U.S. Senate Penalties Loom for Utility Companies That Miss Climate Targets

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Central Utah Coal-Fired Power Plant

With the Biden administration’s green energy crusade, the Democrats of the U.S. Senate seeking to shore up support and statistics with a campaign to penalize utility companies that fall short and fail to accomplish clean-energy goals. For those that do, a reward will be issued through a carbon-free power mandate included in their tax and spending package priced at $3.5 trillion.

Requiring an intense change throughout the national power sector, the mandated clean energy standard would dictate 80% carbon-free electricity by 2030. The plan reigns crucial in helping the Biden administration decarbonize the electric grid by 2035, a signature climate goal. Also fulfilling Paris Agreement strong points, this act would provide a method for cutting the nation’s greenhouse gas emissions in half by the end of the decade.

Plan Specifics

While committees will be tasked with specific details, the planned course would saddle electric utilities with annual clean-energy targets. A system of incentives and penalties would be imposed on companies and be based upon their success rate in meeting goals. Sam Ricketts, Co-Founder of Evergreen Action, indicated he was made aware of the standard by associates of Senate Majority Leader Chuck Schumer and Minnesota Senator Tina Smith, a force behind the measure.

“This is critical policy to decarbonizing the power sector and is the linchpin for our economy-wide clean energy transformation,” said Ricketts. “We’re incredibly thrilled it is part of the Senate Democrats’ budget resolution.”

Although the plan is gaining momentum, certain details remain uncertain. Addressing nuclear or natural gas plants will likely see a variety of changing methods as the measure progresses through Congress. Democrats, however, do not possess a guarantee with prospective votes to even approve the overall bill, which will also include Medicare changes. Additionally, the immigration policy is being driven through Congress through a budget reconciliation approach. Opposition, however, promises to be waged through Byrd Rule prohibitions, which bars budget reconciliation from being utilized to forward policy measures based upon incidental budgetary influences.

As a result, congressional Democrats are avoiding a more unambiguous clean energy standard and renewable power order, mirroring those adopted by over two dozen states. Instead, they have relayed behind an incentive-based mandate supported by Data for Progress and Evergreen Action. This approach is believed to have a better chance of meeting requirements.

“This clean energy standard is about investing in clean energy – it is a budget-based plan, so it clearly fits in a budget bill,” said Smith.

Grants Provide Possibilities

A number of utility companies have funded projects to retrofit coal plants with the goal of fulfilling regulations mandated by the federal government. As they have yet to recoup those costs, grants could be issued to reduce financial pressure. According to University of California, Santa Barbara professor Leah Stokes, the grants could be used in various ways, including closing retrofitted coal plants, lowering customer bills, and bringing on new power generation sources.

“If you put a significant carrot in front of utilities, they will want to do these things in their own interests,” said Stokes during an April Columbia University Center on Global Energy Policy discussion. She referred to the approach as “making utilities whole” and not “jacking up customer bills.”

Reduced Emissions Yield Increased Costs

Questions on the attainability of carbon footprint reduction goals percolate as many energy analysts address the scale of technological gains, improvements to the power grid, and the size of investments that would be required to make the transformation and transition possible. Chief Financial Officer Steve Young of Duke Energy Corporation indicated the 2035 targets would be “challenging.”

Additional concerns have been levied by electric utilities. Reliability could be compromised with changes to the nation’s power mix, and natural-gas-fired power plants are crucial in meeting demand as natural fluctuations span unreliability in wind and solar power generation.

“At minimum, a CES or any other policy tool has to create space in the near term for natural gas generation to continue to play a critical role in integrating more renewable generation,” said Emily Fisher, general counsel with the Edison Electric Institute that represents investor-owned utilities. “ Electric companies and their customers cannot be penalized for keeping the system reliable as we work to achieve our clean-energy goals.” 

The group supports a phaseout of coal-fired power plants and recognizes the importance of natural gas. Additionally, they call for “a well-designed clean-energy standard that covers all clean energy sources, including existing nuclear and hydropower generation.”

Seeking the good of the mandate potential, state regulators would ink the provisions needed to fulfill federal mandates.

“Overall, it is very positive for utilities,” said Andy DeVries, a CreditSights Inc. utility analyst. “If the federal government mandates it, that essentially forces state regulators to approve these record capital expenditure budgets, and that leads to strong earnings growth.”






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