- The Washington Times - Tuesday, October 20, 2009

A little noticed Environmental Protection Agency analysis shows that the pending climate-change bill in Congress would particularly benefit the states represented by its primary authors.

The analysis, obtained by The Washington Times, shows that the states that would benefit most from the climate legislation that passed the House in June include California and Massachusetts. The bill was co-authored by Rep. Henry A. Waxman, California Democrat, and Rep. Edward J. Markey, Massachusetts Democrat.

A spokeswoman for Mr. Waxman, who chairs the House Energy and Commerce Committee, said the EPA’s analysis is preliminary and “has significant limitations” that fail to account for emissions from plants outside California that provide electricity to the state.

An aide to Mr. Markey said the bill was written to ensure “regulatory certainty,” and was based on the input of electric utility sector “to best serve the entire industry across regional lines.”

Critics see the analysis as another reason to go slow on legislation that would reduce greenhouse-gas emissions by establishing a new system of trading emission allowances called cap-and-trade.

The EPA analysis was included in the agency’s response to inquiries by Sen. Russ Feingold, Wisconsin Democrat, about the House bill.

“I have heard concerns from my constituents about how the climate-change bill could unfairly impact Wisconsin,” Mr. Feingold said in a statement. “The data from the EPA was requested as part of my effort to learn as much as possible about the bill and ways to improve it.”

House lawmakers from Midwest and Plains states initially withheld support for the House bill because of worries that rural cooperatives and public utilities that rely on coal-fired power plants would get the least assistance, while the most help would go to large utilities with nuclear and renewable sources.

The EPA estimates provided to Mr. Feingold showed that utilities in coastal states would get the most free allowances handed out to comply with the House bill. California and New York would, under the House bill, be in line to get more than they needed, the EPA estimated. Massachusetts would get nearly all it needs.

The losers under the House-backed bill would be those states whose senators are leery of backing a similar bill by Sen. John Kerry, Massachusetts Democrat, and Sen. Barbara Boxer, California Democrat, based on fears that the bill will mean higher electricity prices to their constituents.

States like Iowa, Nebraska, Minnesota, Missouri, the Dakotas, Wisconsin, Ohio and Indiana get at best just 75 percent of the allowances they would need. The House bill would give allowances to utilities, factories, refiners and others to help them offset energy price increases expected under the law and to pay for renewable energy development.

EPA also told Mr. Feingold that its ability to calculate the maximum number of allowances that a utility would get would be based on complex calculations involving numerous factors.

“Any attempt to remove the impact of the cap and trade program on these factors and thus on total electricity costs would be speculative at best,” EPA stated in the document.

The EPA, in a statement, noted that the analysis “does not accurately represent the allocations that individual states would actually receive under the bill,” in part because a limit in the bill on excess allowances must be “refined before EPA could determine how to implement it.” Still, the analysis has the potential to upend the careful compromise included in the House bill that was proposed by the Edison Electric Institute, the main utility lobby. Its formula would give out free allowances to utilities based equally on a utility’s sales and emissions.

The so-called “50-50” deal is included in the Senate bill by Mr. Kerry and Mrs. Boxer.

The 50-50 deal has been under attack in the Senate by smaller Midwest utilities and rural electric cooperatives. They also say the Senate bill should be written to give out allowances based solely on emissions — a formula that would give California just 80.1 percent of the allowances it needs and would give 33 states, including a number in the Midwest states, higher percentages of needed allowances.

Waxman’s spokeswoman said the plan “reflects a consensus recommendation developed by the Edison Electric Institute, which represents the investor-owned electric utilities. It balances the interests of consumers served by utilities that have high carbon emissions with the interests of consumers served by utilities that have already invested in low-carbon electricity generation.”

Glenn English, the chief executive officerof the National Rural Electric Cooperative Association, said the analysis proves what the group has been saying since this spring about the House bill and the EEI deal.

“What EPA is saying is that anything other than an emissions-based approach on distributing allowances is unfair to regions of the country and creates disparities,” and that it will create windfalls for utility investors. An EEI spokesman said the group has not seen the analysis and could not comment on it.

Mr. English said he believes the analysis will be taken seriously. But he also said investor-owned utilities are going to fight for the 50-50 deal. “What this really comes down to is those people who don’t need the allowances but are going to gain a big windfall are probably putting a lot of pressure on the (Senate Environment and Public Works) committee and their senators, that this provision must be in the bill,”Mr. English added.