APPA, Consumer Groups Decry Climate Bill Provision to Allocate Allowances to Merchant Generators
“At a time when consumers are facing extreme hardships from increasing energy costs and shut-offs of utility service, implementation of a carbon mitigation policy must be done in a manner that achieves needed emission reductions at the least cost to consumers,” the groups stated in the letter.
The groups maintain that because these generators are not owned by a regulated utility, no authority can ensure that consumers receive the benefits of the free allowances. Providing allowances to these generators would also decrease the amount of allowances available to local distribution companies (LDCs), preventing the LDC’s from softening the impact of pricing carbon on consumers.
“Regardless of whether the allowances are allocated or auctioned to generation owners in deregulated markets, consumers will see no benefit,” the letter stated. “Under a free allocation, generators will just add to their electricity price the opportunity cost of holding, rather than selling, the allowance. Coal and natural gas plants will therefore simply add an estimated market price of the allowance to their price charged for electricity.”
“Because these generators sell into the organized wholesale electricity markets, the structure of these markets will further exacerbate the increase in the cost of achieving carbon reduction goals by raising the price of all electricity sold in these markets — including renewable and nuclear generation which emit no carbon — and severely distort the market price signals for carbon that are integral to the success of any cap and trade program.” The groups concluded.
The full text of the letter is available at: http://www.appanet.org/files/PDFs/WaxmanMarkeyltrAPPA051809.pdf
APPA (www.appanet.org) is the national service organization for the nation’s more than 2,000 community- and state-owned electric utilities serving 45 million people.
SOURCE American Public Power Association