Local electric providers: We're for cap, but not trade

MidAmerican Energy representative Mark Reinders explained his company's take on the American Clean Energy and Security Act, a comprehensive energy bill proposed by U.S. Representatives.

Reinders spoke Tuesday at a Plymouth County Board of Supervisors meeting at the request of Supervisor C. Gordon Greene.

The House bill, Reinders said, proposes new limits (caps) on greenhouse gas emissions and requires companies to buy and sell (trade) permits based on how much of these gases they emit. Carbon dioxide is one of these gases.

A similar bill is circulating in the U.S. Senate.

The intent is to cut the amount of greenhouse gases released into the earth's atmosphere.

But according to Reinders, the bill would create a scenario of winners and losers across the United States.

Coal will cost us

The U.S. relies on many forms of electricity generation, ranging from natural gas to nuclear to coal. Of all the methods, coal electricity generation in the U.S. releases the most carbon dioxide.

The majority of the Midwest's energy production comes from coal, Reinders said.

Coal is used for 50 percent of MidAmerican's generation and 75 percent of the Northwest Iowa Power Cooperative (NIPCO), supplier for western Iowa rural electric cooperatives.

The reason: in the Midwest coal is accessible and economical.

Many states outside the Midwest rely more heavily on nuclear and other electricity generation, which has much less carbon dioxide emissions.

In July 2009 alone, Iowa produced 20 times more electricity by coal than California.

That coal generation supplied more than 75 percent of Iowa's electric demand that month.

For California, it was less than 1 percent of the state's demand, according to the U.S. Department of Energy.

The trading game

Under cap and trade rules, electricity users in states like Iowa will pay more for electricity because the companies providing it have to pay for more emission permits.

Initially energy companies get the allowances, or permits, for carbon emission from government.

If companies need more permits, however, they must buy allowances that aren't being used by another company.

According to proposed legislation, anyone can buy those allowances from a company that is not using them and sell them, at whatever profit they choose, to a company that needs more.

"The bidding and trading is open to anybody," said Kent Pauling, executive vice president of NIPCO.

"A foreign government could get into the mix, drive the prices up, and we're held hostage because we have to have them to generate," he added.

In the end, Pauling said, consumers will foot the bill.

How much will it cost?

Assuming an average home uses 1,000 kilowatt hours of electricity per month, the coal generation to meet that demand produces 1 ton of carbon, Pauling theorized.

The per-ton emission costs under a cap and trade law aren't defined yet, he said.

"If it's $20 a ton you're going to pay $20 extra. If it's $100 a ton you're going to pay $100 extra," Pauling said. "This is the impact it will have on your bill. We don't know what that number is at this point, but for every ton that is produced that's what it's going to add to your bill."

Farms using, for example, 3,000 kilowatts would have to multiply that per-ton number by three.

A lot of wealth, Pauling said, will be transferred from the middle of the country out to a couple of the east and west coast states producing energy with less emissions.

Predictions on what the cap and trade law would cost the average family vary greatly.

The Environmental Protection Agency (EPA) suggested costs might be as low as $84 each year per household.

On the steep end, Heritage Foundation, a conservative policy analysis group, found that the House bill would cost a family of four $1,870 per year in 2020 and rise from there to $6,800 per year in 2035.

Losing on the international stage

The industrial sector won't be spared either, Pauling said.

"Manufacturing jobs in the United States that are currently here will have, in my opinion, a tendency to go offshore, to places where it isn't as costly to manufacture or produce what they're producing," he said.

There's no guarantee other countries in the world will follow the United States' steps to reduce carbon emissions, Pauling added.

"What we're doing could be mitigated by things in China or India, without the same set of rules," he said. "That's who we're competing with."

What might work

Both Reinders and Pauling said their companies understand the desire to cut down carbon emissions.

"We have no problem with the cap part. We understand the movement out there to establish the cap," Reinders said. "Our problem is the way they get to that and the allowance program that would be set up."

He suggested that legislation should avoid the trading.

"The trading component actually charges customers twice," Reinders said.

Either way, he said, customers are going to have to help foot the bill for the technology and equipment to retrofit plants to better capture emissions.

"It's not that we haven't been doing some of these things all along," Pauling said. "The generation now, as it occurs today out at the coal plants, is cleaner today than it was 30 years ago."

But the technology to cut the levels of emissions from energy plants is lagging, he said.

"To my understanding, there is really no technology at this point that can remove carbon to the magnitude that we're looking at 20 years down the road when, according to this bill, we're supposed to start reducing carbon on our existing generation," Pauling said. "That's one hurdle we have to jump over."

MidAmerican Energy, Reinders said, has cut emission levels considerable.

But electricity demand continues to rise, he added, and that means more generation.

Pauling pointed out that efforts are being made within the state of Iowa to use electricity more efficiently.

Iowa's energy companies are required to submit an energy plan to the state government by the end of the year, encouraging efficient energy use. One example might be rebates for efficient motors or appliances, Pauling said.

Iowa's voice

U.S. Sen. Chuck Grassley and U.S. Rep. Steve King have both spoken against proposed federal cap and trade energy bills.

In an official statement, Grassley said the proposed legislation would be a "national energy tax on all Americans" and that it would "exacerbate the negative impact of other taxes on economic growth and jobs."

"The agriculture industry and rural communities will be some of the hardest hit areas under this bill," he said.

King spoke against "cap and trade" laws during his October visit to Hole N' the Wall Hunting Lodge in western Plymouth County.

"It would put together an economic structure I don't think we could reverse," King said.

Earlier this year, King vocally opposed the legislation, saying it would "raise taxes on all American energy users, cost American workers their jobs and put American companies at an international disadvantage."

Reinders encouraged people to contact their legislators on the issue.

The idea of legislation driving America toward more efficient, cleaner energy, shouldn't be shredded entirely, he said.

"Take it slower, work it out a little better. We can get to an agreement," Reinders said. "Just don't balance it on the backs of the Midwest customer."