Utilities are willing to accept Senate plans to reduce carbon emissions from the nation's power plants, but the industry needs concessions on other air pollutants to avoid rate spikes, a chief negotiator with the industry's leading trade group said yesterday.
The assertion comes as the Edison Electric Institute (EEI) is preparing to meet with Sen. John Kerry (D-Mass.) today, its first high-level meeting in the Senate since the chamber narrowed its climate aspirations to regulate only the electricity sector.
The positioning is fueling a fiery backlash from environmental groups, which have vowed not to concede sacred provisions in the Clean Air Act addressing pollutants that contribute to smog, haze and mercury poisoning. Many environmentalists see the current climate bill as a weak sibling of previous proposals that also sought to regulate factories and oil refineries.
The Senate's move to abandon those sources of pollution, in a scramble to find enough support for a nationwide carbon cap on power plant smokestacks, is driving utilities to seek their newest compromise: If transportation polluters don't offset the cost of carbon fees on electricity plants, another form of relief is needed, the industry says.
That can be done by delaying new regulations on other air pollutants, Brian Wolff, a senior vice president with EEI, said in an interview.
"If you add carbon into the mix, too, you've got to provide some sort of relief on the other pollutants," he said. "People always say, 'Make the polluters pay.' But who's going to pay for that? The customer," he added.
It is one of the industry's first public assessments around the Senate's sudden move away from an "economywide" cap-and-trade program two weeks ago. EEI had been an important supporter of that bygone effort by Kerry and Sen. Joe Lieberman (I-Conn.), but it failed to find support in the Senate.
"We worked so hard and so long on Kerry-Lieberman -- it took quite a while -- but we came at the end of the day to what was going to be better for our customers and do the responsible thing and put a price on carbon," Wolff said. "But to now do this [utilities-only option] in hours, I'm not sure that that's possible."
Environmental groups girding for battle
Environmentalists have been girding for more than a week to prevent Clean Air Act concessions.
"It sounds as if they're finally admitting they want to roll back the Clean Air Act as part of some deal for a weak climate bill," said Frank O'Donnell, president of Clean Air Watch. "We've drawn a line in the sand. It's a price we're not willing to pay."
His group and dozens of others, including the Environmental Defense Fund, the American Lung Association and the Union of Concerned Scientists, sent a letter to key senators yesterday warning that "delaying the cleanup of these plants threatens the health of millions of Americans."
Wolff suggested that utilities are doing their part to price carbon, a move they would be willing to undertake without other sectors facing the same regulations.
"They [the environmentalists] need to be just as committed to getting a price on carbon, and taking that first step," he said. "We've all got to swallow a bit to take that step."
The maneuvering comes as the Senate prepares for a summer sprint on energy legislation. Senate Majority Leader Harry Reid (D-Nev.) revealed Tuesday that he is drafting a bill addressing offshore oil drilling, energy efficiency and renewable power. It will also include a controversial component regulating utility greenhouse gases, though that provision is still being written.
Senate views a restaurant menu of options
For help, Reid might look to Kerry and Lieberman, who have drafted a new bill to cut utility emissions 4.75 percent in 2013, 17 percent in 2020 and 83 percent in 2050. But it doesn't outline how allowances -- or permits to emit 1 ton of carbon -- would be distributed to the nation's nearly 2,900 electric power plants.
How many would be auctioned or given to companies for free are key questions. Another is whether the bill would cap the value of allowances, a so-called "price collar" that gives industry members some certainty around their carbon costs.
Key Senate aides have spreadsheets outlining various options on how to distribute the allowances. But no decision has been made, according to one source, who expects the allocation formula to remain a mystery until Reid releases his bill, perhaps next week.
"That's the whole ballgame," the aide said of distributing carbon revenue.
Sen. Jeff Bingaman (D-N.M.), chairman of the Energy and Natural Resources Committee, is also floating a utility bill that would auction half of all the allowances and give the other half away for free when the program begins in 2012. It also collars allowance prices so they won't rise above $25.
But the most perplexing question is whether Reid can rally Democrats behind his bill. He would then need to find, probably, a handful of moderate Republicans in order to reach 60 votes.
That means the support, or opposition, of utilities might be irrelevant, Wolff said.
"I really don't think this is about cutting a deal with the utilities," he said. "They've got to be able to sell this in the Senate."