EPA ruling could send US power bills soaring: report

US CONSUMERS will see double-digit electricity rate increases in 43 states if a rule by the Environmental Protection Agency to regulate carbon dioxide emissions from power plants is implemented, according to a report by NERA Economic Consulting.

Lou Caruana

The EPA proposed the Clean Power Plan (CPP) in June 2014 as a nationwide regulation under Section 111(d) of the Clean Air Act (EPA 2014a).

The proposal would set maximum limits on carbon dioxide emission rates (measured in pounds of carbon dioxide per megawatt-hour of generation and end-use energy efficiency according to a formula for electricity systems within relevant states.

In EPA’s preferred regulatory approach , the final carbon dioxide emission rate standards would apply in 2030, and in that year total US power sector carbon dioxide emissions would be 30% below their level in 2005. EPA also developed and evaluated an alternative approach with final standards in 2025.

President and CEO of the American Coalition for Clean Coal Electricity Mike Duncan said: “This rule fails across the board, but most troubling is that it fails the millions of families and businesses who rely on affordable electricity to help them keep food on the table and the lights on.”

The energy market impacts of the CPP would be substantial in a “state unconstrained” scenario. This assumes that states would be constrained to using only building blocks 1 and 2, according to the report. Building block 1 relates to heat rate improvements of coal units and building block 2 relates to increased utilization of existing natural gas combined cycle units.

The report found that annual average electricity sector carbon dioxide emissions would be reduced by about 22% relative to the reference case (not relative to 2005 emission levels) over the period from 2017 through 2031.

Coal unit retirements would increase by about 45 gigawatts. Coal-fired generation would decline by about 29% on average over the period, with natural gas-fired generation increasing by about 5% on average.

The Henry Hub natural gas price would increase by about 2% on average. Delivered electricity prices would increase by about 12% on average over 2017 through 2031. However, even these figures omit several factors that could add to impacts and costs, according to the report.

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