Obama Budget Proposal

In the next few months, federal climate change and energy legislation will be a high priority for passage in Washington D.C. We can get a glimpse of what is on the table by examining the Obama Budget Proposal.

Energy components of the budget proposal includes: Carbon emissions to be 14% below 2005 levels by 2020 and 83% below 2005 by 2050; Cap- and- trade with 100% auction, no free allocations; EPA to write new rules for CO2 and to develop a Greenhouse Gas emission inventory; $645 billion in carbon credit revenues from a Cap-and-trade program on emissions; Doubling renewable energy capacity; increased research for clean coal and geological storage.

The rural electric systems across the country are asking our politicians to consider the implications of what they are proposing on the daily lives of the people and businesses who need electricity to maintain a modern lifestyle. It is our contention that a Cap-and Trade program as proposed with a 100% auction will take large amounts of money from consumers under a scheme managed by Wall Street with big money speculators and multi-national energy companies as likely highest bidders. As small utilities, this then becomes our competitive environment which could easily double or triple electric rates.

The impacts of the cap-and-trade proposal can best be summed up by the following excerpt from the John Mauldin February 27th Thoughts from the Frontline newsletter:
“This week saw President Obama give us a budget with a projected deficit of $1.75 trillion dollars, and a massive tax increase on the “wealthy.” But hidden in the details was an even larger tax increase on everyone. Obama wants to create a cap-and-trade program for carbon emissions. This is expected to generate $79 billion in 2012, $237 billion by 2014, and grow to $646 billion by 2019. These will be payments by energy (primarily utility) companies to the government. That will cause utilities to have to raise the prices they charge customers for energy. Such a level of taxation is eventually 4-5% of the total US Gross Domestic Product (GDP). That is no small potatoes. And since the wealthy do not use all that much more power than the rest of us, it will affect the lower incomes disproportionately.

It will take money out of consumers’ pockets and transfer it to the government. You can call it a cap-and-trade, but it is a tax. And a huge one. Anything that will take 4% of GDP away from consumer spending is not business friendly. And by driving the cost of energy up, it will drive high-energy-using businesses away from the US to developing countries where energy is cheaper. It will make it even harder for people to save money and drive up costs for the elderly and retired. But it will make the environmental lobby happy.

Robert Heinz, General Manager
Dawson Public Power District