Could the Clean Power Plan Double Virginia’s Electric Rates?

coal_powerby James A. Bacon

The Clean Power Plan for reducing carbon dioxide emissions in the nation’s electric power plants could drive up Virginia’s electric rates by as much as 14% per year (non-compounded) on average between 2022 and 2033, according to a new report published by the American Coalition for Clean Coal Electricity (ACCCE). The worst single year could see rates increase by 20%.

“States should be braced to pay higher costs,” said Laura Sheehan, senior vice president for communications for ACCCE, an outspoken opponent of the Clean Power Plan. “Consumers only lose in the Clean Power Plan.” (The state-by-state breakdown can be seen here.)

The ACCCE state numbers reflect the highest of five compliance scenarios explored by NERA Consulting, which used a “state-of-the-art energy/economy model” to assess the impact of the plan. By forcing states to implement their own state-level plans to reach aggressive CO2 reduction goals, the Obama administration is effectively forcing the shut-down of dozens of coal-fired plants around the country in favor of natural gas, solar power and wind power.

The impact is significantly higher than the State Corporation Commission’s estimate last year that rates for Dominion Virginia Power, Virginia’s dominant utility, could increase by 22% in total, not to mention the Environmental Protection Agency’s (EPA) forecast that rate increases would be so modest that, when energy efficiency initiatives were included, rate payers actually would see an 8% reduction in their electric bills.

ACCCE gave two main reasons why its forecast is so much higher than the EPA’s. First, it thinks that the EPA is under-estimating the cost of achieving energy-efficiency savings. Second, ACCCE assumes more coal plants will be retired as a result of the plan than EPA does.

Bacon’s bottom line: In effect, ACCCE is saying that the Clean Power Plan single-handedly could increase Virginia electric rates by 150% over an 11-year period. That 150%-number represents the worst case of the five scenarios explored. I’m not knowledgeable enough to critique ACCCE’s econometric model but, given the plummeting costs of solar and wind power, I find that number highly implausible.

On the other hand, I find the Obama administration’s happy-face scenario that the EPA can shut down dozens of coal-fired plants and force-feed wind and solar into the nation’s electric power system without impact on rate payers to be a fantasy as well.

The ultimate impact of the Clean Power Plan is unknowable — humans just aren’t that good at economic forecasting. Moreover, everybody’s forecast is subject to bias. The Obama administration and allied environmental groups have a vested interest in minimizing the impact. ACCCE has a vested interest in exaggerating the impact. The SCC, charged with balancing the interests of the rate payers with reliability and environmental considerations, has the least overt bias, but even the commission has its blind spots. What the ACCCE study does accomplish is to broaden the range of potential outcomes.

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27 responses to “Could the Clean Power Plan Double Virginia’s Electric Rates?

  1. isn’t this the same organization that was found guilty of forgery?

  2. Another good analysis by Jim. I agree that every stakeholder has a bias. But is there any research about the actual costs after the fact? In other words, are the actual costs of new policies closer to the estimates from industry or closer to the estimates from regulators? Whose estimates tend to be more accurate?

  3. One of the problems with free speech is that most speech comes with a bias, and on any important topic we hear lots of biased views. Then we task a government agency to sort through the facts and give us unbiased opinions. Then we get answers we don’t like and start to blame the agency for hidden biases in response to political pressure, etc., etc., and we task additional government agencies to sort through the facts anew and give us their unbiased opinions also. And, lo and behold, their opinions disagree with one another — and these are from the unbiased experts!

    How is an ordinary citizen, informed only by the newspapers, supposed to make sense of such battling opinions?

    Jim, I agree with you, the VSCC has far less bias here than the Coal Lobby. Dominion’s incentive also is to keep rates low and stable. And both of them have said the EPA rules MIGHT compel Virginia electric rates to go up sharply, though nowhere near as sharply as this Coal Lobby report. I say “might” because exactly what the EPA rules (which are still “proposed”) will require is far from certain. That very uncertainty is shameful; for a federal rulemaking of such importance and potential impact to be so unclear this late in the process is evidence of how political that process has become. That uncertainty also highlights the substantial political bias behind the EPA’s own analysis of its rulemaking’s impact. But, that’s where we are. And now, fossil fuel lobbyists, whose mission is to foster greater uncertainty as well as anger and fear concerning the EPA’s rule, are piling on.

