EPA document creates crossfire between Midwestern utilities and enviros

A new U.S. EPA analysis requested by Sen. Russ Feingold (D-Wis.) is spawning a lobbying frenzy among Midwestern utilities that claim the document shows they will be treated unfairly under federal climate legislation.

They say the assessment reveals that states like California will receive a financial windfall under a global warming bill, while states like Wisconsin will not get enough help and will have to spike electricity rates as a result.

"The EPA document just confirms the formula will disadvantage Midwest states for decades to come while the coastal states will hit a 'federal jackpot' every year over the life of the new program," said Zachary Hill, senior manager of federal government affairs at Alliant Energy, a Wisconsin-based utility.

Some environmentalists are counterattacking that the three-page report is flawed because its author relied on questionable methodology and analyzed only one part of a bill that passed the House earlier this year. They also say a Senate version of climate legislation is still being drafted and could make EPA's statements moot.

"I have not been particularly impressed of certain aspects of EPA modeling," said Joe Romm, a senior fellow at the Center for American Progress. "It looks to me like they've done what is easy for them to do, but isn't accurate."


At issue is the document's focus on a section of the House legislation prohibiting utilities from receiving more carbon allowances than what is "necessary to offset any increased electricity costs" to consumers. The text was added as part of a late compromise in the House to help bring more coal-state lawmakers from states like Missouri and Indiana on board.

Under a mandatory cap on greenhouse gases like the one called for by the House measure, businesses would have to hold a limited number of allowances matching their annual greenhouse gas output.

Green groups claim EPA analysis is incomplete

Yet the EPA analysis argues that enactment of the bill's ban against overallocation of allowances could be difficult because of the complexities in estimating electricity costs, among other things.

"The prohibition provision would be very difficult to implement because it would require a great deal of speculation," the EPA document states.

Many Midwestern utilities and their supporters jumped on the data and argued that companies in some states like California would get an unfair financial boost with climate legislation. Kirk Johnson, vice president of environmental policy at the National Rural Electric Cooperative Association (NRECA), pointed to a chart created by EPA showing that coastal states fare far better than other ones in a mandatory climate regime.

A slew of utilities in the country's interior have been protesting the House bill since its passage. Recently, the Edison Electric Institute, which represents large investor-owned utilities and helped draft parts of the House bill, called for more free allowances to flow to these small generators in states like Ohio to bring them on board (ClimateWire, Sept. 21).

But Romm and supporters of congressional action on climate are questioning whether the EPA data are valid in the first place.

Romm said it was not clear, for example, whether the calculations of emissions of a state like California included imported electricity from coal-fired power plants in Arizona. The EPA assessment simply states that estimates were based on 2006-2007 "retail sales" of electricity.

Dan Lashof, director of the climate center at the Natural Resources Defense Council, made the same argument and added that the analysis appeared to have been put together rapidly.

Senate bill still full of blanks

Others noted that a prior analysis from M.J. Bradley & Associates LLC, an environmental consulting firm, found costs to Midwestern consumers would be minuscule under the House bill sponsored by Reps. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.).

At the same time, Lashof said the document might be EPA's way of saying "it's nervous about the language" and needs clarity. He suggested the Senate could "go a long way" toward resolving confusion on the issue by adding specific wording that no utility can get more allowances than its emissions.

A just-released Senate version of climate legislation sponsored by Sens. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.) left blank many of the details about allocation of carbon allowances in a mandatory cap on greenhouse gases.

EPA did not respond to criticisms from environmentalists about the document's methodology yesterday. But in an earlier statement, spokeswoman Adora Andy questioned the idea that the new document shows the House bill would take money from interior states and give it to coastal states. She pointed to a larger investigation of the House bill performed by the agency earlier this year.

"In fact, EPA's comprehensive analysis of the House-passed bill -- an analysis that has been public since June -- indicates that the bill would not impose hardship on any state," Andy said.

The lobbying push started after Feingold's office released the document to utilities in Wisconsin, which then began a mass e-mail chain. Feingold's office provided the original EPA analysis to E&E after variations of the text with attached commentary starting circulating among lobbyists last Friday.

"I have heard concerns from my constituents about how the climate change bill could unfairly impact Wisconsin. The data from the EPA was requested as part of my effort to learn as much as possible about the bill and ways to improve it. I look forward to working with the administration and my colleagues in the Senate to ensure we address the serious problem of climate change without unfairly hurting Wisconsin," Feingold said in a statement.

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