Get documents about "American Public Power Association October 2008 Description of APPA Spreadsheets on Dingell Boucher October 2008 Discussion Draft The Dingell Boucher draft CO2 cap
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American Public Power Association
October 2008
Description of APPA Spreadsheets on Dingell/Boucher October 2008
Discussion Draft
The Dingell/Boucher draft CO2 cap-and-trade bill, which would reduce emissions 80 percent
below 2005 level by 2050, includes four options for allocating allowances. The options differ in
the amount of allowances allocated to the electric sector, but the allocation method remains the
same: the large majority of electric sector allowances are allocated to electric distribution utilities
(those delivering power to retail customers), with a relatively small amount allocated to merchant
generators with long-term contracts that meet certain conditions and to merchant coal plants.
The allocation to each electric distribution utility is based on the average content of CO2 in the
utility’s retail sales during a three-year period (1997-1999, unless otherwise specified by the
utility). Determining the CO2 content of power obtained from a utility’s own generation is
straightforward since for most units the data are already reported to the Environmental Protection
Agency (EPA). However, since many – if not most – utilities purchase at least some of their
power supply, EPA will have to develop a methodology to estimate the CO2 content of the
purchased portion of power supply. This could require utilities to provide information on their
power purchase agreements and would by necessity also rely on estimates for the portion of
power purchases that are not tied to a specific unit. (Examples include purchases from markets
run by regional transmission organizations (RTOs) and bilateral contracts that do not reference a
specific generating unit.)
APPA has put together data to help public power utilities understand how they might be affected
by the bill, but the analysis is limited because there is no specified method for measuring
emissions from power purchases.
1. The first spreadsheet (“Annual Cap”) shows total allowances for each year of the program
(2012-2050). Column B shows allowances allocated to natural gas local distribution
companies (LDCs). LDCs that that deliver 460,000 cubic feet of natural gas to residential and
commercial customers annually become covered entities and must turn in allowances
beginning in 2017. Column C shows all other allowances, and Column D shows the total cap.
The cap proposed in the Lieberman-Warner bill is also shown for comparison (Column F).
2. The second spreadsheet (“Allocation Options”) shows the number of allowances available to
the electricity sector under three of the four options. (Under Option D, no allowances are
allocated to the electricity sector or to any other covered entity.) The bill only provides
allocations through 2025; thereafter, all allowances will be auctioned unless Congress
provides otherwise in reauthorizing the Title.
Option A is very favorable to the electricity sector, providing allowances greater than or
equal to the sector’s 2007 emissions through 2017, with the total falling to 75% of 2007
emissions by 2025. CO2 emissions from electric power generation were 2,415 million metric
tons in 2007.
Options B and C provide allowances at a level close to the 2007 emissions total in 2012-
2013, but in 2014 to 2016, the electricity sector receives allowances equal to about half of
their 2007 emissions (56% of 2007 emissions under Option B and 48% under Option C), and
the amounts decrease further in 2017 and again in 2021.
American Public Power Association
October 2008
Electricity sector allowances go first to independent power producers with long-term power
purchase agreements that (1) cover 50% of a unit’s output and (2) do not allow for recovery
of allowance costs. The spreadsheet calculations assume that 1% of total electric sector
allowances go to this category (shown on line 12 of the spreadsheet). Users can input their
own estimates by typing a different percent in the box (Cell F-12).
Of the remaining electric sector allowances, ten percent go to merchant coal generators that
are not affiliated with or regulated as an electric utility, and ninety percent go to electric
distribution utilities. The spreadsheet shows the estimated number of allowances allocated to
electric distribution utilities, as these are the only allowances that public power utilities are
eligible to receive.
(Electric distribution utilities must use these allowances to benefit ratepayers, and this may
include energy efficiency and other programs that reduce energy consumption. Allowances
may not be used to provide customer rebates based solely on the level of consumption. Each
utility must submit to EPA a plan on how the allowances will be used and a follow-up report
on how the allowances were actually used.)
3. The third spreadsheet (“97-07 CO2”) shows CO2 emissions from the electric power sector
and electric retail sales for the 1997-2007 time period. Emissions are broken down by type of
fossil fuel used for generation. Total emissions from the electric sector rose by 15% between
1997 and 2007, with an almost 70% increase in emissions from natural gas-fired generation
and a 10% increase in emissions from coal-fired generation. Electric distribution utilities will
receive allowances based on the 1997-1999 CO2 emissions related to their retail sales.
However, a utility can choose an alternative 3-year period between 1997 and 2007, and
would likely benefit from choosing the period in which it had the highest CO2 emissions.
This may be impossible to determine if the utility relies mainly on power purchases.
4. The fourth spreadsheet (“2007 pp co2 emissions”) shows 2007 CO2 emissions for each public
power utility that has ownership in fossil fuel-fired generating units.
(See APPA’s Summary of the Dingell/Boucher bill – also available on APPA’s Web site – for
additional bill details.)
