Friday, June 12, 2009

So...How Much Will This REALLY Cost Me?

If you’ve been keeping up with the latest news and developments with the American Energy and Security Act (aka Waxman-Markey Bill), you are probably intrigued by all of the speculation as to what the end costs will be to electric consumers. Chances are you have seen numbers ranging from about $100 per year, or all the way up to $3,000+ per year for the average household.

For many of our customers, particularly those on a fixed income, even a $100 annual increase is a big issue. But what about the predictions that call for increases above $3,000 per year? Such a wide range of predictions makes it difficult to get a grasp on exactly how Waxman-Markey will affect your budget.

So…why there is such a wide gap in the range of predicted increases? It all comes down to several factors that will play a part in “how big” those increases will be. We have outlined several important factors for you to think about:

  1. Where will the carbon dioxide level be established?
    Currently, the level of CO2 reduction sought by Waxman-Markey calls for a drop in carbon emissions by 17 percent by 2020, and over 80 percent by 2050 compared to levels from 2005. (SOURCE) NRECA CEO Glenn English recently acknowledged that the emission caps have been improved slightly. But he says, “While the emission caps in the bill have been lowered somewhat, we believe they are still overly aggressive in the early years of the program and will need to be adjusted”.


  2. Under cap & trade, how high will carbon credits go under the management of Wall Street?
    The purpose of a cap and trade system, as explained by President Barack Obama, is to cause the price of fossil fuels (such as coal) to skyrocket, and force consumers away from this more affordable source of generation. This would be achieved by requiring power plants that emit carbon above the “cap” level to purchase carbon credits on the market. Putting carbon credits up for auction puts electric consumers at the mercy of Wall Street. The cost passed on to the consumer will depend upon the level of competition to acquire these credits.


  3. Will a carbon tax be imposed for carbon emissions?
    An initial carbon tax has been proposed that would be collected by the Federal Government for all carbon emissions up to any cap adopted. The amount of that tax is purely speculative and the range of speculation is large. The Federal Budget was initially designed anticipating this tax revenue, and without it, proposed programs could be unfunded. There has been opposition to this tax as it is not connected to carbon reduction but rather budget financing. It is a cost factor that contributes to the speculation of just how much rates might increase with passage of global warming legislation.


  4. What will be the cost to replace existing generation?
    In Nebraska we are fortunate to have had the service of nuclear power in our generation mix, as well as the addition of supplemental power provided by wind. But with 68 percent of our state’s generation coming from coal, there will undoubtedly be large investments required to replace that generation with lower emitting or emission-free sources.


  5. How fast will we try to achieve goals?
    As mentioned previously, the first goal for CO2 reduction comes in 2020, just over one decade from today. During those years Waxman-Markey, as it currently reads, requires an increase in a combination of renewable energy and electricity savings. This increase begins at 6 percent renewable generation in 2012, and the requirement will gradually rise to 20-percent by 2020 ( SOURCE: see "Clean Energy Provisions"). By the way, nuclear power, which is a non-carbon-emitting source of power, is not considered to be renewable generation (such as wind, solar or biomass). Although NPPD currently produces 34% of its electricity from non-carbon emitting sources—much of that being nuclear--only one percent of its mix specifically comes from wind power. Increasing wind generation to six percent by 2012 will be a tremendous investment which, of course, is passed down to the consumer. Let’s not forget that some of the proposed solutions contained within the legislation—such as carbon capture and sequestration--have not even been developed for coal power plants. So, the goals set for the timeframe of CO2 reduction need to take the large investments into consideration, and the lack of technology currently available to capture CO2.

    When you consider all these factors, it’s easy to see that the formula which determines your future increases is difficult to nail down. Much of what you have seen in the news and heard from legislators is based upon a combination of both fact and opinion. We feel the potential for significant increases in electric cost is very strong, and will depend upon the compromises reached as this bill continues its journey through Congress and later our Senate.

    With Waxman-Markey navigating its way through various committees in Congress, this is a time for us all to work together, and issue a challenge to our Senators and Congressman to carefully weigh the implications of the above mentioned factors on the affordability of electricity. There are those who believe that we SHOULD pay dearly to bring about significant reductions in carbon emissions, and they are certainly doing their part to be heard. If you would like to see these issues addressed in the most affordable manner possible, then you too need to be heard.

    Let’s keep the conversation going, join us in the Our Energy, Our Future campaign and let’s keep these concerns at the front of the minds of our elected officials. Look for a form in your most recent SPD Customer Newsletters to voice your concerns, visit Southern's OEOF website.