Legislation

President Obama’s Administration, as well as Congressional leadership, are very concerned about global warming and the potential changes it may have on the climate and environment. The Environmental Protection Agency recently determined that CO2 is a pollutant and harmful to public health. This, as well as ideological principals, has initiated major legislative initiatives to reduce CO2.

Energy is central to economy and certainly related to the environment. The resources utilities use to generate power come from the earth and the balance of how they are used in relation to meeting the electrical needs of customers is central to the debate.

Federal legislation has varied since the 2008 Presidential Election, but as this chart shows, today's proposal, called the American Clean Energy and Security Act of 2009 (or the Waxman-Markey bill), has been to “cap and trade” allowances for utilities that produce CO2 during the generation of electricity.

NPPD projects that it will generate 10.9 million metric tons of CO2 in 2012.

The plan first proposed by then-candidate Barack Obama did not offer any allowance allocations and proposed purchasing allowances at auction for a price between $20 and $60 per ton.

• To meet the goals of this plan NPPD would have to pay between $220 and $650 million. These costs would have to be passed on to customers.

Under the Waxman-Markey legislation, NPPD and its wholesale customers (utilities that buy power from NPPD) would receive approximately 5 million allowances, but would still need to purchase 5.9 million allowances at an estimated cost of $20-60 a ton.

• To meet the goals of this plan NPPD would have to pay between $120 and $350 million. Again, these costs would have to be passed on to customers.

NPPD would also need to change its fuel mix to generate more of its power from non-carbon emitting resources, which are traditionally more expensive than coal, NPPD’s least-cost but most abundant resource. You can see the proposed difference in NPPD’s portfolio between 2008 and 2020. Generating with higher-cost fuel means higher costs for customers.

There are many uncertainties that must be addressed. Some questions include:

• Will new nuclear power plants be built as part of the plan to reduce America’s dependence on foreign oil and reduction of emissions? Nuclear generation produces no CO2 emissions.
• Will carbon capture and sequestration occur on a large scale? If so, how soon? How much will it cost?
• Will there be a national renewable portfolio standard that will require the construction of wind facilities and other renewable generation resources in every state? Will these costs be on top of the costs associated with allowances?
• Will coal fired facilities be required to install expensive pollutant control equipment that addresses emissions unrelated to CO2? If so, this could costs billions more.
• How long will natural gas prices remain low?

The answers - and the solutions - are not easy.