    Fortunately you are not alone in asking these questions. The Federal Energy Regulatory Commission (FERC) and a great many State utility commissions have been asking also, including of course the VSCC. In fact all the State commissions within the PJM multi-state region commissioned PJM to prepare a study of the impact of the EPA clean-power rules on the PJM region, and that study was recently completed and presented to FERC on behalf of the Organization of PJM States Inc. (OPSI), a group whose membership includes the VSCC.

    The FERC’s investigation, launched 12/09/2014, is still ongoing, but everything filed in the docket, No. AD15-4-000, is a public document, so if you want to read it yourself, go do so at this website: https://elibrary.ferc.gov/IDMWS/search/fercgensearch.asp Among those documents you will find the PJM study for OPSI; here is a brief summary: https://elibrary.ferc.gov/IDMWS/common/opennat.asp?fileID=13812043 The report itself is available through the link on page 5 of this PJM filing in the FERC docket: https://elibrary.ferc.gov/IDMWS/common/opennat.asp?fileID=13796709

    What does the report say? PJM believes the total coal unit retirements across the 12-state PJM area resulting from the EPA’s rule will be between 6,200 and 49,000 MW by 2030. The impact of this on the market price of energy is expected to be an increase, but not a huge one; big variables include the price of natural gas over the period and the amount of nuclear power also retired. That’s still an awful lot of uncertainty. PJM joined the chorus of speakers before FERC saying that EPA’s rule must be finalized and the interim provisions made “realistic” before these numbers can be refined.

    • Hah! Hah! Acbar, I tried reading the PJM study you refer to about three months ago and found it incomprehensible; and PJM’s PR staff was totally unhelpful. But that was three months ago. I’ve moved up the learning curve. Maybe I’ll find it semi-comprehensible by now.

      As for the average citizen understanding any of it, forget it. Insofar as the Average Joe is interested (not much), he will rely upon trusted others — journalists for some, environmentalists for others, industry spokesmen for yet others — to keep them informed.

      • I wouldn’t bother reading it again Jim. There will be another PJM study coming along in a few months, this time modeling the actual rules.

        PJM is in a strange position having among its members deregulated Eastern states like Maryland, New Jersey, Delaware and the always odd District of Columbia. Then it has the heavy coal states of Kentucky, West Virginia and Indiana and Ohio to a slightly lesser degree. The first 3 of those remain served by vertically integrated utilities, meaning the local regulatory commissions have much greater influence over rates than PJM does. Ohio has deregulated generation, as has Pennsylvania, but both of those states are well positioned to transition to a gas generation environment, being atop the Marcellus and Utica shales. The part of Illinois that is in PJM is home to Commonwealth Edison, the nation’s largest operator of nuclear, some of which appears to be as threatened as the old coal plants that are withering away.

        Then there is Virginia plugging right along in its unique regulatory environment that has incented the construction of thousands of MW of new generation since 2007, including, yes, the coal-fired plant down at Wise.

        I guess the point is, I wouldn’t want to be a PJM modeler.

  4. Jim complains about the loss of fact-based news in the very next post after he essentially promotes an industry group with clear conflicting interests – “study’.

    and this is the same group that got caught forging comments to the Feds.

    yes indeed, propaganda, misinformation, disinformation from obviously biased groups is preferable to a JRM report.. better to get that sound bite from the overtly biased group…. and conjecture.

    Clean Coal Electricity? JESUS…!!!

    • A. I very clearly labeled the ACCCE as an interest group with an axe to grind.
      B. I did not “promote” the group. I summarized what it had to say, with appropriate reservations and caveats.
      C. Your real problem is that I don’t accept the EPA or the environmental lobby as handing down the divine truth from on high — I regard them as entities that pursue their own self-interest like everyone else.

