House Climate Bill Could Hike Electricity Rates 20% by 2030

August 5, 2009

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The House climate bill by Democrats would increase electricity prices to 12 cents per kilowatt-hour, or by 20 percent, in 2030, under a scenario where low-emission technology is developed on schedule and offsets are not constrained, according to a draft analysis by the Energy Information Administration, reports the New York Times. The current average price of electricity is about 10 cents per kilowatt-hour.

A key finding indicates that electricity prices will vary from 11 to 17.6 cents per kilowatt-hour in 2030 under six different scenarios that vary by the readiness of technology, generation costs and the availability of offsets for carbon dioxide emissions that exceed the federal cap, reports the New York Times. The House bill requires a reduction of carbon emissions by 17 percent by 2020 and 83 percent by 2050 relative to a 2005 baseline.

By 2020, the report finds that electricity prices would be about 9.5 cents per kilowatt-hour in 2020, about 3 percent above “business as usual” increases. This estimate reflects the free allocation of emission allowances available until 2025, reports the New York Times.

As a result, the draft notes that energy costs will reduce household consumption by $142 (in 2007 dollars) in 2020 and will deplete consumption by $583 in 2030 under the “basic” scenario, while the cost of greenhouse gas allowances will range from $32 per metric ton in 2020 to $65 per metric ton in 2030 under the basic case.

The report does not address all provisions, under the American Clean Energy and Security Act of 2009, including the Clean Energy Deployment Administration, the strategic allowance reserve, the separate cap-and-trade program for HFC emissions, the GHG performance standards for activities not subject to the cap-and-trade program, the distribution of allowances to coal merchant plants, new efficiency standards for transportation equipment, and the effects of increased investment in energy research and development.

Other uncertainties noted by the report include the cost and public acceptance of low- and no-carbon technologies and the role of offsets whose availability will be based on decisions by U.S. EPA and international agreements, reports the New York Times. The report estimates that under the basic scenario, about 39 percent of the emission reductions under the bill would come from domestic abatement, while the remainder of the emission reductions would come from offsets, according to the newspaper.

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