The U.S. Environmental Protection Agency's Clean Power Plan, calling for 30% greenhouse gas (GHG) reductions by 2030 for existing power plants, would have huge cost impacts on both residential and industrial power consumers, said witnesses at a June 23 U.S. Senate hearing.
The Senate Environment & Public Works Committee's Subcommittee on Clean Air and Nuclear Safety held the hearing, entitled “The Impacts of EPA’s Proposed Carbon Regulations on Electricity Costs for American Businesses, Rural Communities and Families, and a Legislative Hearing on S. 1324.”
S. 1324 is better known as the Affordable Reliable Electricity Now Act (ARENA). Sen. Shelley Moore Capito, R-W.Va., introduced ARENA in May and has more than 30 cosponsors, including Senate Majority Leader Mitch McConnell, another coal-state Republican who hails from Kentucky.
Said Capito in her opening statement for the June 23 hearing: "I have a letter here sent to me yesterday from Ammar’s Inc., a family owned company that operates 19 Magic Mart stores in West Virginia, Virginia and Kentucky. The letter is accompanied by a petition signed by 26,000 Magic Mart customers, calling on EPA to end its war on coal and catastrophic impact on local economies. Ammar’s Inc. has been active in the region for 95 years, and according to this letter, the present economic crunch is the most difficult challenge the company has faced."
Capito noted that coal provided 96% of West Virginia’s electricity last year. West Virginia has among the lowest electricity prices in the nation: last year, the average price was 27% below the national average. "But that advantage will not survive this administration’s policies," she said. "Studies have projected the Clean Power Plan will raise electricity prices in West Virginia by between 12 and 16 percent."
Capito added: "Turning to the Regional Greenhouse Gas Initiative (RGGI) states. One of the witnesses we will hear from today, Mr. Martens, is affiliated with RGGI, a program of nine northeastern states that uses market principles to reduce greenhouse gas emissions from the power sector. Mr. Martens probably won’t mention that RGGI’s nine states consume five times more energy than they produce. Or that my little state of West Virginia produces twice as much energy as all nine of the RGGI states combined. There are energy producing states, and there are energy consuming states. Only 13 states produce more energy than they consume. West Virginia ranks second, behind only Wyoming. And for 10 of the 13 states that export energy, coal is critical to maintaining that net positive result. Put simply, there is no way that this massive, largely EPA-driven reduction in coal fired electricity generation is going to impact only coal states. It’s going to impact the majority of states, and the families and businesses within them."
Capito's bill provides a host of new requirements that would severely limit EPA's ability to impose the Clean Power Plan.
Coal industry rep says EPA's plan would hit the poor the hardest
Eugene Trisko, an energy economist, speaking on behalf of the pro-coal American Coalition for Clean Coal Electricity, testified on the consumer impacts of the Clean Power Plan, which is expected to shut dozens of coal-fired power plants around the country.
The principal findings of a study on the plan are:
Some 48% of American families have pre-tax annual incomes of $50,000 or less, with an average after-tax income among these households of $22,732, less than $1,900 per month. In other words, nearly half of U.S. families - some 59 million households - have average take-home incomes of less than $1,900 per month.
Energy costs are consuming the after-tax household incomes of America’s lower- and middle-income families at levels comparable to other necessities such as housing, food, and health care. The 48% of households earning less than $50,000 devote an estimated average of 17% of their after-tax incomes to residential and transportation energy. Energy costs for the 29% of households earning less than $30,000 before taxes represent 23% of their after-tax family incomes, before accounting for any energy assistance programs.
American consumers have benefitted recently from lower gasoline prices, but higher oil prices are now reducing consumer savings at the gas pump. Meanwhile, residential electricity prices are rising due to the costs of compliance with U.S. EPA and other regulations, and other factors such as fuel and capital costs. Residential electricity represents 69% of total household utility bills.
A 2011 survey of low-income households for the National Energy Assistance Directors Association reveals some of the adverse health and welfare impacts of high energy costs. Low-income households reported these responses to high energy bills: 24% went without food for at least one day; 37% went without medical or dental care; 34% did not fill a prescription or took less than the full dose; and 19% had someone become sick because their home was too cold.
The relatively low median incomes of minority and senior households indicate that these groups are among those most vulnerable to energy price increases. Recent and prospective increases in residential energy costs should be assessed in the context of the long-term declining trend of real income among American families.
In 2014, the average price of residential electricity in the U.S. was 32% above its level in 2005, compared with a 22% increase in the Consumer Price Index during this period. U.S. Department of Energy's Energy Information Administration projects continued escalation of residential electricity prices due to the costs of compliance with environmental regulations and other factors, including fuel, capital, and operating and maintenance costs. Moreover, EIA, EPA, National Economic Research Associates, and others project that electricity prices will increase even more because of EPA’s proposed Clean Power Plan, Trisko added.
Fixed-income seniors are a growing proportion of the U.S. population, and are among the most vulnerable to energy cost increases due to their relatively low average incomes and high per capita energy use. In 2013, the median pre-tax income of 29 million households with a principal householder aged 65 or older was $35,611, 31% below the national median household income of $51,939. "Senior citizens and other lower-income groups will bear the burden of higher energy costs imposed by EPA’s Clean Power Plan, but will be among the least likely to invest in – or benefit from - the energy efficiency programs that the proposed rule envisions," Trisko said in his prepared testimony.
Industrials see a lot of costs with the Clean Power Plan
Paul N. Cicio, President of the Industrial Energy Consumers of America (IECA), a nonpartisan association of leading manufacturing companies with $1.0 trillion in annual sales, noted in his own June 23 testimony that his members are major stakeholders in this debate.