      • you cited a group that is known to lie… as an equal voice to the EPA.

        you actually do not dispute the EPA data – you impugn it with stuff like this.

        that’s not objective at all.. you’re giving credence to a group as if they are just as legitimate as the EPA even as you give caveats.. you STILL say they have a legitimate view… then you dismiss PJM because “it’s too hard to understand”.

        geeze

        bad.

      • re: ” I regard them as entities that pursue their own self-interest like everyone else.”

        you treat the entire govt as an “interest” group with equal footing with groups like this?

        really?

        Come on Jim – you’ve gone hard over here lately.. you’re into Rush Limbaugh’s world.

  5. re: ” he will rely upon trusted others” who are they?

    you know what they’re NOT teaching in schools and there is an obvious need – is HOW to VETT information. It’s a course that a ton of people need… because they basically nowdays “trust” those who cater to their own biases…

    and you KNOW this when you’ve got things like ELECTED Senators who believe the earth is 6000 years old and mankind was on earth at the time of Dinosaurs… and worse.. much, much worse.

    people want simplistic sound-bites from “trusted” sources … like ???

    who ? all the groups that agree with your own politics?

    😉

    • My point exactly: who can you trust? Especially when the people supposedly tasked to speak in the public interest violently disagree with one another? I simply want to point out that there are others, such as PJM, who are working on it and who don’t have the built in biases of the Coal Lobby. Although I agree with Jim that PJM’s initial effort was a. filled with obtuse industry slang and b. qualified to death, the ‘testimony’ by Mr. Kormos is a pretty good explanation of what it means.

  6. There are many complicated issues involved here. When they are addressed by one industry that is greatly affected by the proposed change, often certain issues get overemphasized or distorted.

    Peabody Coal, which was one of the largest coal suppliers back in my utility days, has lost over 85% of its stock value. This is due not only to closure of American coal – fired plants, but lower exports of coal around the world, especially to China (China is by far the world’s largest coal producer now). Lower worldwide economic growth reduces the role of exports as a savior for coal companies so they have to try and maintain a domestic market. It is understandable that the coal industry is doing everything they can to improve their situation including using scare tactics about higher rates. However, the coal industry will not admit to the high external costs of using more coal (environmental and health effects) that are larger than inflated estimates of higher costs.

    The rapid decline in costs of wind and solar is not directly related to the CPP. These renewable sources would be an economic threat to coal plants regardless of the EPA regulations. Coal plants are not good complements to renewables because they cannot vary their capacity rapidly or efficiently. Gas-fired peakers are a much better match (combined-cycle units much less so).

    There is an important distinction to be made here. For example, if we were to pursue energy efficiency aggressively – ratepayers would save money (even if they didn’t install efficiency measures) because the peaks would be lower. Thus fewer rates riders (to pay for new power plants) for everyone. However, we still need healthy utilities to maintain an intelligent resilient grid. If utilities revenues are less, because of lower energy consumption, rates would have to increase to provide them with suitable returns. We could have higher rates but lower utility bills.

    The CPP discussion hides the overall strategic question. If the air, water, land and related human health effects of mining and burning coal and disposing of fly ash were included in the price of coal (this is truly free market pricing) there would not even be a discussion of a cost advantage for coal. If a real or “shadow” price for carbon was attached it would be even less competitive. We often get involved in these heated discussions about issues where all parties shout partial truths at one another and we lose sight of the bigger picture.

    Coal gasification and sequestration technologies are very expensive and not technologically proven. Their cost trend is going up while the price of renewables is going down.

    Many strategic thinkers believe that using generation technologies that do not have a fuel cost protects us from cost shocks in the future. Once a solar facility is built, it is fairly predictable what the cost of the energy produced will be throughout the 25 -35 year life of the facility. The same cannot be said of coal or gas plants.

    Forward thinking utilities and regulators are looking at shifting the basic load following method for utilities. In the last 100+ years utilities have added supply to follow demand, with many generating assets being used very little. If instead, we varied demand to correspond to supply, many generating assets would be used to their full capacity, lowering costs and avoiding ancillary costs such as transmission lines, etc.

