The current climate legislation being debated in Congress should be dumped. The bill aims to create clean energy jobs, achieve energy independence, reduce global warming pollution and transition to a clean energy economy.  These stated goals were originally meant to be realized through a least-cost policy approach designed to invigorate the renewable energy sector, update efficiency and conservation standards, and to directly reduce emissions through a cap and trade system.  However, industry lobbying efforts and stark political realities in the U.S. House of Representatives effectively undermined the bill’s efficacy. The same is unfortunately true in the U.S. Senate debate.

Emissions Targets in the House and Senate Fall Short:
The best available science tells us that the U.S. and developed nations must achieve emissions cuts ranging between 25-40% below 1990 levels by 2020 and 80-95% by 2050.   Under a cap and trade system to reduce emissions, the government creates permits to pollute in one ton increments that are bought and sold by those who either have significantly reduced their emissions or must have more allowances to operate.  The catch is that a complex, corruption-prone set of complementary policies have been introduced to “ease the burden on polluters and the general public” by making pollution compliance easier.  While these policies may ease the burden of compliance, they render the emissions reduction mechanism useless.

One of these complementary policies, and perhaps the worst, is the carbon offset market.  Offsets allow polluters to avoid making real emission reductions by subsidizing projects to prevent deforestation, to plant saplings, or to prevent additional emissions elsewhere - either domestically or internationally.  The nature of the offset market makes it difficult to calculate real emissions reduction, is prone to corruption, and is arguably the reason why the European Union’s cap and trade scheme failed to reduce emissions.

Polluters Receive Massive Giveaways in Both Bills:
The most serious issue is which technologies will be emphasized to address the issue of reducing carbon dioxide emissions.  This is critically important because of financial and social risk, cost, efficacy of reducing carbon emissions, job creation, environmental and public health impact, and consumer affordability issues. 

Least-cost investments in efficiency, renewable energy, and distributed power resources can accomplish these goals.  However, polluters have no incentive to harvest the low-hanging fruit when they are being handed bushels for free in the form of carbon allowances, massive subsidies for high-cost coal-fired and nuclear technologies, offshore drilling, and a complex set of complementary policies that enable nothing more than business as usual.

It is time to shift gears and implement policies that will bolster the economy while reducing our enormous budget deficit and cut carbon dioxide emissions. Least-cost efficiency, renewable and distributed power investments can accomplish these goals. High-cost coal and nuclear investments cannot.

The legislature can enact a proven policy that will create jobs for Hoosiers, make the state a leader in renewable energy development, and stabilize energy costs for consumers. The question is whether the legislature has the political will to buck the coal and utility industries to do it.

The general concept of the policy is simple: guarantee those who generate renewable energy a long-term purchase contract with their local electric utility that covers their costs and provides a return on their investment. This is the same approach the state already takes with base-load power plants. Electric utilities are allowed to recover their costs and a reasonable profit when they build their own major generating facilities. Why not give small generators of renewable energy the same opportunity?

Known as Feed-in Tariffs, many European nations and now a growing number of locations in North America are offering advanced renewable energy contracts to spur the growth of renewable energy. Germany is a prime example of how effective advanced renewable energy contracts can be. Since enacting this policy, Germany has become the leader in solar power despite the fact it gets about as much sun as Maine or Alaska. It has created a lot of jobs and now exports solar and wind technology throughout the world. It’s no accident the companies building wind farms in northern Indiana are subsidiaries of European companies headquartered in countries with advanced renewable energy contracts.

Consumers would benefit from this policy, too. Advanced renewable energy contracts encourage the development of smaller generating facilities distributed throughout the power grid. Bringing the power generation closer to electric consumers avoids the need for new expensive transmission lines. Consumers also benefit because the cost of renewable energy is stable, unlike fossil fuel prices that can spike with little notice. And adding new renewable energy sources helps to avoid the need to build expensive new power plants.

The legislature has spun its wheels for years now debating whether to mandate a renewable energy portfolio that requires utilities to purchase a certain percentage of their power from renewable sources. Rather than continuing the same stale debate over a policy that essentially entrusts the promotion of renewable energy to utilities that are heavily invested in coal-fired power plants, the legislature should push Indiana to the forefront of renewable energy development by making advanced renewable energy contracts available in the state.

The General Assembly has been more than willing to saddle electric utility ratepayers with the costs of new power plants that the private market won’t fund and has thrown tens of millions of dollars in incentives at so-called “clean coal” technology. Renewable energy contracts would provide far greater benefits to the citizens of Indiana by creating renewable energy jobs throughout the state that can’t be outsourced to China or Mexico and reducing future energy costs for consumers. Now is the time for the legislature to show it also has the willingness to seize the opportunity to bring these benefits to Indiana.

