The House bill reduces advantages now held by midwestern utilities, says a utility executive. And an Iowa utility is running ads saying the climate bill will lead to higher electricity rates.
MidAmerican Energy president William J. Fehrman says a climate change bill now in Congress could hurt farmers by increasing costs for inputs like fertilizer and fuel — as well as hiking their own electric bills.
“This is a game-changing (bill),” Fehrman said. “I don’t think folks really understand just how game-changing this is.” MidAmerican Energy provides electricity to 723,000 customers, mostly in Iowa. It is a subsidiary of Warren Buffet’s company Berkshire Hathaway.
The plan Congress devised, known as cap and trade, would limit greenhouse-gas emissions by limiting the total amount of pollution allowed and then providing a trading scheme for entities, like utilities, to buy credits — essentially permits to pollute as they transition from traditional sources of power like coal to wind and renewables.
The news is not all bad for rural America, and could create opportunities for farmers. “The offset market could be a boon to farmers and other landowners who plant extra trees to absorb carbon dioxide, use new technology to feed livestock, install methane capture systems over animal waste lagoons or practice no-till farming to store carbon in the soil,” The New York Times reports.
In an advertising blitz, however, MidAmerican is arguing that the markets for emissions allowances could force it to increase utility bills by 20 to 25 percent when the law takes effect in 2012.
The Obama administration expects its carbon plan to raise about $700 billion in sales of pollution allowances by 2019. Administration officials say about 80 percent of that revenue will flow back to consumers in tax credits intended to offset increases in energy costs.
Because carbon emissions will be in what amounts to a commodity market, advocates of cap and trade say its mere presence will encourage innovations to reduce greenhouse gases at their source and promote more alternative energy investments by utilities and businesses
The U.S. House of Representatives has passed the measure but it is now awaiting action in the Senate, where its fate is less than certain as rural and agriculture interests, as well as regions with a strong reliance on coal, have stronger voices.
Fehrman said the bill will amount to a transfer of wealth out of Iowa: the Hawkeye State is now reliant on coal, a loser in cap and trade, and has fewer customers than big-state utilities.
For example, Seattle City Light, which is powered with a heavy mix of hydropower, provides electricity with relatively low CO2 emissions, and will have a major advantage over MidAmerican in the trading markets, Fehrman said. “This generates a lot of chaos in our ability to price our product,” Fehrman said.
In an interview, Fehrman added, “It’s a West Coast-East Coast-Midwest issue.” MidAmerican, which has a major wind power project in western Iowa and is scouting for more, would prefer to opt out of the trading portion of the plan and move to capping greenhouse gases on its own, Fehrman said.
Dozens of farmers in the Carroll-area already benefit from wind turbine leases through wind generation projects. Carroll Area Development Corp. executive director Jim Gossett said he has a major concern for rural America with cap and trade as it seeks to equalize prices for electricity, taking away regional advantages that Carroll and other Midwestern areas have enjoyed.
Iowa may not have mountains and oceans and other amenities to attract new business, but it has offered competitive electric rates, which Gossett says has been significant in luring companies like Google to Iowa. “It makes us very competitive,” Gossett said.
Because health care is likely to be a higher priority than cap and trade in the Senate, there would appear to be more time for stakeholders to make their cases.