    It’s time that poor strategic choices such as coal gradually decline and take their place in the dustbin of history.

    • Excellent comment, Tom.

    • Yes, good comment, covering a lot of issues. I especially agree, “If the air, water, land and related human health effects of mining and burning coal and disposing of fly ash were included in the price of coal (this is truly free market pricing) there would not even be a discussion of a cost advantage for coal.” Reflecting the fully loaded societal cost in a generator’s market price would be an economists’ dream; but it ain’t gonna happen anytime soon. What we could do is impose some of those societal costs on the coal producers; but that ain’t gonna happen anytime soon, either.

      “Many strategic thinkers believe that using generation technologies that do not have a fuel cost protects us from cost shocks in the future.” That’s like any business decision to spend capital up front to control or eliminate a future cost — like buying your office building instead of renting. Of course the up front cost has to be reasonable, compared to the on-going cost avoided.

      “If instead, we varied demand to correspond to supply, many generating assets would be used to their full capacity.” We should all be for it! But controlling demand means controlling what the customer wants, and that requires either a strong price signal or a (likely very unpopular) set of mandatory usage controls. Moreover, the more you flatten the demand curve, the smaller the cost savings from further flattening — which is to say, this is a limited resource which will not eliminate the demand curve. Now, if we could complement those efforts with some distributed generation and distributed new-technology batteries . . . .

      • I’m hopeful that simple innovations will help with the demand curve flattening. Thermal storage might be cheaper than battery storage, at least initially. In Hawaii, we used electricity to make ice, off peak, then used the ice to assist with air conditioning during the peak. Pretty basic tech, not terribly efficient though. I think once we turn our attention to new ways of achieving the outcomes that we want, innovation will provide many pleasant surprises.

        Distributed generation and storage open up many possibilities. The more we can open up the market to new ways of doing things, customers should have many new choices and greater savings. Utilities have to be willing to be the platform where this occurs, not the one calling all of the shots. That will be a major adjustment for many of them.

        I think that is what is going on with the big coal companies. Not too long ago they had a major influence, since much of our energy and economy depended on them. Now their influence is waning as other alternatives take their place. They are making a last gasp to save their industry. And over the last few decades we have become a nation that is more easily scared into choosing short-term safety over long-term good sense.

  7. The thing is Jim BACON – KNOWS this organization is obviously and totally biased – yet he says they are equivalent to the EPA in their information!

    it boggles the mind!

    There are at least a dozen other groups – to compare and contrast their words- to at least get an idea how far apart they are from each other and the EPA.

    On some issues – Jim will work his butt off to actually get the width and breadth of an issue – to do it justice … then he just falls off the trolley some days when he’s obviously got a major partisan bee in his bonnet…

    Jim is always yammering about ROI. The EPA actually does ROI on all of their proposals and they did on this one.

    Has Jim even looked at the ROI much less critique it .

    he more or less assumes there is no ROI – and that all of the proposal is a “cost” – per the industry propaganda… who also ignore the ROI as if it does not exist.

    • Larry, do you think it impossible that senior EPA administrators behind the Clean Power Plan might be driven by political considerations? Really, truly?

      • Jim – what does the govt and senior EPA staff have as “interests” compared with industry?

        why would you think “senior staff” would have any more or less “political” considerations than say FHWA or NTSB or FAA or CDC or any other agency of the govt that is SUPPOSED to represent the public interest.

        Do you not believe the ROI that EPA has done? Have you EVERY commented on the ROI as you have done frequently for other issues?

        when you say the phrase “senior administrators” what exactly are you talking about? do you think “senior administrators” of the FBI, HHS, Dept of Interior, etc are “different” in terms of their duties?

