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Cap and trade legislation worries utililties
Staff Writer House Resolution 2454 is known by many names - the cap and trade bill, the American Clean Energy and Security Act, the Waxman-Markey bill, the climate energy bill.
Regardless of the name applied to it, the legislation, which passed the U.S. House of Representatives this summer and awaits action in the Senate, would have a tremendous impact on the U.S. economy.
Critics say it will raise electricity rates and put the Midwest at an economic disadvantage. Proponents say it's needed to curb carbon emissions that create destructive greenhouse gases.
Under the cap and trade system, industries that emit carbon dioxide beyond a certain level or cap would either have to pay for cleaner technology or trade pollution permits from industries that were greener and did not use their clean credits.
Char Kinzer, public relations manager for Crow Wing Power, said Minnesota Gov. Tim Pawlenty has pushed for green legislation and her industry is not against the emphasis on renewable energy. The problem is the expense and the time needed for research and development for many types of non-coal generated electricity.
"Nobody's fighting the renewable (energy) mandates," she said. "We live here too."
Crow Wing Power, she explained, buys a mix of coal-generated and renewable energy-generated electricity, but the bulk of it - about 80 percent - comes from coal-fired plants in North Dakota. In addition, industry officials are working with a variety of technologies to make the use of coal a cleaner process. Emissions can be reduced by scrubbers that sequester carbon, Kinzer said. Also, algae has been used in some research projects to eat carbon dioxide.
"We heavily rely on coal-fired electric plants," she said.
There is no question electric bills will rise if the legislation is passed in both the Senate and signed by the president, Kinzer said. A Crow Wing Power newsletter recently cited Minnesota lobbyists who estimate that in this state consumers could see an additional $500 to $700 added to their annual electric bills.
Kinzer said she believes President Barack Obama's administration is pushing for passage of the bill this fall by the Senate - before a U.N. climate summit in December.
She outlined points the National Rural Electric Cooperative Association is emphasizing in the debate. That organization, with 41 million consumer-members, sees the need to reduce greenhouse gases, she said, but doesn't want an unfair burden placed on electric companies or on the Midwest plants that rely largely on coal. Kinzer said the goals or caps on emissions have to be achievable.
"If the legislation moves slowly enough and there's time for research and development, we'll get there," she said. "They have to be careful how they write this."
Kinzer is concerned that overly restrictive standards might drive jobs out of the Midwest and even out of the U.S.
Another concern, Kinzer said, is that the final version of the House bill does not stipulate how the cost per ton of carbon emissions will be determined. She said the industry is concerned the decision will be left up to Wall Street in a volatile auction situation.
One aspect of the problem is that despite encouragement to conserve electricity, Americans are using it at a record pace. Part of that equation is the growing number of household devices that use electricity, ranging from multiple cell phones and TVs in households to energy-draining plasma television sets.
"The whole U.S. has become rather lax about electricity," she said. "We use too much."
Despite an economy-based reduction in the number of new services (homes, businesses, garages, etc.) it provides electricity to, Kinzer said Crow Wing Power customers are using a great deal of energy.
She said the number of new services was 745 in 2007, 490 in 2008 and 200 so far in 2009.
In comparison, the number of kilowatt-hours sold in 2007 was 543 million, compared to 604 million in 2008.
Kinzer expressed concern with how quickly the 1,400-page bill passed in the U.S. House of Representatives. She said it gained committee approval in May and was passed by the full House by June 26. The margin it passed by was seven votes, she said. The Minnesota delegation voted along party lines with Democrats in favor of the measure and Republicans opposed, she said.
J. Drake Hamilton, the science policy director from Fresh Energy, a St. Paul-based nonprofit organization, said that because of lobbying from the electric utility industries those businesses will not have to pay for credits for a considerable length of time after the cap goes into effect so any short-term electric hikes could not be attributed to the new legislation.
"They get, initially and for a long time, free allowances," Hamilton said.
"I think the industry lobbied very hard," she said. "It wouldn't have been our choice."
Hamilton said when the cap is applied all electricity prices will go up a little bit, however she compared the government's efforts in this area to similar restrictions on acid rain and lead in gasoline when those pollutants were considered to be a public health problem.
"Government is doing what only government can do, which is to set a responsible limit or cap on carbon and then step back and industries can figure out the cheapest way to meet that cap," Hamilton said.
She said the idea of cap and trade has been on the horizon for some time and the bill wouldn't even start until 2013.
Kinzer said electric cooperatives did receive an extra number of free allocation of credits to exceed the cap at the beginning of the process for a few more years. The cooperatives will eventually be weaned off the free credits, she said.
She said estimates regarding how much electric bills will increase and when it will take place are all over the place.
"The point is, nobody seems to know when ... there's nothing definite. The bottom line is we will be paying more. How much more is all over the board."
MIKE O'ROURKE may be reached at mike.orourke@brainerddispatch.com or 855-5860.
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