<img src="http://www.joplinglobeonline.com/images/zope/extra.gif" border=0> Utilities: Carbon ‘tax’ could slam customers <font color="#ff0000"> w/ information about carbon emissions </font>

By Greg Grisolano

ggrisolano@joplinglobe.com

Some U.S. lawmakers could begin voting Monday on a plan to cut carbon emissions that has local utilities warning that consumers could take a big hit.

“The numbers we’ve calculated are very simple to remember,” said Duane Highley, director of power production for Associated Electric Cooperative Inc. of Springfield, which provides power to many rural cooperatives in the area. “If you have a $20 per ton carbon penalty or carbon tax, that will equate to a $20 per month increase on the average utility bill. If you go to a $50 tax, it goes to $50 per month.”

The bill now making its way through the U.S. House Energy and Commerce Committee is highlighted by a cap-and-trade plan. If it passes, a limit will be set for companies and utilities that discharge carbon dioxide, a greenhouse gas. That limit would be tightened each year, leading to an overall reduction of the pollution in subsequent years.

Industries and utilities will have to get a permit from the government for their discharge and those permits would be auctioned off under some proposals and traded via a carbon market.

Utilities say they want the permits to emit carbon dioxide given to them for free and some congressional leaders who support the bill reached agreement on a plan Thursday to give away more than 50 percent of those permits to local electric-power distributors, trade-sensitive industries and automakers.

Proponents, meanwhile, say the characterization of the cost for the permits as a “tax” is misleading. They also argue something must be done to address climate change and to push companies to invest in alternative energy technologies such as wind.

‘A bigger hit’

Highley was one of about a half-dozen executives from various utilities who met with U.S. Rep. Roy Blunt, R-Mo., earlier this month at the headquarters of The Empire District Electric Co. in Joplin.

Highley’s company is a wholesale power provider that serves about 2 million customers, primarily rural and lower income families in Missouri and Southeast Oklahoma. His customers include Barry Electric Cooperative in Cassville, Barton County Electric Cooperative in Lamar, and New-Mac Electric Cooperative in Neosho.

“Half our customers make less that $40,000 per year household income,” Highley said. “Almost 20 percent of our customers make less than $20,000 per year. So we’re serving some of the poorer customers in the country, and yet because we have 85 percent of our energy coming from coal, we’re going to see a bigger hit.”

Blunt, who is the second-highest ranking Republican on the energy committee, had his own criticism of the bill, saying it foists more of the burden on Midwestern states that generate the bulk of their power from coal-fired plants.

“This is a bad thing for America, it’s a really bad thing for Missouri and the region we live in, so we’ve got to be very concerned about it,” he said. “This is like deciding we’re going to penalize utilities that come from coal, and we’re going to spend all that penalty money all over the country in ways that really disadvantage people in Missouri, Oklahoma, Arkansas.”

U.S. Sen. Claire McCaskill, D-Mo., issued a statement recently in which she said she would not support a bill if it overburdened Missouri families.

“While I recognize that climate change is a serious problem that must be addressed, I won’t support a bill that passes the costs of fixing it to Missourians and their businesses,” McCaskill said. “People in my state have no choice but to be dependent on coal-based utility companies. Whatever monies are generated cannot create a bunch of rich people. It must go back into the pockets of the people and small businesses that will face higher utility costs.”

Other Democrats from coal-burning and industrial states are pushing the bill’s sponsors, U.S. Rep. Henry Waxman, D-Calif., and U.S. Rep. Edward Markey, D-Mass., to find ways to ease costs for their constituents, too.

Waxman, chairman of the House Energy and Commerce Committee, and others, including Markey, sent a letter to President Obama outlining the need for the bill.

They argued there are three national “imperatives” driving the legislation. It would diversify the nation’s energy supplies and reduce dependence on foreign oil, it would help protect the planet from global warming, and it would create incentives to invest in clean energy, creating jobs during the recession.

President Obama’s budget, meanwhile, anticipates raising $650 billion by auctioning off permits to companies that release the heat-trapping gas, with the bulk of the money going back to families to help with higher energy prices.

‘Market-based’

The term “carbon tax” is misleading, said Vanessa Crawford, a climate-change coordinator for Missouri Votes Conservation, a St. Louis-based political advocacy group affiliated with the national League of Conservation Voters.

“What we’re talking about is not a carbon tax ... it’s a cap-and-trade system,” she said. “(It’s) a market-based system that incentivizes a reduction in carbon emissions rather than just taxing those emissions straight out. With a carbon tax you can still pollute just as much as you can afford to.”

Crawford dismissed concerns of utility-rate hikes.

“The legislation has no intent on being bad for business,” she said. “We really want consumer protections in the way of a tax rebate to offset increases in utilities. And we’re not talking about sending that money off. Low- and middle-income people in Southwest Missouri would be getting that benefit.”

But an Empire official says Missouri is likely to face a “double-whammy” if Congress approves the bill.

“First of all, it could push jobs to the coast, because it makes the Midwest less competitive than the coast and it makes us less competitive overseas,” said Brad Beecher, vice president and chief operating officer of electric operations for Empire. “So it really gives us a double-whammy here. If our rates go up more than (on) the coasts, it takes away one of our advantages.”

But Crawford said Missouri and America already are losing jobs right now in wind energy, in part because utilities haven’t had enough incentives to invest in those technologies.

“We have an 8.9 percent unemployment rate, and we’re talking about an industry that’s booming in other countries,” Crawford said. “Germany’s second highest export is wind turbines. We could be competitive on the world market, but instead we’re letting other countries take the lead.”

In their letter to the president, Waxman, Markey and others noted that utility estimates of the cost of environmental legislation have been overblown in the past.

“When Congress debated capping the sulfur dioxide emissions from power plants that cause acid rain, we were told achieving reductions in these emissions would cost up to $1,500 per ton. In fact, the market-based mechanisms we enacted cut emissions in half at a cost of less than $250 per ton. We are determined to find similar solutions to our energy and climate challenges and enact an economically responsible emissions reduction law,” they wrote.

25 percent jump

Beecher said that Empire estimates a cap-and-trade proposal could have a 25 percent impact on customer rates. He also said the investor-owned utility emits about one metric ton of carbon per megawatt hour. The average customer uses about a megawatt hour, or 1,000 kilowatt hours per month.

“For us, if it’s a $10 per ton tax at auction price, then it’s about $50 million a year,” he said. “If it’s a $20 tax, then it’s $100 million more we have to collect every year from our customers. That’s about a 25 percent price impact.”

Utilities have been lobbying Congress to give them at least some of those permits for free.

“If we do have a cap-and-trade bill, we think it’s very important that the allowances first be allocated for free, based on our usage,” Beecher said. “The allowances need to be allocated at no cost to those of us who have retail customers so that the price impact doesn’t happen.”

The Associated Press contributed to this report.

Bill timeline

U.S. Rep. Henry Waxman, D-Los Angeles, chairman of the House Energy and Commerce Committee, said he hopes to have the committee wrap up its work on the bill before the Memorial Day recess.

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