        The CPP has specifically addressed the health of Americans and they’ve done the analysis and provided an ROI – yet you say there are politics involved… so you would take the analysis of a self-avowed industry group as better than “senior administrators”?

        you’ve drunk the political Kool-Aid Jim. In more and more of your posts of late – it’s become clear that you are headed further right and in a direction that is less and less truly objective about the issues.

        sorry.. that’s my view.. on some issues – you are fully objective – really go to both sides to the discussion – on others – you clearly have already adopted a far right position

        there are MANY different players in the CPP – INCLUDING PJM and DOMINION itself – and yet you purposely choose to give credence to an organization that has a history of bias and bad faith on the issues. Clean Coal? really?

        • Larry, Can you read?

          Here’s what I wrote: “I’m not knowledgeable enough to critique ACCCE’s econometric model but, given the plummeting costs of solar and wind power, I find that number highly implausible.”

          Does that sound like I’m giving credence to ACCCE?

          As for vested interests, yes, ideologues have vested interests, even if they don’t benefit materially from a position. Some people like power. Some people like telling other people how to live. So, yes, absolutely, political appointees to EPA are vulnerable to the temptation to manipulate numbers.

  8. Tom: “Peabody Coal, which was one of the largest coal suppliers back in my utility days, has lost over 85% of its stock value. This is due not only to closure of American coal – fired plants, but lower exports of coal around the world, especially to China (China is by far the world’s largest coal producer now).”

    I think you are confusing things. All the coal that might go to China from the U.S. is metallurgical coal to make steel. It has nothing to do with electricity generation. The reason China isn’t importing much met coal right now is that it is in an economic slump and doesn’t need more steel. There’s no connection here with the climate change debate or natural gas.

    I agree with Larry on all points. Sorry, but this all is getting so over-the-top that I must break my silence.

  9. Hello Peter. Good to hear from you.

    You are correct. Metallurgical coal is the primary type of coal that the U.S. currently exports to China. That was not always the case. Not too many years ago (early 2000’s) when China was doubling its coal fired generating capacity every year, U.S. bituminous coal was exported to China until Chinese coal mines increased their capacity (at a horrible cost to the environment and miner’s health and safety). And the worldwide economic downturn you mention was the reason I said that U.S. coal companies were desperate to try and maintain their domestic market.

    A careful reading of my posts would reveal that I thought that coal should be relegated to the “dustbin of history”. My other comments were about how renewables and energy efficiency could accommodate the decline in coal fired generation without a significant increase, or perhaps a savings in customer bills.

    My last comment was intended to address what happened in this discussion. We have become a nation (a world) that is easily scared. Special interests, in this case coal companies, stake out an extreme position and spew half-truths to scare others into supporting their position.

    Our discussion became distorted – away from PJM analyses and support for alternatives that would not raise costs, to an ideological discussion of the coal companies’ position, the EPA, etc. Larry was exactly right about the coal companies being biased and selective with the facts. But a close reading of Jim’s article showed that he was only presenting their position, not supporting it.

    I have been impressed with the wisdom and experience of the various participants in this blog, across a spectrum of political viewpoints. My hope is that collectively we can return the practice of civil dialogue to being the norm instead of the rare exception. It seems it is too easy to let a partial comment push our buttons and off we go on our favorite hobby horse.

    There are forces at work that seek to divide us. If we are scared and attack one another over minor issues, our attention is diverted from the important ones. We stop assessing the facts and start arguing on ideological grounds. As citizens of this nation and the world, we share many more common interests than opposing ones. Our differing viewpoints on how to accomplish our shared interests should produce a better outcome not a stalemate.

    Lincoln told us that “a nation divided against itself cannot stand”. When divided into partisan groups, constantly squabbling with one another, we are fed by superficial facts that support our predetermined opinions. The bigger picture is obscured from our view by the dust from our constant squabbles. Our strength is in our diversity, bound together by our common interests. When we lose sight of that we become pawns of manipulators who can easily set us against one another, until we are all pushed aside.

  10. re: ” But a close reading of Jim’s article showed that he was only presenting their position, not supporting it.”

    by publishing the position of such a clearly biased and discredited organization he gave them credence they should not have received.

