Utilities split on climate legislation
By MarketWatch
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Their defection opens a rift between companies that fear billions of dollars in higher operating costs and those moving now to tackle the challenges posed by stricter laws against carbon emissions.
Collectively, the climate change legislation that passed the U.S. House of Representatives in June could cost $566 billion, or 0.3%, of gross domestic product between 2012 to 2030, if it becomes law, according to the U.S. Energy Information Administration.
The higher costs from emissions caused by making and burning fuel and generating electricity may not be shared equally by utility firms or other polluters, igniting efforts from a growing list of stakeholders to focus on a newer climate change measure working its way through the U.S. Senate.
Exelon, PG&E Corp., PNM Resources, Apple and even some coal-fired power companies such as AEP now find themselves at odds with the U.S. Chamber of Commerce by supporting current climate-change legislation.
Besides the chamber, the opposition also includes a small, coal-powered utility cooperatives, refiners such as Valero Energy Corp. and others that face sharply higher expenses for emitting greenhouse gases under current climate-change proposals.
PG&E Corp., parent of Pacific Gas & Electric, California's biggest utility, was the first to formally break with the chamber.
In a September 18 letter, PG&E Chairman and CEO Peter Darbee cited "fundamental differences" over climate change: We find it dismaying that the Chamber neglects the indisputable fact that a decisive majority of experts have said the data on global warming are compelling and point to a threat that cannot be ignored."
Under the Waxman-Markey bill passed in the House in June, the U.S. government would certify 4.6 billion carbon allowances in 2012 at an inflation-adjusted price of $17.46 a ton, placing the value of the U.S. carbon market at $84 billion. That legislation was sponsored by Reps. Edward Markey, D-Mass., chairman of the House Select Committee on Independence and Global Warming, and Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee.
A bill that would set even stricter emissions caps was unveiled on September 30 by Sens. Barbara Boxer, D-Calif., and John Kerry, D-Mass. The U.S. Chamber's role in climate-change lawmaking has tapped into the underlying dispute in the utility industry over the allocation of those valuable allowances.
Platts editor Catherine Cash said small utility cooperatives around the country will push the Senate for a greater share of free emission allowances than they were set to receive under the House version.
The National Rural Electric Cooperative Association and others have flooded Capitol Hill with a half million postcards urging lawmakers to increase the share of credits doled out to smaller power companies whose plants are fueled by coal, Cash said.
On the other hand, generators with low carbon emissions, including those using nuclear power to generate electricity, currently stand to benefit from climate legislation, and continue to push for it.
"The real in-fighting in the utility industry is going to be over the free, tradable carbon allowances that the sector is given," she added.
Known as one of the best-funded lobbying groups in Washington, the U.S. Chamber of Commerce leads the pack of those opposing the cap-and-trade laws backed by President Barack Obama and some members of Congress.
The 3-million-member organization opposed the Waxman-Markey bill because of its projected cost to small businesses and impact on jobs. The chamber also has opposed the U.S. Environmental Protection Agency's move to regulate greenhouse gas emissions under the Clean Air Act.
The controversy over the U.S. Chamber's stance heightened in August, when one of its representatives, William Kovacs, called for a "Scopes Monkey Trial" to test the science behind climate change, a reference to the 1926 case that pitted creationists against evolutionists in public education.
Kovacs later called his analogy "inappropriate," but some powerful members, mostly from the utility sector, decided to take action of their own.
Soon after PG&E quit, Albuquerque, N.M.-based utility PNM Resources Inc. scrapped its membership as well.
"We believe the science is compelling enough to act sooner rather than later, and we support comprehensive federal legislation to meaningfully reduce greenhouse-gas emissions and protect customers against unreasonable cost increases," PNM said.
Exelon Corp., the nation's biggest nuclear power generator, also joined the fray.
"Inaction on climate is not an option," Exelon Chairman John Rowe said. "If Congress does not act, the Environmental Protection Agency will, and the result will be more arbitrary, more expensive, and more uncertain for investors and the industry than a reasonable, market-based legislative solution."
In the past week, Nike Inc. said it would quit the Chamber's executive board over climate change, but remain a member.
Computer giant Apple Inc. said on October 5 it also would leave the group for its failure to "take a more progressive stance on this critical issue and play a constructive role in addressing the climate crisis."
The defections drew praise from Energy Secretary Steven Chu, who told reporters at a solar energy event in Washington that the moves were "wonderful" and said more companies should follow suit.
U.S. Chamber President Thomas Donohue fired back at the defections, saying Apple "didn't take the time to understand the Chamber's position on climate."
Donohue wrote that proposals in Congress threaten to cause "Americans to lose their jobs and shift greenhouse gas emissions overseas, negating potential climate benefits."
The chamber continues to call for a public hearing on the science behind the EPA's move to regulate carbon dioxide emissions as it does other forms of pollution.
Donohue said the chamber supports, "strong action on climate change" including congressional legislation, although it remains opposed to the Waxman-Markey bill.
Donahue said fewer than a dozen members have raised objections to the chamber's policies on climate change and concluded that he wasn't worried about departures, which he blamed on an "orchestrated pressure campaign."
The climate bills on the table in Washington have drawn fire from many others in business, including Valero Energy Corp. CEO Bill Klesse, who has blasted them as a "bad idea."
Although coal-fired power plants are typically cited as major contributors to global warming, not all big coal-burning companies oppose climate change legislation. Duke Energy and Alstom have publicly given up their memberships in the American Coalition for Clean Coal Energy to protest the group's stand against federal legislation.
In an opinion article published earlier this month in Midwestern newspapers, American Electric Power Chairman and CEO Michael G. Morris said he supports climate-change legislation, rather than the alternative, which is more regulation by the EPA.
"Climate action is inevitable," Morris wrote. "The only choice is whether to encourage the Senate to pass comprehensive, well-crafted climate legislation or to wait for the EPA to enact regulations under the Clean Air Act. We're pulling for the Senate."
