CREDIT: AP / Matthew Brown
The federal government’s carbon dioxide regulations for new power plants will drive up electricity rates, according to utilities and fossil fuel companies. But this isn’t the first time those groups warned new environmental rules would drive up costs. And their predictive track record is shoddy.
That’s the conclusion of a new analysis by the Center for American Progress (CAP). It looked into previous rate forecasts by the Edison Electric Institute (EEI), which is the lobbying outfit for investor owned utilities.
Back in 1989, new Clean Air Act amendments aimed at cutting the sulfur dioxide emissions from coal-fired power plants were on the verge of passage. In response, EEI released a study estimating those new rules would drive up electricity rates, especially in states reliant on coal for their electrical power. Specifically, the study predicted a rate hike across the lower 48 states of 3.2 percent by 2009, resulting in a price of 10.8 cents per kilowatt hour (kWh).
The amendments passed in 1990 and the sulfur dioxide regulations went into effect. By going back and looking at data from the U.S. Energy Information Administration, the CAP study was able to compare EEI’s numbers to reality. Their 10.8 cents prediction overshot the actual result by 16 percent. And in the 10 states most dependent on coal for power, EEI’s study overshot by 24 percent.
EEI is one of the chief critics of the Obama Administration’s new limits on carbon dioxide emissions from new power plants. The rule would fall hardest on coal power, but “we cannot afford to take generation sources out of the mix,” according to the outfit. The American Coalition for Clean Coal Electricity — a group that represents 44 coal, utility, and other companies — also warned of “double-digit” rate hikes. The U.S. Chamber of Commerce said the carbon rules would “hamper economic growth and job creation.”
Fossil fuel companies and business interests have something of a history here. Since the 1970s and the creation of the Environmental Protection Agency, they’ve consistently predicted new regulations would not just raise electricity costs for consumers but would damage the economy as a whole. And they’ve consistently been wrong.
In the case of the 1990 sulfur dioxide rules specifically, it was likely because they underestimated how well the cap-and-trade system would work as a market incentive. More broadly, analysts tend to overlook the benefits environmental regulations bring for Americans health, which then rebound in benefits to the economy that regularly dwarf the direct compliance costs of the regulations.
“The bloated predictions about the cost of EPA proposals to finally control carbon pollution from power plants is simply a rehash of past hysteria,” said Daniel J. Weiss, the Director of Climate Strategies at CAP, and one of the paper’s co-authors. “These new safeguards are essential for Americans’ health and economy. Officials should ignore industry’s phony forecasts, and instead focus on the huge costs of climate inaction: more smog, more asthma attacks, more ferocious storms, more droughts, and more wildfires.”