House Bill Will Spur 20% Electricity-Price Hike by 2030—EIA


"In the short term, electricity prices rise to only about 9.5 cents per kilowatt-hour in 2020. . ."

The average U.S. electricity customer would face a 20% price increase in 20 years under climate legislation passed by the House last month, according to a draft analysis by the Energy Information Administration.

The House bill by Democrats Henry Waxman (Calif.) and Ed Markey (Mass.) would force electricity prices to climb to 12 cents per kilowatt-hour in 2030—20% above EIA's 2009 projections—under a scenario in which low-emission technology is developed on schedule and offsets are not constrained, the Energy Department agency says in the obtained by E&E.

Electricity prices will vary from 11 to 17.6 cents per kilowatt-hour in 2030 under six different scenarios EIA analyzed. The Waxman-Markey bill would cap and reduce carbon emissions by 17% by 2020 and 83% by 2050 compared with the 2005 baseline.

The current average price of electricity is about 10 cents per kilowatt-hour.

In the short term, electricity prices rise to only about 9.5 cents per kilowatt-hour in 2020, about 3% above "business as usual," reflecting the free allocation of emission allowances available until 2025.

Overall, U.S. GDP will decrease by 0.2% in the basic case, or by about $492 billion (in 2000 dollars) from 2012 to 2030, according to the report.

The draft predicts the cost of greenhouse gas allowances will range from $32 per metric ton in 2020 to $65 per metric ton in 2030 under the basic case.

But EIA's modeling formula can only forecast up to 2030. It also doesn't account for several provisions, including the impact of financing of advanced low-emission technology, the distribution of allowances to merchant coal plants, strategic allowance reserve and effects of increased investment in energy R&D.

The report says the bill's clean-energy bank provision "may have the most significant potential to alter the reported results."

EIA spokesman Jonathan Cogan said the agency plans to release a final version of the report soon.

Click here (pdf) to view the draft report.

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