by 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.
