Higher Electricity/Heating Bills Coming Soon

On June 1st, the EPA is expected to publish their final rule implementing Obama’s executive order to cut greenhouse gas emissions by 30% of 2005 levels by 2030.  This executive order was issued last June.  It was a behemoth of an executive order coming in at 645 pages (which may be a record).  The President has the authority under the Clean Air Act of 1970.  The problem actually evolves from a Supreme Court decision in 2007- Massachusetts vs. EPA- which allowed the EPA to classify carbon dioxide as a “pollutant” under the Clear Air Act of 1970.  Further complicating the picture was the 1990 amendments to the 1970 law which created ambiguity over the EPA’s regulations of power plants.  Those amendments involved different interpretations between the House and Senate of how power plants can be regulated.  Usually these differences are reconciled in a conference, but both interpretations were written into the law with the EPA accepting the Senate’s version which says that if not regulated under Rule 112, they can be regulated under Rule 111(b)- the move in question here.  However, when there is this ambiguity in the statute, courts usually defer to the interpretation of the agency tasked with the regulation or rule under a legal doctrine called Chevron deference.

Twelve states and several power companies and trade groups have filed suit against the EPA and will likely fail under Chevron deference.  But, there is another area where they might have a point and any pending lower court action is likely awaiting a decision by the US Supreme Court in an unrelated case pending before them involving the technicalities of cost/benefit analysis.  If the Supreme Court rules in favor of the EPA in that case, these other courts will likely side with the EPA in the Rule 111(b) cases.

Leaving aside the legal technicalities of the law, the EPA is claiming that they avoided these cost/benefit concerns by allowing states great leeway in how they reach the goals.  According to the design of the plan, states can use one of four methods or any combination thereof.  Since coal-fired plants are the obvious targets of these efforts, states can keep coal fired plants by making them more efficient through technology.  Second, they can make natural gas-fired plants more efficient.  Third, they can expand their renewable energy portfolio or increase nuclear production since both methods emits near zero or no greenhouse gases.  Finally, they can mandate and regulate end-user efficiency.

The targets for each state are different since some states are more dependent on coal plants than other forms of energy production.  Obviously, the states with more coal fired plants have higher targets and the costs born will be greater.  This is quite obviously a war on coal disguised as a “we are making it easy for you” plan.

During the public comment period, there were protests at some hearings.  Coal miners protested at a hearing in Pittsburgh and the United Mine Workers Union has come out against the rule arguing that if implemented, it would cost 75,000 mining jobs by 2020, drive up energy costs and have a negligible environmental impact.  The Chamber of Commerce estimates it would cost the American economy $50 billion in GDP.  For their part, the EPA estimates that the proposed rule would have a net gain to the economy of $48 to $82 billion in decreased health care costs while a trade group estimates it would actually cost the American economy $366 billion by 2030 (a $410-448 billion difference from the EPA estimates).  In fact, these conflicting figures are now the subject of the lawsuits since the EPA left out important technical data on how they arrived at their figures.

Regardless, if implemented all sides agree that this will be a costly endeavor to achieve and that the cost will fall on American consumers of energy and electricity.  The lowest estimate this writer could find is that it would cost the typical American household $207 per year in additional electricity costs while heating prices would vary depending on (1) the type of heat a house ues and (2) what the state does to reach the goal.  One estimate puts the increased price as high as another $1,400 per year in addition to the increased electricity costs for a total of over $1,600 a year.  In an era when we are talking about income equality, this rule would be costing the average American more in expendable income which is already constrained.

The comment period also produced some interesting observations by the environmentalist community which illustrates their true colors.  They were highly critical of the EPA’s reliance on natural gas plants and believes they should be more heavily targeted and regulated.  They were even more critical of the EPA “over reliance” on nuclear energy.  In other words, the EPA did not go far enough in wrecking the American economy.  This, to this writer, reveals the real agenda of the environmental crowd which has little to do with protecting the environment and a lot to do with dismantling the economic cog that fuels capitalism.  But, that is another story for another day.

There are many problems with this proposed rule.  The final rule will be announced June 1st and states have a year until June 30, 2016 to submit their initial plans to the EPA for approval.  By 2017, their final plans must be submitted and by 2018 any multi-state plans and agreements approved.  Between 2020 and 2029, the states must implement and prove that they are meeting their interim targets with full implementation by 2030.  The industry argues, correctly, that this is not enough time for states to issue guidelines and come up with a plan.  In effect, the rush to reach EPA compliance will result in taking the easiest tack- decreasing and phasing out coal production.

Clearly, Obama wants this to be his environmental legacy ignorant of the fact that countries like China and India are today bigger producers of carbon dioxide.  Thus far, they have been resistant to any international agreements claiming the United States lacks the moral authority to dictate climate change protocols.  In essence, this rule change is akin to America apologizing yet again for having the strongest economy in the world.  As stated earlier, this rule will affect certain states more than others.  Washington, for example, will be the hardest hit with a targeted 72% decrease in greenhouse gas emissions.  Although no state, except Vermont, is immune, the other states expected to see a heavy impact are Arizona, Arkansas, Georgia, Minnesota, New Hampshire, New Jersey, New York, North Carolina, Oregon and South Carolina.

At a time when the United States is experiencing an energy boom- one bright spot of the economy- the Obama administration’s EPA is, to quote McConnell, “…dismantling our own economic supremacy and the self-imposed destruction of one of our nation’s main competitive advantages in the global economy.”  Fortunately, Obama’s attitude towards the rule of law and emphasis on executive orders could be the undoing of Rule 111(b).  After all, if the Obama administration can tell DHS not to enforce immigration law, a Republican administration can use that same legal justification to tell the EPA not to enforce Rule 111(b).  For the record, Hillary Clinton supports these efforts.