Coal utilities weigh in on the carbon policy
Something old, something new, something borrowed …
For years, utilities have blurred the line between their interests and those of their customers (which are, under the rules of cost-plus rate-making, precisely opposed). Typically, this argument is used to frame rate cases in the form of, “if we can’t raise rates on customer X, we’ll be forced to raise rates on customer Y. Let us tell you how tragic that would be from customer Y’s perspective, to cloud the fact that we’re asking to increase rates on customer X.”
I’m oversimplifying, but only just. Ameren is now applying this old idea to carbon policy, saying that the problem isn’t what carbon policy will do to their shareholders (perish the thought!), but what it will do to their customers. Article from Restructuring Today ($ub req’d) below the fold:
Ameren weighed in on global warming policy Friday, saying whatever action the government takes needs to consider the impact on areas such as the Midwest that rely heavily on coal.
It issued a report called “Stewardship — Balancing the Needs of Our Environment, Our Customers and Our Economy.”
“Effective climate policy must balance the benefits to the environment against the potential for significant damage to the economy in the Midwest and throughout the nation,” said CEO Gary Rainwater.
The utility has operations in Missouri and Illinois and supports mandates to create a meaningful cut in CO2 emissions as long as economic considerations are taken into account.
Ameren gets 85% of its power from coal and it worries that some policies being considered could double power prices by 2030.
The firm pledged in its report to continue improving efficiency at its coal plants.
Such efficiency growth can be done now but it’s role in cutting carbon dioxide is limited, said the firm. What’s really needed is carbon capture and storage (CCS) for coal plants.
The technology shows promise — but it’s decades away from being commercially available, said the report.
Whatever policy Congress adopts needs to take into account that CCS and other critical technologies will take time to come to fruition, said Ameren.
The IOU plans to boost renewables and efficiency and wants the door left open on building new nuclear plants to meet the challenge, too.
A cap-and-trade system should give allowances based on historical emissions and it should include a safety valve if credit prices get too high, said Ameren.
The program needs to regulate a broad swath of the economy including motor vehicles — and the US can’t act alone to stop global warming, said the report.
The report detailed how Ameren worked over the past two decades to cut emissions in advance of regulatory mandates and how it intends to address GHG emissions.
An assessment of technology options available today to cut CO2 is included.
The heck of it is, even on its face this press release make no sense. The cost of coal is doubling, even without carbon policies, thanks to more expensive capital and the requirement to be Clean Air Act compliant. Putting on carbon sequestration means it’ll be closer to tripling. But even if it “only” doubles, coal’s in trouble.
That said, this all brings to mind one of my favorite court cases, Public Service Company of Indiana, Inc. v. Federal Energy Regulatory Commission. (575 F.2d 1204 (7th Cir. 1978)) In that case, Public Service Company of Indiana had asked for rate increases on precisely this same, “it’s not me, it’s my customers” logic, in this instance with respect to rates they wanted to raise to the city of Frankfort, Ind. The disingenuous request was beautifully shot down in the court’s ruling:
It is somewhat incongruous for PSCI to argue as to the best interests of Frankfort. It, nonetheless has helped to make a persuasive showing that that community might be injured by the rate disparity … While our decision potentially lowering the rates charged to Frankfort is not what PSCI has requested, it should at least assuage its concerns about Frankfort’s citizenry.
Amen. Let’s use the same pen to nip this anti-GHG reduction claptrap.