New coal rules: Good news on Michigan jobs, or bad news on electricity rates?

Jun 3 - McClatchy-Tribune Regional News - Keith Matheny Detroit Free Press

 

An Obama Administration proposal to slash carbon dioxide emissions from U.S. power plants is prompting fierce debate in coal-heavy Michigan, with proponents of the new regulations saying they will open the way to thousands of greener-energy jobs and others fearful of rising electricity rates and reduced competitiveness.

In a historic step to fight climate change, the U.S. Environmental Protection Agency proposed a plan today that aims to slash carbon dioxide emissions from existing power plants 30% by 2030. As environmental groups cheered the proposal, state and utility officials looked for ways to ensure Michigan doesn't come out on the losing end of the sweeping changes.

"Obviously, if you are in a heavy manufacturing state reliant on coal-fired electrical generation, this is going to affect you more than other states," said Judy Palnau, spokeswoman for the Michigan Public Service Commission, the state's utility regulator.

Michigan gets more than half -- 54% -- of its power from coal, including from the massive DTE Energy plant in Monroe, the third-largest coal-fired power plant in the Western Hemisphere. Only 17 U.S. states have more intensive carbon emissions from their power generation.

Changing the way Michigan turns on the lights has even supporters wanting more details.

As a metro Detroit bicycle shop owner, Jon Hughes welcomes steps toward a cleaner environment. But as a small business owner, he has to worry about the bottom line of his energy costs as well.

Hughes, the owner of Downtown Ferndale Bike Shop, said he supports the Obama administration's plan -- even if it means higher electricity rates.

"Nobody wants to pay more," he said. "But at the same time, it's going to be better for us in the long run. Over 30 years, to reduce it 30% seems like the kind of thing we need to push in the right direction."

The policy bases the 30% reduction off 2005 emissions, allowing states like Michigan that increased their renewable energy portfolios in recent years to get credit for those efforts, said Jeremiah Johnson, an assistant research scientist at the University of Michigan's School of Natural Resources and Environment.

But Michigan's renewable portfolio standard, passed in 2008 and requiring that 10% of power be generated from renewable sources by 2015, "doesn't get us all the way there," Johnson said.

The new rules will spur innovation and create jobs while giving states flexibility to lower plant emissions and set goals tailored to their circumstances, said EPA Administrator Gina McCarthy.

"By leveraging cleaner energy sources and cutting energy waste, this plan will clean the air we breathe while helping slow climate change so we can leave a safe and healthy future for our kids," McCarthy said.

Total U.S. carbon emissions have fallen slightly already, about 10% since 2005, but the Department of Energy forecasts a slight rise in the near future without new emissions caps. Coal-fired power plants are the largest sources of man-made carbon dioxide emissions, and the amount the EPA wants to eliminate by 2030 is equal to two-thirds of all U.S. cars and trucks.

DTE Energy's initial reaction was cautious.

Spokesman Alejandro Bodipo-Memba said the utility believes it's prudent to take "reasonable steps" to reduce greenhouse gas emissions through such efforts as increased efficiency; operating DTE's Fermi 2 nuclear plant and retiring older coal plants, and transitioning to more renewable energy resources such as wind turbines and new plants fueled by natural gas.

"Of course, we want to ensure that any such steps are structured in a cost-effective way that protects our customers, the people of Michigan and the state's economy," Bodipo-Memba said.

There's no consensus on what the new carbon rules would mean for the economy. ICF International, a consulting firm that often works in the electrical power industry, studied the impacts of the EPA's proposed carbon rule on Michigan for the Natural Resources Defense Council, an environmental nonprofit group. ICF found the new carbon rule could create 6,900 jobs and reduce total electric bills about $462 million per year, or $9.10 per month for every household.

"This creates room for a new energy economy to thrive in Michigan, with good paying local jobs for our workforce, cleaner air and lower power bills," said Josh Mogerman, a Great Lakes region spokesman for the Natural Resources Defense Council.

The Michigan Chamber of Commerce's take, however, is that the increased regulation adds cost.

"It will reduce our ability to be competitive, not only in the region but across the country," said Jason Geer, the chamber's director of energy and environmental policy. "Outside of the electric industry, this is going to have a big impact on businesses, no matter what."

A representative of the Michigan Manufacturers Association saw the potential for negative impacts, too. The association represents about 2,500 companies.

"We do have concerns about the increased costs and loss of jobs," said Andrew Such, the association's director of environmental and regulatory policy.

While the EPA acknowledges some increased costs, it likely has underestimated, overlooked and dismissed many of them, Such said. The increased demand for natural gas for power plants could drive rates up for other gas users, including residential users, he said. To offset those increased costs, manufacturers and other companies will most likely cut payrolls, he said.

"All you have to do is look at propane this year," he said, pointing to the tight supply that raised the price of the gas to record levels.

Johnson, who is studying the impact of the new rules and various potential responses to them, said that while the analysis is still preliminary, "We are seeing no indication that this will be a very high impact on energy rates to consumers."

Thwarted by Congress' inability to pass a bill to lower carbon emissions, President Barack Obama is pushing his own approach. Last June, he asked the EPA to use its authority under the Clean Air Act to limit power plant emissions, which account for the largest share of total U.S. emissions, nearly 40%. Coal-fired facilities will be the hardest hit, because they emit more carbon than other power plants.

The administration says its proposal will save more than $90 billion in climate and health benefits and will avoid up to 100,000 asthma attacks and 2,100 heart attacks annually.

Anticipating new carbon rules, Michigan and other old-manufacturing states in the Midwest formed coalitions, looking for beneficial, cost-effective regional ways to meet the new rules, said the public service commission's Palnau.

"Midwest states have special concerns ... obviously our market is a little different than other parts of the country," she said.

The new rules may spur a trend that's already occurring, as coal-fired power plants fall by the wayside. One-third of Michigan's coal fleet is 50 or more years old, Bodipo-Memba said. DTE started retiring older and less-efficient coal plants already, and expects to retire about one-third of its coal-fired capacity by 2025, he said.

USA TODAY's Wendy Koch and Free Press staff writer Frank Witsil contributed to this report. Contact Keith Matheny: 313-222-5021 or kmatheny@freepress.com.

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