Washington (Platts)--5Feb2008

The timing of any carbon control legislation from the US Congress and the
flexibility in being able to comply with such a mandate will be key factors in
whether utilities can meet any mandate without significant effects, such as
increased strains on natural gas supply and demand, Thomas Kuhn, president and
CEO of the Edison Electric Institute, said Tuesday.

The most prominent bill to date -- which Senator Joe Lieberman, a
Connecticut Independent, and Virginia Republican Senator John Warner have
forwarded -- sets annual caps on greenhouse gas emissions or carbon dioxide
equivalents starting in 2012, which is not far off, speakers at a US
Department of Commerce conference said.

Not putting emission reduction targets far enough into the future could
affect natural gas usage and prices, Kuhn said.

"It's easy for a politician to pick out a timetable," but if that time
table is off, there can be serious economic consequences, Kuhn added.

Without enough flexibility -- such as a price cap on carbon credits -- or
enough time to meet any mandate, coal-fired generation could become uneconomic
to build and natural gas prices could soar, added Herman Schopman, president
and CEO of Suez Energy Generation North America. A price cap, or "safety
valve," of $20 or $30/credit would enable more economic stability for adding
coal-fired generation and ensure that there are not stranded generation assets
in the future, Schopman said.

The 2012 time frame in the Lieberman-Warner bill is not likely to change,
said John Shanahan, minority counsel on the Senate Environment and Public
Works Committee. Using natural gas as a "bridge fuel" until more renewable
resources and new nuclear power plants are added presents real challenges for
the energy industry in terms of energy security and price volatility in global
markets, Shanahan said.

When it comes to reaching a low-carbon future, "public policymaking has
to be codified so that the industry knows where to go," said Schopman. A trio
of banks codifying lending practices for coal-fired generation projects is a
step in the right direction, but the federal government has not provided much
certainty to utilities or the investment community, added John Cavalier, vice
chairman at Credit Suisse.

--Tom Tiernan, tom_tiernan@platts.com