Friday, June 19, 2009

Map Shows True Cost of National Energy Tax on Electricity Prices - $636 Million in Increases for PA

Yesterday, the Capitol Hill newspaper The Hill published an article on the fight over the Democrats’ national energy tax in Congress. The article, posted below, referenced a map that shows how much electricity rates in states like Pennsylvania, West Virginia and would increase under “cap and trade.”

“The fact that this map shows electricity rates skyrocketing by $636 million in Pennsylvania isn’t surprising if you take a close look at what the Democrats are proposing,” Shuster said in response to the article. “This cap and trade proposal is aimed at killing America’s coal industry which would be devastating to our state’s economy.”

Coal lobby fights back on climate bill

By Jim Snyder

Posted: 06/18/09 06:15 PM [ET]

The coal industry is pushing back against a climate change bill that would likely curb coal use by circulating a map that shows which states would see their electric bills increase the most under the legislation.

But supporters of the bill say the industry’s figures are off the mark and don’t factor in ways the bill will offset rising energy costs or the jobs that it will create.

Lobbying has intensified with Energy and Commerce Chairman Henry Waxman (D-Calif.) pressing for a floor vote next week. Waxman reported progress on Thursday in talks with Democrats from rural states who have criticized the bill for not doing enough to protect consumers from higher energy costs.

Industry opponents of the bill are working to sow discontent within the Democratic caucus by estimating the cost impact by state, in hopes of drawing battle lines based on region rather than political party.

House Republicans have picked up on the theme and are circulating the coal industry’s map in hopes of blocking what is a top legislative priority of Speaker Nancy Pelosi (D-Calif.) and President Obama.

The National Mining Association, a trade group that represents coal producers, has claimed credit for the map, although an official at Peabody Energy, a large coal company, is listed in a pdf as its specific author.

According to the map, electricity prices in Texas could increase by more than $1 billion and in Pennsylvania by $636 million in 2012 and each subsequent year if the climate change bill becomes law.

Utilities in these states will not receive enough free allowances from the government to cover their emissions, leaving them to buy additional credits in a marketplace created by the bill, invest in projects that would offset their carbon pollution, find ways to conserve electricity, or switch to more climate friendly fuel sources.

Consumers in Washington, Oregon and California, in contrast, would see their electric bills decrease under the bill because utilities there emit less carbon dioxide and will likely have a surplus of allowances to sell in the marketplace.

The bill creates a transfer of wealth from states with high carbon emissions to those with lower levels, critics say.

Luke Popovich of the mining group said the map combines estimates from the Congressional Budget Office as to what the price of carbon will be in 2012 with emissions data from the Energy Information Administration, a division of the Energy Department.

“This is simply to say, ‘let’s be careful before we leap into the dark here,’” Popovich said.

Under the bill, utilities and other industrial sectors would have to obtain allowances to cover their carbon dioxide emissions. The majority of those allowances would be given away for free during an initial phase to help prevent dramatic cost increases. But some companies will likely have to buy additional allowances to cover their emissions.

The cost disparity comes because allowances are distributed both based on emissions and electric sales. So, a utility that relies on hydroelectric power and therefore has a relatively small amount of emissions to cover would likely have a surplus of allowances it could then sell to a utility that is short.

The coal industry’s map shows that states that rely on coal to get their power will see the electricity prices increase more than other areas like the West Coast and Northeast, areas that depend more on hydroelectric and nuclear power, neither of which emits carbon dioxide.

Coal now accounts for more than 50 percent of the electricity produced in the United States. But coal-fired power plants are the single largest source of carbon dioxide emissions from human activity. Legislation that caps carbon dioxide emissions is likely to make coal use less economical versus other fuel sources.

But a spokesman for one of the climate bill’s main authors, Energy and Commerce Energy and Environment Subcommittee Chairman Edward Markey (D-Mass.), said the map grossly overstates the bill’s cost.

“Many other studies on a clean energy jobs plan, including the EPA study on Waxman-Markey, show that the cost increases would be vastly lower, and many other quality, transparently-created studies show energy savings and job increases,” said Eben Burnham-Snyder. “The positive results of those studies calls into question the validity of this map, especially given the fact that the authors appear to be those who oppose a clean energy plan.”

Burnham-Snyder said the map doesn’t take into account electricity savings generated by energy efficiency programs promoted by the bill.

Another map circulating on Capitol Hill shows far less of a cost impact in 2012, the first year of implementation

It shows that electric rates in Texas and Pennsylvania would increase only $3. Consumers in Washington and Oregon would see a savings, but only of $1, and electricity prices in California would increase by that amount. The map was developed by PG&E, a utility that is supportive of climate change legislation.

The Environmental Protection Agency, meanwhile, has estimated that the climate bill would cost consumers between $98 to $140 a year on average.

Other studies show a cap and trade program akin to what Congress is considering will be much costlier.

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