Are we talking to the Cheshire Cat?

When Alice in Wonderland came to a fork in the road, she asked the Cheshire Cat which way she should go. His answer: “That depends on where you want to go.” And with that, the cat disappears and leaves only the grin. I think it looks a lot like Henry Waxman’s grin as HR2454 heads to Congress.

Some proposals (American Clean Energy & Security Act 2009) will freely allocate allowances to electric utilities which may affect electricity prices. Waxman-Markey allocates allowances to local distribution companies, which are subject to cost-of-service regulation even in regions with restructured wholesale electricity markets. So, electricity prices would likely be affected by these allocations [Robert Stavins, The Energy Collective]. The Waxman-Markey legislation seeks to address this problem by specifying that the economic value of the allowances given to electricity and natural gas local distribution companies should be passed on to consumers through lump-sum rebates, not through a reduction in electricity rates, thereby compensating consumers for increases in electricity prices, but without reducing incentives for energy conservation.

The electricity sector will receive 35% of the allowances, representing 90% of current utility emissions. Local electric distribution companies, whose rates are regulated by the states, will receive 30% of the allowances, which they must use to protect consumers from electricity price increases.

The whole point of cap and trade legislation is to raise the price of energy derived from fossil fuels, in order to wean consumers from their (alleged) addiction to cheap gas and electricity. Don’t take our word for it; the Institute for Energy Research article can quote from the president himself to make the point: (Barack Obama January 2008). Click here to watch video. The summary for the allowance allocation goes to GREAT LENGTHS (even titling it CONSUMER PROTECTION) to explain how it will protect consumers against the economic harm created by the Waxman-Markey bill. “GRIN” No cat. J They admit this bill will raise electric rates (and the costs in other energy sectors).

According to Glenn English, CEO of National Rural Electric Cooperative Association, “The renewable energy provisions have been improved significantly in the bill as have the efficiency provisions. Including temporary free allowances in the bill is a step in the right direction to protecting electric cooperative consumers from unnecessarily increasing electricity bills, but the formula for allocation of allowances among industry segments needs to be equitable. The Committee adopted the formula developed by big investor owned power companies but that formula does not treat electric co-op consumers fairly. And, while the emission caps in the bill have been lowered somewhat, we agree with many members of the committee who believe they are still overly aggressive in the early years of the program and will need to be adjusted.”

On April 24, 2008, OMB Director Peter Orszag stated in testimony (to the Senate Committee on Finance) that regardless of whether the government auctioned off allowances or gave them away, electricity rates will still increase significantly based on any cap and trade system.

While improvement has been made in the bill, we urge you to contact your legislator so that HR2454 isn’t a slam-dunk. Insist that your representative take a hard stand on the formula for allowance allocation. Listen to your local utility’s concerns. This isn’t about us; we have to pass the costs on to consumers. This is about you and which fork in the road you want to take.

Gwen Kautz, Customer Service Manager
Dawson Public Power District