
100 percent of the credits and would, per the direction of the oversight board, determine whether
to hold, bank or sell tradable credits. The trustee would receive funds from the auctioneer and,
after paying RGGI dues, its allowed costs, and allowed state agency administrative costs, deposit
the remainder into the fuel efficiency fund. If subsequently authorized by statute, it might also
have the ability to make program fund disbursements, consistent with direction from the
oversight board, or make proposals for altering disbursements again subject to that direction.
The trustee would be responsible for ensuring that the state’s allowances are auctioned properly
and that proceeds are distributed pursuant to overall direction provided by statute, the Board’s
allocation plan, and the oversight board.
Model II – Fiscal Agent with Oversight Entity, Guided by PSB
A second option consists of designating an entity that would provide oversight and guide the
RGGI process in a role similar to the Board’s current EEU contract administrator. Under this
model, the entity could serve as an extension of the Board or the Department. In this case, final
discretion on all issues of material concern would reside with the PSB. A fiscal agent
(potentially RGGI, Inc, or the oversight entity, or a combination thereof depending on the
circumstances) would be chosen to handle ministerial work consisting of implementing Board
directives associated with the actual auctioning of Vermont’s allowances and disbursing auction
proceeds as directed by statute. Under this model, the fiscal agent would be given clear direction
by the Board, through the oversight entity, prior to each auction period concerning the number of
allowances to auction. However, as residual discretion becomes necessary, the Board could vest
that responsibility with the oversight entity. Under this model, the fiscal agent would have little
or no discretion regarding the handling of allowances and money and would need to be
supported by the oversight entity to ensure efficient operation of the carbon auctions and proper
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handling of the proceeds. It is possible that the oversight entity might be given the ability to
bank money resulting from the sale of Vermont’s allowances for future disbursements to the fuel
efficiency fund, rather than disbursing funds immediately upon receipt.
Additional Discussion
While the sub-group focused largely on possible structures for the consumer trustee, it also
addressed some of the other PSB implementation issues. With regard to the necessary
capabilities of the trustee, the sub-group suggests that in the short-term the trustee is less likely to
guide strategic bidding and/or market analysis. The sub-group noted that it will be of greater
importance to have an entity which can effectively monitor, analyze and report on the workings
of initial RGGI auctions so informed decisions can be made regarding future auctions. Over
time, the role of the entity could change as the market matures and auction proceeds grow. A
fiscal agent would have the power to disburse proceeds from RGGI auctions as directed by
Vermont statute. Currently this means that any fees associated with membership in RGGI, Inc
and any costs incurred by the administrative agencies or the trustee will be paid first and the net
proceeds will then be transferred to the fuel efficiency fund. The Board is expected to retain
final decision-making power over any material actions taken by the RGGI trustee. Initially, this
will consist of approving how Vermont intends to auction its carbon allowances.
Designation of Consumer Trustee and role for RGGI, Inc.
The significance of the designation of a consumer trustee may be secondary to gaining clarity
on the roles and responsibilities of the trustee and clarity on where discretion will reside.
Consistent with statute, the formal designation of an entity to be the consumer trustee will
probably depend on who holds the funds from each auction.
Rhode Island has chosen to contract with the RGGI regional organization, RGGI, Inc, for
trustee services. In the Rhode Island contract, RGGI, Inc has been given the authority to receive
and auction 100% of the state’s carbon allowances and then to distribute the proceeds according
to Rhode Island law. It is possible that a form of the Rhode Island model might work for
Vermont as well. If willing, RGGI, Inc could serve as the fiscal agent for Vermont and have
authority similar to that given to it by Rhode Island. This possibility is similar to Model II
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described above. In this case, an oversight entity could be selected to provide an oversight role
for the fiscal agent. Again, all material discretion would reside with the Board.
Responses to Board List of Implementation Issues to Discuss
As noted above, in their April 18 memo, Board staff identified a number of implementation
issues that should be clarified by the sub-group in its discussion. Those issues and sub-group
responses are listed below.
1. Description of necessary trustee capabilities, and/or identification of potential trustee
candidates.
The trustee, fiscal agent or fund manager should be bonded, must hold financial and
accounting credentials and should be capable of (a) developing, implementing and
administering a carbon credit marketing strategy, including the set-aside of allowances
for voluntary renewable electricity (REC) sales in the state, (b) monitoring and analyzing
the market and auction results, (c) disbursing funds in accordance with statute and (d)
providing periodic reports on operating results compared to plan and the status of cash
balances. The trustee, fiscal agent or fund manager would be expected to provide
periodic financial statements and independently audited annual financial reports to
interested parties and to the PSB. The trustee, fiscal agent or fund manager and oversight
entity should be familiar with the energy and carbon markets and understand the roles
and responsibilities of Vermont and other regional market participants and parties with a
shared interest in regional greenhouse gas issues. The trustee, fiscal agent, fund manager
and oversight entity must be able to demonstrate a high level of credibility and integrity
and must have managerial skills sufficient to establish and manage formal institutional
controls.
2. Trustee, fiscal agent, fund manager and oversight entity responsibilities include:
o Participation on behalf of Vermont in the RGGI auction.

Developing and implementing a marketing strategy for participation in the
carbon auction.
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
Developing a risk management and mitigation plan to optimize the
effectiveness of participating in RGGI.
o Monitor the tracking system and assist the tracking system operator in
determining the number of allowances required by CO2 emitters in Vermont.
o Provide performance reports and other minimum reporting requirements.
o Administer the disbursement of funds in compliance with 30 V.S.A. §203a and
§255(d) (associated with RGGI implementation and administrative costs and for
the funding of the fuel efficiency fund).
3. Degree of Board oversight necessary.
Under Model I, the Board would provide initial guidance and review its guidance at least
once annually in conjunction with the development of an operating plan and marketing
strategy by the trustee, fiscal agent, fund manager or oversight entity. Under Model II,
the Board would have full discretion and provide clear direction in response to any
material issues that arise.
4. Other auditing requirements.
An annual audit of the fund would require an independent financial auditor.
5. Provisions beyond standard contract provisions that may be necessary.
To be determined.
6. Automatic periodic review of initial structure.
The RGGI structure should be reviewed at least annually. During the first twelve
months, review should occur with greater frequency.
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