energyStudy Looks at Rate Impact of a Renewable Electricity Standard

October 4, 2006

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The Indiana Coalition for Renewable Energy and Economic Development (ICREED), a coalition of businesses, elected officials, and clean energy groups, recently released (via RenewableEnergyAccess) a rate impact study that describes estimated rate impacts of a Renewable Electricity Standard on Hoosier electric utility ratepayers.

That study, authored by Pete Boerger, a PhD Purdue-educated economist and former head of the Electric Division of the Indiana Office of the Utility Consumer Counselor, was released in the context of study committee hearings in the Indiana General Assembly on renewable electricity development.

Currently, 20 states have a Renewable Electricity Standard (RES) in place, and 15 additional states have bills pending in their legislatures. Such market mechanisms require that electric utility companies supply a small percentage of their electricity with renewable sources of power, such as wind or biomass.

Republican State Representative Don Lehe and Democrat State Representative Dale Grubb are supporting an RES that calls on Indiana electric utilities to supply 10 percent of their electricity with renewable energy technology by 2017.

According to Jesse Kharbanda, of the Environmental Law and Policy Center, combined with the current federal incentive for wind, the study estimates that the rate impact of a 10 percent RES by 2017 in Indiana would amount to a total of 1.14 percent over the ten year period. Lawrence Berkeley National Laboratory which states that the average rate impact across 22 studies is about 0.7 percent.

Grant Smith, Executive Director of Citizens Action Coalition, said, “Our overemphasis on coal-based power is costing Hoosiers dearly. The rate impacts of a 10 percent RES are dwarfed by the cost of controlling air pollution from existing coal plants and new coal-fired power plants.”

As an example Smith cited Duke Energy whose customers face a rate increase of 17.5 percent for retrofitting existing plants with equipment to control sulfur dioxide, nitrogen oxide and mercury emissions. Moreover, Smith said, “Duke and Vectren have filed for a certificate of need of up to $1.6 billion for a 625 MW coal gasification plant proposed at the company’s Edwardsport generating station. That is more than 80% higher than the published per kilowatt capital cost of pulverized coal plants.”

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