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Commissioner Robert F. Powelson Pennsylvania PUC October 1, 2009 Annapolis, MD

Cap and Trade: A Colossal Failure of Common Sense. Commissioner Robert F. Powelson Pennsylvania PUC October 1, 2009 Annapolis, MD. OPSI Climate Change Panel. Coal: “Part of America’s Energy Future”. According to President Obama, the U.S. is “the Saudi Arabia of coal.”

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Commissioner Robert F. Powelson Pennsylvania PUC October 1, 2009 Annapolis, MD

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  1. Cap and Trade: A Colossal Failure of Common Sense Commissioner Robert F. PowelsonPennsylvania PUCOctober 1, 2009Annapolis, MD OPSI Climate Change Panel

  2. Coal: “Part of America’s Energy Future” • According to President Obama, the U.S. is “the Saudi Arabia of coal.” • Interview with the Canadian Broadcasting Corporation • Vice President Joe Biden: “This is not rocket science. Coal is a part of our energy future. We have enormous reserves. … We can provide clean coal technology, not only exporting that technology, [but also selling it].” • Campaign rally in St. Clairsville, WV • Obama / Biden Campaign Promise (9/23/08): Creation of a Clean Coal Jobs Task Force • Clean Coal Jobs Task Force

  3. But….. ? Obama & Biden: “Saudi Arabia of coal?” Or anti-coal? President Obama: “If somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them.” Biden Contradicts Himself on Coal

  4. Economic Impact of H.R. 2454: U.S. • According to recent estimates by the Congressional Budget Office (June 2009), climate change legislation would cost the average American household $175 annually by 2020. • This estimate is significantly higher than that previously released by the EPA ($98-$140 annually). • The CBO released a report in mid-September estimating that the climate change bill would reduce the U.S. GDP by as much as 3.5% by 2050. • National job loss estimates: • 1.9 million jobs lost by 2020 • 3.2 million jobs by 2050* * “Impact on the Economy of the American Clean Energy and Security Act of 2009 (H.R. 2454),” Charles River Associates, May 2009.

  5. Economic Impact of H.R. 2454: PJM “Impact of Climate Change Legislation on Electricity Prices in PJM”(1/23/09) • In January 2009, PJM undertook a comprehensive study of H.R. 2454 and analyzed its impact on wholesale power prices within the RTO. PJM found that 75-80% of the price established for CO2 would flow through to wholesale electricity prices. • Note: In 2008, coal was on the margin 70.8% o f the time in PJM. • Another telling story comes from ERCOT: In a similar study conducted by the RTO, CO2 prices are estimated to be between $40-$60 per short ton - this would result in an annual increase in wholesale power costs of approximately $10 billion, which would increase customers’ monthly bills by over $300 annually by 2013. Higher gas prices would increase wholesale power costs to approximately $20 billion.

  6. Economic Impact of H.R. 2454: PJM(cont’d.) PJM Study: The numbers tell the story! * Emissions reductions are only 25 million tons because gas prices also rise to nearly $10/mmBtu.

  7. Economic Impact of H.R. 2454: PJM(cont’d.) Load-weighted average LMP increases by approximately 75-80% of the CO2 price in both the base gas and high gas cases, regardless of the price of natural gas.

  8. Economic Impact of H.R. 2454: Pennsylvania Background: • Pennsylvania = 4th largest coal-producing state • Roughly 7% of the nation’s coal supply is in PA • 58% of all electricity used in PA comes from coal In short, Pennsylvania and other coal-reliant states will be disproportionately affected by climate legislation. • Electricity costs could increase by as much as 40% by 2030 • Job loss impacts range anywhere from 71,000 to 98,000 jobs • GSP is forecasted to drop by roughly 7% • At a 20% emissions reduction goal, a new carbon scheme system would impose a tax of $92.66 per metric ton of CO2 in 2020. This would cost ratepayers $6.45 billion in 2020 and would increase to $55.34 billion in 2050.

  9. Economic Impact of H.R. 2454: Pennsylvania(cont’d.) The Economic Impacts of Proposed Cap-and-Trade Legislation on the State of Pennsylvania (Beacon Hill Institute, Suffolk University - June 2009) Based on data from CBO and the Energy Information Agency, the estimated cost of CO2 will be $15/short ton in 2012, resulting in an approximate cost to Pennsylvanians of $636.7 million.

  10. Is there a middle-ground compromise or some type of common-sense approach to this issue? YES! To quote President Obama: “The development of renewable energy sources can actively contribute to job creation, predominantly among small and medium sized enterprises which are so central to a Community’s economic fabric, and indeed themselves form the majority in the various renewable sectors. Deployment can be a key feature in the regional development with the aim of achieving greater social and economic cohesion within the community.”

  11. Necessary Considerations • Alternative Energy: Congressional leaders should debate the merits of adopting a national RPS which exempts those states that already have them on the books. Such a system should also include sources like waste coal. • Pennsylvania passed the AEPS Act in 2004, which calls for an 18% target for renewables by 2020. • PJM studies show the inclusion of renewables, such as wind, can have positive effects such as mitigating increases in LMP, wholesale power costs, customer power bills, and CO2 emissions. • The addition of 15,000 MW of wind, for example, can reduce customer bills by $42-$48 annually and reduce CO2 emissions by 34-37 million short tons. • Clean Energy Deployment Administration (“Green Bank”): Congress should support the formation of CEDA to fund viable renewable projects. • Initial capitalization: $7.5 billion in “green bonds” issued by the Treasury • Independent corporation chartered for 20 years, charged with: • Providing access to affordable financing for widespread development of clean energy, energy efficiency, and advanced energy infrastructure technologies • Issuing direct loans, letters of credit, and loan guarantees for such projects • Recommending near-, medium-, and long-term goals for the deployment of such technologies.

  12. Necessary Considerations(cont’d.) • Coal:One of our nation’s cheapest, most efficient energy sources should be considered vital to America’s future. Additionally, increased investment should be made in new nuclear, natural gas , and CCS demonstrations. • A legal, regulatory, long-term vision must be created for carbon capture & sequestration technology so that we beat other nations to the punch. • Energy Efficiency/Demand Response: These techniques should be made part of the overall energy mix. • PJM studies estimate that a 2% reduction in demand could reduce wholesale power costs by $3-$4 billion, reduce customer bills by $12-$36 annually, and contribute to the reduction of 14 million short tons of CO2. If this massive carbon policy idea is an economic failure, there must be off-ramps to address things like sizable increases in electric rates, unemployment, and stagnant GDP growth.

  13. THANK YOU

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