US Utilities Gear Up For Fight Over Climate-Law Revenue
10 März 2009 - 8:39PM
Dow Jones News
The U.S. utility industry is gearing up for a fight over who
receives the revenue generated under a plan that would bring about
sharp reductions in greenhouse-gas emissions by raising energy
prices.
U.S. President Barack Obama and Democratic leaders in Congress
want to set nationwide emissions limits and require companies to
buy allowances conferring the right to pollute up to the limit, or
cap. The White House last month estimated that a climate-change law
could generate $646 billion by 2020, and proposed $526 billion of
that would fund a tax rebate for working families, essentially
redistributing wealth to poorer households.
U.S. utilities say that a large share of the allowances should
be handed out for free to power companies in the early years of the
program, so that the savings may be passed along to electricity
consumers or used to invest in renewable energy and energy
efficiency.
"I think this is probably going to be the biggest part of the
debate," Tom Kuhn, president of trade group Edison Electric
Institute, said at a forum organized by EnergyBiz Magazine. "The
important thing for us to do is to make sure we don't get rapidly
escalating prices of electricity."
Utilities have echoed that sentiment. Duke Energy Corp. (DUK)
Chief Executive Jim Rogers has spent the past week calling for free
allowances for utilities to help keep electricity costs from
surging. Exelon Corp. (EXC) CEO John Rowe said in an interview last
month that he hoped the Obama administration would reconsider its
position.
Susan Story, CEO of Southern Co.'s (SO) Gulf Power unit, said
Monday on the sidelines of the EnergyBiz forum that directing
climate revenue to working families would leave another needy group
- small businesses - exposed to electricity price shocks.
"We think it's important to keep in mind the impact on the
consumer," Mark Crisson, CEO of the American Public Power
Association, said Tuesday at the forum. "We'd like to see 100%
allocation to begin with, to minimize consumer impacts."
Utilities are hardly small players in the climate-revenue
debate. Electric-power companies would have accounted for at least
82% of emissions reductions by 2020 under legislation that cleared
a Senate panel last year, according to an analysis by the U.S.
Energy Information Administration.
But Peter Orszag, who is currently the director of the Office of
Management and Budget, the budget arm of the White House, said last
year that giving all or most allowances to energy producers would
wind up posing a bigger burden on poorer people, or "exacerbate the
regressivity of the price increases."
Orszag, who at the time was the director of the Congressional
Budget Office, said the value of the allowances would "more than
compensate them [the companies] for any decline in profits caused
by a drop in demand for energy and energy-intensive goods and
services.
"As a result, the companies that received allowances could
experience windfall profits," he said.
-By Siobhan Hughes, Dow Jones Newswires; 202-862-6654;
Siobhan.Hughes@dowjones.com