"IECA supports the requirements set forth in S. 1324 that the EPA must fulfill before regulating standards of performance for new, modified, and reconstructed fossil fuel-fired electric utility generating units," Cicio wrote in his prepared testimony. "The ratepayer protections are also critically important. This provision provides flexibility, such that in the event that compliance would have a negative impact on economic growth, competitiveness, reliability, or on electric ratepayers, the governor would be able to opt-out from compliance. Higher electric rates can result in industrial demand destruction and middle class job losses. Some states would be significantly impacted by the EPA’s target GHG reductions.
"IECA supports action to reduce GHG emissions in a manner that will not impair manufacturing competitiveness. The manufacturing sector must have a level playing field with global competitiors. Climate change is global in scope and requires meaningful global action. Offshore competitors, who import product into the U.S., must be held to the same environmental standards as domestic manufacturers, or GHG leakage of jobs and emissions will occur, which accomplishes nothing environmentally.
"For decades, IECA companies have had energy efficiency programs that reduce GHG emissions driven by intense global competition and sustainability goals. This means that these companies have achieved high levels of energy efficiency. They include chemicals, iron and steel, petroleum refineries, aluminum, paper, glass, and cement. ... Plus, [energy-intensive trade-exposed] companies provide the majority of all industrial combined heat and power generation in the U.S.
"It is the consumer, the ratepayer who is the true stakeholder, since they will bear the burden of any costs from the CPP. We urge the EPA and states to work closely with these stakeholders as they address the CPP. IECA does not believe that the EPA has the legal authority to regulate GHG emissions outside-the-fence line as proposed. We find that the CPP is incompatible with numerous practical and technical aspects of America’s electricity system, and would represent a vast expansion of the agency’s regulatory reach into the authority held by states and other federal regulatory agencies. In effect, the CPP dictates environmental, and energy and economic policy, something the authors of the Clean Air Act never intended.
"IECA has serious concerns about the impacts of the CPP on the cost and potential reliability of electricity and natural gas regionally, and therefore the competitiveness of U.S. manufacturers, but especially EITE industries. It is clear that the CPP as proposed will dramatically increase the cost of power and natural gas, while providing our offshore competitors an economic advantage, potentially creating GHG emission leakage, with a harmful effect on jobs, the economy, and the environment."
Martens: the Regional Greenhouse Gas Initiative shows the Clean Power Plan can work
As Capito predicted, Joseph Martens, the Commissioner of the New York State Department of Environmental Conservation and Vice-Chair of the Board of Directors of RGGI Inc., which administers the Regional Greenhouse Gas Initiative (RGGI), testified for the Clean Power Plant. RGGI is a program of nine northeastern states that uses market principles to reduce greenhouse gas emissions from the power sector.
"Although I am testifying today on behalf of New York, I will also relate the collective experience of the RGGI states," Martens wrote. "I appreciate the opportunity to testify today about the benefits of programs to reduce the greenhouse gas emissions that contribute to climate change, with a particular focus on how families and businesses in New York have benefitted from RGGI and complementary clean energy programs. Simply put, the experience of New York and the other RGGI states over the last seven years clearly establishes that a state can grow its economy while reducing harmful carbon emissions.
"As I will explain, participation in RGGI is helping to improve energy efficiency and reduce costs for our residents and businesses and create jobs in New York and across the RGGI region. In addition, strategies to reduce harmful power plant emissions provide ample public health benefits that reduce the cost of medical care for our residents. The structure of the proposed federal Clean Power Plan provides flexibility to other states to design their own pathways to reduce carbon pollution and reap similar economic, social and environmental benefits. The RGGI effort, similar to EPA’s Clean Power Plan proposal, recognizes that carbon emissions are not limited to political boundaries or jurisdictions. Individual state and regional efforts like RGGI must be supported by a strong and equitable federal plan that ensures that all states contribute to achieving the reductions needed to address climate change."
Senate bill would limit EPA's authority in various ways
Capito on May 13 joined with a group of other senators to introduce the ARENA bill. EPA proposed the Clean Power Plan last year and it is due to be issued in final form this summer. Key provisions of the bill include:
Prevents mandates for unproven technology - Before EPA can set a technology-based standard for new power plants, the standard must first be achieved for at least one year at several separate power facilities throughout the country. The bill also prevents the EPA from using any demonstration projects –which are projects that are reliant on federal support – from being used to set the standard. That means the projects must be commercial and not supported by the U.S. Department of Energy. Industry officials say that commercial CO2 capture and sequestration projects are at least 10 years off.
Extends compliance dates - The bill would extend the rule’s compliance dates pending final judicial review, including the dates for submission of state plans.
Holds EPA accountable - This bill would require EPA to issue state-specific model plans demonstrating how each state could meet the required GHG emissions reductions under the rule.
Enables states to protect ratepayers - The bill would provide that no state shall be required to implement a state or federal plan that the state’s governor determines would negatively impact economic growth, negatively impact the reliability of the electricity system or negatively impact electricity ratepayers.
Protects highway fund dollars - The bill would prevent the EPA from withholding highway funds from any states for noncompliance with the Clean Power Plan.
The ARENA Act, which takes into account EPA’s proposed regulations for both new and existing power plants, also requires EPA to submit to Congress a report describing the quantity of greenhouse gas emissions the Clean Power Plan is expected to reduce, and to conduct modeling to show the impacts of the rule on the climate indicators used to develop the rule.