    Worse, Jim goes on to equate the EPA senior staff as equivalent to the Clean Coal folks… in terms of their objectivity and subjectiveness. WHERE does he get THAT from?

    so what I see is he highlights the “clean coal” while ignoring their record, accuses the EPA of nefarious deeds without one scintilla of evidence and blows off the PJM analysis.

    And the shame is that until this point – he DID have a string of truly objective and non-partisan blog posts about energy and the grid – then he just drives right off the cliff… with his “the price of electricity could double” tripe – grade A propaganda from a group we KNOW would just LOVE to have that headline PLANTED in any publication…

    giving no breaks here – Bacon’s feet should not only be held to the fire – they should be left to turn into charcoal!

    😉

  11. Larry
    I agree. Bacon must be sizzled.

    • Peter – you are NEEDED HERE!

      Bacon is running of the rails..!!!

      and like I said – he’ll do a really good effort on something – no bias, just facts, and excellent analysis

      then he must eat something strange from time to time or get into soe really potent right wing swamp gas – or take some meds or something cuz the next thing you know – the most odious right wing dribble gets put to print and loyal readers are forced to sniff the really odious stuff…

      then the man has no shame at all – he DEFENDS it – like it’s not total tripe …!!!

      we need your help Peter. BR is turning into yet another polluted parrot!

  12. I don’t want to endorse ACCCE, but to some extent they are saying the same thing I said in my CPP analysis here on BR. EPA has a utility model that apparently says that Virginia utilities will automatically choose on their own to shut down most of their coal power plants by 2020, before the Clean Power Plan takes effect. EPA told me their model, which predicts a Va. reduction from 1470 to 959 lbs CO2/MWhr by 2020, takes account of cheap natural gas and other factors. This gives the EPA a basis to estimate what additional coal plants may be shut down due to EPA’s new plan.

    If EPA’s model indeed predicts Virginia will, on its on accord by 2020, shut down all but one or two coal plants by 2020, then it makes sense that EPA could be under-estimating the cost impact caused by the CPP. I have asked DEQ to review the EPA model and advise the public if Virginia agrees with it.

    I am not hearing much back from DEQ or EPA on this matter. Time is a wasting, and DEQ needs to promptly get back to the public on this matter due to the ultra-short time fuse EPA put on it. I was mystified when attorney general Herring recently made a staunch pro-CPP filing to the federal courts, on behalf of Virginia, when we don’t even know yet if Virginia can comply without severe pain. Maybe he knows more than I do, but OK just tell us how Va. expects to comply?

  13. I would think that more than one organization would have replicated what the ACCCE said including Dominion, Duke and Southern, PJM, etc… if it had real credence.

    The fact the ACCCE has been involved in some nefarious activities – taints them in my view – and require others backing up what they are saying to have any real credibility.

    I would think that on the cost aspect that PJM would have some solid analysis since they are working a much larger region than just Va.

    keep in mind also that the EPA did do an ROI in terms of health impacts which for some reason the fretters just totally ignore like there is no real health cost to continue to use coal.

    to me – that undermines those who say they are worried about “costs” but not costs to people’s health.

    • Just a week or two ago, EPA published the Clean Power Plan in the Federal Register. By law, no legal challenges of CPP can start until then. Since then, I believe over 20 states have already filed against the CPP plan. That’s why our state attorney general recently sent a conflicting opinion to the court, saying he sides totally with EPA on this matter. But I do not observe a failure of many other states/utilities to support the ACCCE’s general logic, like you inferred above (excepting of course Virginia’s and New York’s attorneys general).

      Another strategy factor though, some companies have changed approach. The old days of adversarial fighting over EPA environmental regulations has proven to be a losing formula for industry. Many firms now take more of a “can do” attitude. Witness the “new” auto industry agreeing to meet 52.5 Fleet average CAFE MPG by 2025. It may well be impossible, but the public has tired of hearing that excuse. So it can be better for a company to march forward and try to comply. Another example of “impossible dream” legislation was cellulosic ethanol. We are just forced to go with the flow sometimes to see if the plan works in practice, or if it is flawed.

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