Rep. Pierce (D, Bloomington) represents District 61

Investors were unwilling to accept the risks related to the construction of the nuclear power plants without some limitation on liability. So it was deemed necessary to indemnify the nuclear industry against liability claims in order to expand nuclear generation in the United States. So in 1957, the Federal Government granted the industry just that with the passage of the Price-Anderson Act.

Now the utility industry is facing similar obstacles with the implementation of carbon waste capture and sequestration (CCS), or so-called “clean” coal. Too much legal, regulatory, and scientific uncertainty and risk surround CCS. Those uncertainties and risks include, but are certainly not limited to:

Utilities are actively seeking protection from those, and many other issues before they will venture into any large scale project. They and their investors want complete assurance that they will not be liable for any harm or damage that CCS may cause to the public. They are asking for protection from local regulators, state regulators, federal regulators, state legislatures and the Federal Government. Duke Energy has made it quite clear they intend to introduce legislation in Indiana regarding those issues, possibly as soon as the 2010 session. Duke and others are also aggressively seeking the same protections, along with massive public subsidies, in Congress right now via the various climate and energy bills, or in amendments offered to other bills.

The same economic realities that caused the end of the nuclear age in the early eighties, is now catching up to the coal industry. Coal usage and consumption is in serious decline over the last 12 months in the United States. Peabody Coal and others are realizing lower profits as a result.

Failure to obtain indemnity and massive public subsidies may prove fatal to the coal industry; so they will continue their all out assault on democracy and flood the halls of our Statehouse and the halls of Congress with their lobbyists and their cash, and clutter the airwaves with their lies and propaganda until they get their way. This is why the public must engage and demand that our elected officials and our regulators finally begin to protect the public by forcing the utility industry to assume the financial and liability risks of storing carbon waste.

The Duke Coal-Gasification Plant, aka Edwardsport IGCC
To date, Duke’s expenditures plus rate of return amount to approximately $581M. CAC continues to oppose the inclusion of Edwardsport costs arguing that the project is not needed and not least cost, especially in light of the growing amount of renewable energy in Indiana, the declining use of electricity, and the decreasing cost and Federal push for more energy efficiency.

Duke Carbon Waste Storage Study
In March of 2009, Duke filed to force ratepayers to pay $121M to study the storage of carbon waste. CAC has intervened in the cause. The basic proposition underlying utility law is that customers pay for the utility service they receive and are not guarantors of investor risk. Although Indiana has been undermining the requirement that capital investments be “used-and-useful” with Construction Work In Progress (CWIP), what’s being proposed is even more heinous– Construction Work In Mind (CWIM).

The Leucadia Coal-Gasification Plant
Negotiations are stalled because a requirement of the latest legislation was that Leucadia had to guarantee ratepayer savings. With natural gas at record lows, proving savings is a challenge Leucadia cannot overcome. We are expecting more legislation regarding this plant. Stay tuned, the insanity continues.

NIPSCO Electric Rate Case
We are still waiting for a decision on NIPSCO’s request for an 16.5% increase in residential electricity rates. A ruling is expected in December. However, NIPSCO has indicated that regardless of the outcome, they are prepared to file another request for additional increases in early 2010. CAC will be watching.

Gas Universal Service Program
CAC was joined by AARP and United Senior Action in filing testimony in support of renewal and expansion of Universal Service programs designed to help keep gas service affordable for seniors and low-income gas customers of Citizens Gas, NIPSCO, and Vectren. The utilities support renewal, but oppose expansion. The Indiana Utility Regulatory Commission (IURC) Chairman, David Hardy, opposes the programs. The case has been fully briefed and is awaiting a final decision.

Efficiency and Renewables: Feed in Tariffs
We have been working for many years at the Indiana Statehouse for a progressive and sustainable energy policy that is focused on energy efficiency and renewable energy. The evidence is clear that efficiency and renewables are better for our health and our environment, save consumers money, and create far more jobs than fossil fuels. As discussed by Rep. Pierce, a feed in tariff is the best policy option. We won’t stop until we make it happen!

2010 Legislative Session
The 2010 session of the Indiana General Assembly begins on January 5, 2010. Please sign up for our e-mail alerts and check our website to follow the legislation that CAC is tracking. Rest assured, CAC will be on guard protecting our environment and our pocketbooks from the greed of the utilities.