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February 2015 Brief: Volume 22, Number 4

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No Higher Utility Bills

 

by Deborah D. Thornton

 

“Nearly 250,000 Iowans owed a record $47.7 million at the end of last year’s winter, Iowa power companies reported to the state utilities board.” – The Des Moines Register, November 23, 2014.[1]

 

It has taken the Obama administration seven years to attempt to shut down the U.S. coal industry, but he is finally on the verge of bankrupting – if not the plant builders and operators – then American families. We have enough trouble with winter in Iowa and do not need higher utility bills.

 

The United States Environmental Protection Agency (EPA) in June 2014 issued a proposed carbon dioxide (CO2) regulation under the Clean Air Act, called the Clean Power Plan (CPP), which calls for reducing CO2 emissions from fossil-fuel-based electricity power plants by 30 percent by 2030.[2] Most of these power plants are coal burning. Upgrading these systems with wildly expensive carbon capture and storage technologies will cost consumers billions of dollars.

 

Under the CPP, existing power plants must limit their CO2 emissions to 1.1 pounds per kilowatt hour (kWh).[3] Currently the average is 2.14 pounds per kWh. The cost to make the equipment upgrades is estimated to be $50 billion annually. The main way to reduce the CO2 emissions is through Carbon Capture and Storage (CCS). Currently, there is only one coal-fired power plant in the entire world successfully using CCS, in Saskatchewan, Canada.[4] Worldwide, there are only two other commercial CCS projects even under construction. One is in Mississippi and the other near Houston.[5] Both projects are facing financial and regulatory roadblocks resulting in significant delays and billions of dollars of cost overruns. Yet, in only about five years – by 2020 – the EPA expects significant progress by all coal-fired energy plants in the U.S. towards having this technology.

The EPA claims this regulation will reduce monthly residential electricity bills by 8 percent by 2030, following an initial increase in electricity costs over the next six years.[6] Many are skeptical as the track record of reducing the costs for anything the government regulates is poor. Coal and natural gas are critical to the base-load energy needed to keep the lights and heat on in our homes. Without reliable, consistent energy Americans are no better off than those in developing countries.

 

The Beacon Hill Institute for Public Policy Research just released a cost-benefit study of the CPP both nationally and for Iowa specifically. The results of their State Tax Analysis Modeling Program (STAMP) are not good. STAMP allows researchers to calculate the costs in Net Present Value dollars of a specific regulatory proposal.[7] In 2030 the annual net present value (NPV) cost of the CPP regulations on existing coal power plants will be a negative $16 billion. The total cost, nationally, from 2015 to 2030, is a negative $284.5 billion, with the potential as high as $300 billion.[8]

 

Another study just completed by Energy Ventures Analysis (EVA) shows that instead of cutting power and gas costs the CPP will result in an increase of over $170 billion in power costs by 2020, a 37 percent increase.[9] Households will see an average annual increase of $293, approximately $102 more for electricity and $190 more for heating. The industrial sector will be hit with increases of 64 percent. This cost will, of course, be passed on to consumers. Some families will be bankrupted.

 

The CPP regulation also assumes demand/user efficiencies of 250 percent.[10] This means that we would return to the energy crisis of the 1970s – where homes were only heated to 62 degrees in the winter and Christmas lights prohibited.

 

Beacon Hill also generated state-specific cost-benefit projections. The total costs to Iowa families by 2030 are estimated at $549 million, resulting in a 2 cent per kWh or 25 percent price increase in electricity for our homes, a loss of 15,650 jobs, almost $200 million less in new business investments, and over $1.6 billion in reduced real disposable income.[11] This is a $460 per year increase in energy (electricity and heat) costs to the average family.

 

According to The Des Moines Register, utilities disconnected the heat of almost 16,100 families last winter who were unable to pay their bills. This impacted over 66,000 people. Some are still trying to get those bills paid off. Power companies reported to the Iowa Utilities Board that 250,000 Iowans owed a “record” $47.7 million in utility bills. As of November 1, about $27 million of that was still outstanding – with cold weather once again on its way.

 

Almost 30,500 families have already qualified for heating assistance this year, up 5 percent from last. These families will receive about $450 each to pay their utility bills from a federally funded program.[12] Bankruptcy is a potential reality, and financial worry sits on their shoulders. These costs can cause them to become homeless and children to go to sleep cold and hungry.

 

The environmentalists and regulators in Washington, D.C., helping to bankrupt coal-burning power plants and “save” the environment do not understand workers and families trying to pay their bills. They do not understand the enormous positive impact of fossil fuels on our economy and the progress made by all people over the last 200 years of the industrial revolution. Say “No” to the CPP and higher utility bills.

 

(Endnotes)
[1] Donnelle Eller, “Costs Fall, But Iowans Struggle to Pay Their Heat Bills,” The Des Moines Register, November 23, 2014, <http://www.desmoinesregister.com> accessed on November 29, 2014.
[2] “Clean Power Plan, Reducing Carbon Pollution From Existing Power Plants,” United States Environmental Protection Agency, <http://111d.naseo.org/Data/Sites/5/media/clean-power-plan-overview.pdf> accessed on November 15, 2014.
[3] “Regulatory Impact Analysis for the Proposed Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources: Electric Utility Generating Units,” United States Environmental Protection Agency, September 2013, <http://www.epa.gov/ttnecas1/regdata/RIAs/EGUGHGNewSourceStandardsRIA.pdf> accessed on November 21, 2014.
[4] “Boundary Dam Fact Sheet: Carbon Dioxide Capture and Storage Project,” Massachusetts Institute of Technology, November 23, 2014, <http://sequestration.mit.edu/tools/projects/boundary_dam.html> accessed on November 29, 2014.
[5] “Large-Scale Power Plant CCS Projects Worldwide,” Massachusetts Institute of Technology, November 23, 2014, <http://sequestration.mit.edu/tools/projects/index_capture.html> accessed on November 29, 2014.
[6] “Clean Power Plan, Reducing Carbon Pollution From Existing Power Plants,” p. 22.
[7] “How STAMP Works,” The Beacon Hill Institute, 2014, <http://www.beaconhill.org/STAMP_Web_Brochure/STAMP_HowSTAMPworks.html> accessed on November 15, 2014.
[8] “The EPAs New Rule Limiting CO2 Emissions from Existing Coal Power Plants,” The Beacon Hill Institute for Public Policy Research, November 2014, p. 1.
[9] “Energy Market Impacts of Recent Federal Regulations on the Electric Power Sector,” Energy Ventures Analysis, November 2014, p. 4.
[10] Ibid. pp. 5-7.
[11] “The Economic Effects of the New EPA Rules on the State of Iowa,” The Beacon Hill Institute, September 2014, pp. 2-3, <http://www.beaconhill.org/> accessed on November 9, 2014.
[12] Donnelle Eller.

 

Deborah D. Thornton is a Research Analyst with Public Interest Institute, Mount Pleasant, Iowa. Contact her at Public.Interest.Institute@LimitedGovernment.org.

 

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