 companies face with regard to coal-fired generation can be seen in a report by the National Resource Defense Council (NRDC), based on 2008 data but recently released and showing the criteria pollutants (e.g., sulfur dioxide, nitrogen oxide, and mercury) and carbon dioxide emissions of the nation’s top 100 electric generation producers. According to Dan Lashof, NRDC’s climate director, “Power companies have been on notice for more than a decade that they will need to cut their emissions of carbon dioxide and other pollutants. This report shows which companies have made smart decisions to position themselves for the transition to clean energy and which are lagging.” Three electric utility companies co-sponsored the report with the NRDC and CERES, an investor advocacy coalition that describes itself as “a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.”
Federal Regulatory and Legislative Activity Affecting Coal
Various proposals are circulating for national regulation and legislation that effectively mandate less coal consumption. These include a possible nationwide renewable portfolio standard (RPS) that would require electric utilities to generate a set percentage of their electricity from qualified renewable generating technologies. Another is a cap-and-trade bill that would force the reduction of carbon dioxide emissions. Because coal generation emits twice the carbon dioxide emissions of natural gas, any cap-and-trade policy would be targeted at lowering coal’s share of generation within the electric utility sector.
The Environmental Protection Agency (EPA) just released a proposed “transport rule” that would improve air quality in the eastern United States by reducing power plant emissions from 31 states and the District of Columbia. Specifically, it would alter the limits on sulfur dioxide, nitrogen oxides, and ozone emissions that are currently in place. According to the EPA, the rule would reduce sulfur dioxide emissions by 71 percent and nitrogen oxide emissions by 52 percent from 2005 levels by 2014. EPA projects the utilities’ cost of compliance at $2.8 billion. The agency is still working on the new rule for ozone and plans to finalize it as well as revisit the transport rule in 2012.
Because the power sector has already significantly reduced its sulfur dioxide and nitrogen oxide emissions since 1990 when legislation first required a reduction in criteria pollutants, Dan Riedinger, a spokesman at the Edison Electric Institute, said “EPA’s new proposal would require dramatic reductions in power sector emissions, on top of major reductions to date, on a very short timeline.” The short timeline is likely to increase the cost of compliance because electric utility companies frequently make technology changes when they are down for scheduled maintenance. Major changes will increase that down time, resulting in less generation output and increased equipment cost to comply with the lower emissions rates. Any legislative or regulatory policy that would reduce existing coal-fired generation or further limit their emissions will almost certainly cause an increase in electricity prices.
Although the Federal government has yet to pass an RPS or a cap-and-trade program for electric utilities, some states have already enacted such programs. The Institute for Energy Research found that, in those states that have an RPS, electricity prices in 2009 were 39 percent higher than in states without an RPS.
State Programs, Generation Mix Changes, and Electricity Price Increases
In 2009, average electricity prices nation-wide increased by 1.5 percent, a small percentage, partially because of lower natural gas prices. However, some states saw double-digit price increases. For example, West Virginia had an 18 percent increase in average electricity prices, while Virginia customers saw an 11 percent increase. Coal generation in both states was lower, by 24 percent and 17 percent, respective