Cap-and-trade costs a concern

Congresswoman fears rural areas will be especially hard hit

TEMPE - Duncan Mayor M.C. Holiday has nothing against renewable energy. But as the state and federal governments look toward reducing greenhouse gas emissions, he hopes officials will keep in mind that his remote town has a high unemployment rate and many residents on fixed incomes.

If government requirements boost electric bills significantly, he said, it would be tough for Duncan's 800 residents.

"We as a town have a hard time paying our utility bills now," Holiday said. "I don't know what we'd do. We'd have go back to burning wood."

Concerns about the costs to rural Arizona contributed to U.S. Rep. Ann Kirkpatrick's vote against legislation dubbed the American Clean Energy and Security Act, which would require large utilities to obtain 6 percent of their power from renewable sources by 2012 and 20 percent by 2020, though companies can make up some of that total in energy efficiency. The bill also would establish a cap-and-trade program through which companies could buy and sell permits to emit greenhouse gases.

Kirkpatrick, a Democrat, said the standards in the bill would have a disproportionately large impact on rural residents because they are served by smaller utilities that rely more on coal-fired plants and have smaller customer bases across which to spread costs. She also is worried about job losses in her district, where four coal power plants employ around 12,000.

"I think we have to address climate change but also be very sensitive right now to the economic recession," Kirkpatrick said in a telephone interview.

The bill passed the House in June and is under consideration by the Senate.

The legislation's renewable-energy requirements would apply to utilities that sell at least 4 million megawatt hours of electricity annually, which excludes most electric cooperatives such as those serving Duncan and rural communities. However, all utilities would participate in the cap-and-trade program, and it's this provision has rural officials worried, said Tom Jones, CEO of the Grand Canyon State Electric Cooperative Association Inc., which represents six electric cooperatives in Arizona.

"The concern is that Wall Street would get involved and people would buy up emission credits and hold them until the price goes up and then those of us having to buy them would be competing in that marketplace," Jones said.

"Larger utilities, while it's still costly, are able to blend those costs into other resources, and the impact is not as great as it would be for a smaller utility like an electric cooperative," he added.

Companies regulated by the Arizona Corporation Commission already are bound by that body's requirement that utilities obtain 15 percent of their energy from renewable sources by 2025. But small cooperatives won't be penalized under the rule if they show good-faith efforts to comply.

Kristin Mayes, chairwoman of the Arizona Corporation Commission, said that she is optimistic about rural cooperatives meeting the renewable energy requirement.

"I think we are fast approaching a time when it's going to be more expensive to produce electricity from coal than from the sun or wind, and that day will come when Congress passes a cap-and-trade or carbon tax," Mayes said. "So the more we invest in renewable energy now the more we protect the consumer."

Key facts

Here are key facts about H.R. 2454, dubbed the American Clean Energy and Security Act:

• Sponsors: Reps. Henry Waxman, D-Calif., and Ed Markey, D-Mass.

• Goal: Reduce carbon emissions by 17 percent by 2020 and 80 percent by 2050.

• Status: Passed House of Representatives in June on a 219-212 vote. Sent to the Senate.

• Arizona Representatives Voting Yes: Ed Pastor, Democrat; Raul Grijalva, Democrat; Gabrielle Giffords, Democrat.

• Arizona Representatives Voting No: Ann Kirkpatrick, Democrat; Harry Mitchell, Democrat; Trent Franks, Republican; John Shadegg, Republican.

• Arizona Representative Not Voting: Jeff Flake, Republican.