By Argen Duncan: Freedom New Mexico
Local electricity providers expect customer costs to go up if a proposed federal cap-and-trade climate legislation passes the U.S. Senate without changes.
This summer, the U.S. House of Representatives passed the American Clean Energy and Security Act of 2009, which has a number of provisions to limit carbon emissions and global warming.
Among other things, it requires electric utilities to meet 20 percent of their electricity demand with renewable energy and energy efficiency by 2020. It also sets up a cap-and-trade system in which carbon emitters must buy allowances for increasingly large portions of the carbon dioxide they release. Allowances are permits for the discharge of a ton of carbon dioxide each.
Expenses from buying allowances and upgrading facilities to be more efficient are expected to be passed on to consumers.
The Senate must now consider the bill, and could change it.
“We understand that the estimates that came out of the legislation before amendments felt like we would be looking at 20 percent (cost increases),” said Lance R. Adkins, general manager of Curry County’s Farmers Electric Cooperative Inc.
The 20 percent rise could happen as early as 2013, he said.
Under the current bill, the federal government would provide 80 percent of the needed allowances in 2012, meaning the electricity providers would only pay for 20 percent. However, Adkins said the 80 percent is calculated using 2005 emission measurements.
That means they don’t take into account the past four years of growth, he said, so providers will need to buy more allowances than it would appear, driving up the cost to consumers more quickly.
“You start out in a deficit from the beginning,” Adkins said.
Also, he said the market for buying and selling allowances could fluctuate based on the traders and he is worried about “shenanigans” in the system.
Xcel Energy spokesman Wes Reeves said his company’s forecast indicates a 5 percent short-term increase in the cost to customers, if the bill passes in its current form.
In the long term, Reeves said, it’s more difficult to predict the expenses without knowing what the final bill will look like, but prices will rise.
“At first glance, it doesn’t appear it would be as bad as some might say,” Reeves said.
The impact varies in different areas of the country, he said. Eastern New Mexico has renewable energy, and Xcel can upgrade existing power plants to produce the same amount of energy with fewer emissions.
Reeves said Xcel is in favor of market-based policy with incentives to do the right thing, and the company has succeeded with such systems in the past.
“We can make some gains, hopefully without terrible burdens to consumers, but there will be costs involved,” Reeves said.
Roosevelt County Electric Cooperative Inc. Manager Jerry Partin could not be reached for comment.