Thursday, April 23, 2015

The Proposed Ratepayer Protection Act Will Not Actually Protect Ratepayers

By Amelia Schlusser, Staff Attorney

On March 23, 2015, U.S. Representative Ed Whitfield (R-Ky.), Chairman of the House Energy and Power Subcommittee, introduced a discussion draft of a bill titled the “Ratepayer Protection Act of 2015,” which would allow states to “opt out” of complying with the Environmental Protection Agency’s final Clean Power Plan.

The draft bill aims to dramatically weaken state compliance obligations under the Clean Power Plan. First, the bill would extend the rule’s compliance deadlines until final judgments are issued in all legal challenges against EPA’s regulation, which could take years. Second, and more significantly, the bill would exempt a state from adopting a plan to implement the final rule if the governor determines that compliance would “have a significant adverse effect on the State’s residential, commercial, or industrial ratepayers” or “on the reliability of the State’s electricity system.” A state could also refuse to implement a federal plan if these same conditions are met. In determining whether compliance would adversely affect ratepayers, the state must take into account any potential rate increases associated with implementation of the Clean Power Plan or other federal or state environmental regulations. In determining whether compliance would adversely affect reliability, the state must consider the rule’s effects on the state’s electricity generating resources, transmission and distribution infrastructure, and projected electricity demands.

Rep. Whitfield argues that this legislation is necessary to protect coal-dependent states, like Kentucky, from rising electricity rates. According to the House Energy & Commerce Committee website, the bill “seeks to empower states to protect families and businesses from higher electricity rates and other harmful effects of EPA’s pending rule to regulate carbon dioxide emissions from existing power plants.” Whitfield described the Clean Power Plan as an “unprecedented power grab,” and stated that his “commonsense legislation” is necessary to protect states from “EPA’s damaging overreach.” House Energy and Power Committee Chairman Fred Upton (R-MI) also expressed his support for Whitfield’s legislation, stating, “[t]his bill is about protecting families and jobs.”

Supporting Alarmist Claims With Questionable Data

Rep. Whitfield rationalizes his opposition to EPA’s proposed rule by asserting that the Clean Power Plan will unreasonably burden ratepayers. EPA estimated that the rule’s annual compliance costs would range from $5.4 to $7.4 billion in 2020 and range from $7.3 to $8.8 billion in 2030. Proponents of the Ratepayer Protection Act, however, cautioned that the rule’s actual compliance costs may be much higher than EPA projected. An April 10 memo introducing the draft bill argued that according to “other estimates,” the rule’s compliance costs could potentially range from $366 to $479 billion between 2017 and 2031.

The “other estimates” cited by the memo were drawn from a NERA Economic Consulting report prepared for the American Coalition for Clean Coal Electricity, the American Fuel & Petrochemical Manufacturers, and the National Mining Association, among others. While the industry-funded assessment did estimate that compliance costs would be much higher than EPA’s projections, the report’s authors noted that the data they applied in their analysis was not independently verified and may not be accurate or complete. Moreover, the report projected that implementation costs would be highest (i.e. $479 billion) under a scenario in which states refused to use renewable energy, energy efficiency, and new nuclear power to achieve compliance. These high compliance costs would instead be directly attributed to rising natural gas prices.

Lamenting Costs While Ignoring Benefits

The cost projections favored by Rep. Whitfield fail to account for the economic and social benefits that the Clean Power Plan would provide. EPA estimated that the final rule would contribute $55 to $93 billion in climate and health benefits by 2030. The Agency projected that the rule would prevent 2,700 to 6,000 premature deaths resulting from air pollution, and would avoid 140,000 to 150,000 asthma attacks in children. By reducing power-sector CO2 emissions by 30% below 2005 levels, the rule could help to mitigate the impacts from climate change, which cost the U.S. economy more than $100 billion in 2012 alone.

The Clean Power Plan will also contribute to economic growth and create significant new employment opportunities. A new report by Industrial Economics and the Interindustry Economic Research Fund estimated that the final rule would lead to 74,000 new jobs in 2020 and would contribute an additional 196,000 to 273,000 new jobs each year between 2025 and 2040.

In the aggregate, the climate, health, and employment benefits resulting from the final Clean Power Plan will more than offset state compliance costs. Moreover, the draft rule proposed to provide states with significant flexibility in deciding how to implement the rule, which should enable states to develop strategies to reduce power sector emissions at the lowest cost to ratepayers. For example, many states have substantial potential to reduce electricity consumption (and thus emissions) through increased energy efficiency, which is commonly the lowest-cost “source” of power available. In addition, states can also implement the rule through increased deployment of renewable energy resources, which can provide jobs and other economic benefits while offsetting emissions.

A Transparent Attempt to Protect Coal Industry Interests

On Wednesday, April 22, the Energy and Power Subcommittee conducted a markup of the Ratepayer Protection Act, in which the subcommittee approved the proposed bill by a vote of 17 to 12. The vote was entirely along party lines, with 17 Republicans voting in favor and 12 Democrats voting against the proposed legislation.

The subcommittee also voted against a series of proposed amendments to the draft bill. One of these amendments would have allowed states to opt out of compliance only if projected ratepayer cost increases were expected to exceed the costs of responding to climate change. Another amendment would require a state to certify that a decision to opt out would not have a significant adverse effect on public health. The subcommittee also voted against an amendment proposing to add a section declaring that “the Federal Government should promote national security, economic growth, and public health by addressing human-induced climate change through the increased use of clean energy, energy efficiency, and reductions in carbon pollution.”

The subcommittee members’ failure to approve these proposed amendments revealed the true objectives of the so-called “Ratepayer Protection Act,” which have little to nothing to do with protecting ratepayers. Instead, the proposed bill aims to protect the economic interests of the coal industry by enabling states to choose not to comply with federal air quality regulations. This transparent attempt at industry protectionism at the expense of public health and welfare exposes a growing disconnect between conservative lawmakers and the public they ostensibly represent.

If this proposed bill survives the legislative process and actually gets signed into law (which is highly unlikely, but not impossible), it will encourage coal-hungry states to opt out of complying with the Clean Power Plan to the detriment of the electricity system as a whole. The proposed regulation represents an opportunity for states to modernize their electricity sectors and build a more sustainable, resilient energy grid. States that refuse to implement the final rule will fail to invest in new resources and technologies that would provide lasting benefits for power consumers, and instead will continue to rely on outdated technologies and aging infrastructure. The electricity grid is a highly interconnected system, and one state’s refusal to modernize its power sector imposes additional risks on the system as whole. Moreover, a refusal to deploy non-emitting electricity resources will have long-term climate implications for current and future generations. The Clean Power Plan provides an opportunity for states to start transitioning to the electricity system of the future, and the Ratepayer Protection Act represents an attempt to remain stuck in the past.

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