Reactions to the Waxman energy legislation are going to be pouring in over the coming days and weeks. On an early read, environmentalists are enthusiastic. But who is looking out for society’s most vulnerable? Power companies, of course!

Says Scott Segal, chairman of the Electric Reliability Coordinating Council:

… the bill’s silence on a method for allocating credits leaves open the option of an auctioning system that could double up the impact on energy consumers. Those living at or near the poverty level or on fixed incomes, and institutions like schools and hospitals are likely to be particularly hard hit.

Although Segal makes no mention of the fact, credit auctions could also have particularly dire consequences for orphanages and ice cream trucks.

The issue at hand is how carbon credits will be allocated to industry under a cap-and-trade bill. Segal and the companies he represents want them to be handed out for free, rather than sold via auction. His claim is that a credit auction will “double up” the impact on consumers. Both economic theory and real-world experience in Europe suggest that this is not true. The consumer impact is the same in either case.

But a carbon auction allows the government to raise revenue that can be put to useful ends. Such as, for example, providing relief to pensioners, schools, and other groups adversely affected by higher energy prices. Weep not, gentle power companies. Permit auctions are good for consumers.