How the GOP Might Raise Your Electric Rates

How the GOP Might Raise Your Electric Rates
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Republican state governors and legislators will be raising your electric rates soon, according to a recent economic study commissioned by the National Mining Association and various other industry groups. But only if they refuse to implement the Environmental Protection Agency's proposed Clean Power Plan when it's finalized later this summer.

EPA’s Plan is the backbone of President Obama's climate agenda. That’s because the Plan would radically restructure this nation's electric system to reign in the carbon dioxide coming from existing power plants, which account for about 40% of all U.S. emissions.

The Clean Power Plan is based on the 1970 Clean Air Act, a law that directs the states to work as partners with the federal government to reduce air pollution. In most cases, EPA adopts a model rule under the Act, and then each state drafts its own laws to implement the rule, which are submitted to EPA for approval (lawyers call this a state implementation plan). If EPA doesn’t like what the state proposes to do, however, or if the state refuses to cooperate, EPA will step in itself and regulate with a more detailed federal plan.

Virtually all Republican state governors and legislators have come out in staunch opposition to EPA’s Plan. They certainly won’t want to adopt state-level climate laws and regulations to implement the Plan in their states. Talk about a difficult political pill to swallow.

That’s why most of them will undoubtedly consider refusing to submit a state plan to EPA. In fact, the conservative leaning Federalist Society recently released a legal white paper urging many states to do just that.

But it turns out that many Republican-run states could actually cause their electric rates to go up significantly if they opt for a federal plan, rather than developing a state plan themselves. The reason has to do with both how the Clean Air Act is written and the current makeup of the electric systems in these states.

Put simply, the EPA’s Plan will set carbon dioxide emission limits for each state’s fleet of existing power plants. One obvious way to meet these limits is to reduce the amount of carbon dioxide flowing from the stack of each plant. However, the Plan also allows states to rely on renewable power and various end-use energy efficiency measures (such as promoting efficient lighting in homes and businesses) to meet EPA’s emission targets. By using more renewables and investing in energy efficiency, states can reduce the carbon intensity of their electricity sectors, which will help them more cheaply comply with the emission limits set by EPA.

The problem with refusing to adopt a state plan and instead opting for a federal plan is that EPA likely doesn’t have the authority to require a state’s utilities to use more renewable power or to invest in energy efficiency. Unlike states, which can adopt their own laws, EPA only has the authority granted to it by Congress in the Clean Air Act. And “it is absolutely clear,” according to the Federalist Society’s white paper, “that EPA lacks authority [under the Act] . . . to impose a federal plan [that orders] the State’s utilities to acquire more renewable or demand-side resources.” This means that if a state wants to use renewable power and energy efficiency measures to help it comply with its EPA-imposed emission limit, the state will need to enact its own laws doing so as part of its state compliance plan.

By contrast, if EPA steps-in with a federal compliance plan and wants to obtain the same overall emission reductions without using renewables and energy efficiency, it will have to go after more expensive coal plant reductions even harder. And guess what? That’s bad news for Republican-run states, which rely more heavily on coal to generate electricity.

There are 31 Republican-run states and they generate an average of 43% of their electricity using coal. The remaining blue states rely on coal for only about 31% of their total electric generation.

Each state’s electric system is different, of course, which means that the impacts of having a federal plan will vary by state. According to the National Mining Association’s study, for example, if newly elected Republican Governor Greg Abbott decides to play nice with EPA, Texas’ electric rates will increase by 10%. By contrast, if Governor Abbott just says no and opts for a federal plan, Texas’ electric rates would increase by an additional 44%. Likewise, if Utah refuses to develop its own plan, its rates would increase by an additional 16%. And Wyoming, Nevada and Illinois would all see additional double-digit rate increases if they opted for the federal plan.

The irony of all this is that most Republican state lawmakers are opposed to the Clean Power Plan because they believe it will raise electric rates and hurt the businesses in their states. Now, the coal industry's own study shows that, if these lawmakers don't cooperate, they will exacerbate the exact thing that they are trying to avoid.

 

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