What impact would a clean energy standard have on utilities? During today's OnPoint, Tom Kuhn, president of the Edison Electric Institute, weighs in on the CES debate and discusses the main challenges. In light of events in the Middle East, Kuhn also explains why he believes Washington should shift its focus away from clean energy and toward oil independence.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Tom Kuhn, president of the Edison Electric Institute. Tom, thanks for coming on the show.
Tom Kuhn: My pleasure, Monica.
Monica Trauzzi: Tom, clean energy is the buzz phrase in Washington right now. What would a clean energy standard mean for electric companies that you represent?
Tom Kuhn: Well, Monica, I think that we've always subscribed to the idea that you need to use all the fuels, that we need a diversity of fuels. Electricity uses all of them. It is the stability of our system, but I think a clean energy standard, we haven't seen the specifics of the one the president has mentioned. What credits do you give for various fuels? We are moving to a cleaner, more modernized fleet over the next 10 years.
Monica Trauzzi: But you're concerned with all that's happening in the Middle East right now. Clean energy standard is perhaps not where the focus should be?
Tom Kuhn: Well, the clean energy standard is focused on electricity and, again, we think electricity is providing the answers to the growth of our economy. Everything is becoming more electrified. We have many more appliances in the homes than we did before. Ten years ago we didn't have the iPod, the iPad, the Twitter and Facebook and things of that nature. In the Middle East though I am very, very concerned. I think that's the big energy story right now. You know, eight presidents and over 40 years we have talked about reducing our dependence on foreign oil. Why can't we do it? Why can we do anything in that direction? We now have the tools to do it. We can do some increased drilling, number one, but secondly we have alternative fuel vehicles we can bring in that will make a huge difference.
Monica Trauzzi: Do you think there's a push for all of that in Congress right now or is there misguidance?
Tom Kuhn: I think there will be. I mean oil is practically back at $100 a barrel again, gasoline up close to $4 a gallon. I think that people are very, very concerned about what's happening in the Middle East. Every recession we've had over the last 20 years has been precipitated by a spike in oil prices. I think if we don't wake up soon and say we need some alternatives, we need to move forward with alternative fuel vehicles, they're available now, 25 different vehicles are being offered by the manufacturers and overseas there are even more. So it is time to move forward.
Monica Trauzzi: How do you define clean energy? It seems like everyone has a different definition of what types of energy and technologies fall under the clean energy umbrella.
Tom Kuhn: Well, you know, the fact of the matter is, our electricity is getting cleaner and, again, over the next 10 years we're going to make major differences. Nuclear plants, obviously, are very, very clean plants. The coal, we're working on carbon capture and storage because we need to maintain coal as part of our energy resources. Obviously, we're moving strongly toward renewables. Some of the higher growth areas for industry has been the introduction of renewables. And the president rightly says we should consider natural gas in the future. Natural gas is half as carbon intensive as coal and we can move forward with additional natural gas in our system, which we are doing.
Monica Trauzzi: And playing into all of this is, of course, EPA's regulation of greenhouse gas emissions. As it stands now, is the regulation reasonable?
Tom Kuhn: Well, there is no regulation yet, no specific regulation yet. They are developing ideas for regulation in the utility industry over the next year or so. There's nothing really specific in the industrial side of the equation. I understand why people are concerned and worried about it. In the utility industry we're even more concerned near-term about regulations that are coming down on coal ash, on clean water, on mercury and hazardous air pollutants. All of these regulations, in series, are going to add billions and billions of dollars to our customers' costs.
Monica Trauzzi: And so how are you working with the Obama administration to define things a bit better?
Tom Kuhn: Well, we're trying to say if we have reasonable and flexible regulations, if we-you know, we have reduced emissions of sulfur and nitrogen in the utility system by more than 70 percent over the last 30 years while electricity has increased by 85 percent. And we're going to continue to reduce in an absolute basis emissions from our power plants, but we need flexibility. We need rules where we can do this in a time period, again, over the next 10 years to accomplish these things without doing great harm to the economy.
Monica Trauzzi: A lot of folks would say just deal with it. Utilities have money, they can handle the regulations. How do you respond to that?
Tom Kuhn: Well, utilities, money goes into customers' bills. I mean this is what-the costs go into the customers' bills, so it's the customers that pay. We need to keep electricity rates reasonable in order to maintain our competitiveness and maintain jobs in this country. Jobs are the number one issue as I understand it in the political side of the equation.
Monica Trauzzi: With Carol Browner leaving the White House, how do you expect the tone on energy and climate discussions to shift?
Tom Kuhn: Well, I think that basically there's going to be a lot more congressional oversight of the regulations that are coming out of the EPA and the government in general. And I think that's a good thing. And I think that, again, there's a debate over, you know, can we reach a middle ground here to have reasonable regulation? I think we can get this job done.
Monica Trauzzi: So then what's your take on efforts to stop or pause EPA's regulation of greenhouse gases?
Tom Kuhn: Well, again, that's just focused on the greenhouse gas thing, which I understand industry is concerned about. We're focused mainly on these other rules that are coming even before the greenhouse gas regulations would come out from EPA. And, again, I understand how the industry, in general, is concerned about EPA's regulations. We are as well.
Monica Trauzzi: And would you support something like what Senator Rockefeller has proposed?
Tom Kuhn: Well, it's hard. There are about four or five different proposals out there right now. Rockefeller is a two-year delay. There's proposals that say EPA, you know, we should take the authority away from EPA to regulate greenhouse gases. We'll have to see how that all plays out.
Monica Trauzzi: Electric vehicles, I know you've been driving a Volt.
Tom Kuhn: Yes, I have.
Monica Trauzzi: How do you think the influx of electric vehicles will change the way that utilities do business and shift the marketplace?
Tom Kuhn: Well, I think it's extremely exciting for consumers. The Chevy Volt, which I'm driving, was named car of the year by Motor Trends magazine, by Automobile magazine and the Detroit auto show car of the year. This was decided by car guys, not by electric guys and it's a very, very exciting car. To operate it costs about a third to a quarter what it costs to operate a normal car. It doesn't require much maintenance and you can drive at $0.02 to $0.03 a mile as opposed to $0.12 a mile. And I haven't visited a gas station in over two months, so I think that's pretty exciting.
Monica Trauzzi: But infrastructure remains a challenge. How long do you think before that's up to speed with the number of vehicles that we want to get on the road?
Tom Kuhn: We can build infrastructure. We're building the charging stations now where the vehicles are coming out. Eighty percent of the people are charging in their homes and we can build the electric infrastructure to go along with it. We did again for all those new appliances we brought online, for air-conditioning, for refrigeration, you name it, the electric utility system has always been up to the task.
Monica Trauzzi: OK, a lot of moving parts here.
Tom Kuhn: Absolutely, Monica.
Monica Trauzzi: Thanks for coming on the show.
Tom Kuhn: Thank you very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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