According to a recent E&E Daily article, a federal climate change issue that has been simmering recently burst into open view with private utility executives sparring over how to allocate greenhouse gas (GHG) emissions credits. On one side, utilities such as Florida Power & Light (FPL) and Pacific Gas & Electric (PG&E), with substantial base-load generation from nuclear, natural gas and hydropower resources, want an auction system of distributing GHG emissions credits. On the other side, utilities such as American Electric Power Corp (AEP) and Duke, which have significant coal-based generation, are advocating for a system that would provide GHG emissions credits at no cost, based on a utility's historic emission levels. These differences of opinion, clearly, are not limited to investor-owned utilities (IOUs).
Adding to the trade press, Jim Rogers, the CEO at Duke Energy Corporation, recently criticized the Lieberman-Warner bill by describing the legislation as a "bastardized" version of a cap-and-trade program. The Lieberman-Warner bill, expected to be considered by the Senate as early as April, would initially allocate 19 percent of the allowances to fossil fuel burning utilities (and one percent to a specific group of electric cooperatives). Those allowances would decrease to zero by 2030.
Under the Lieberman-Warner framework, 21.5 percent of allowances would be auctioned in 2012, with another five percent allocated for "early auction; the percentage of allowances allocated to the auction would then grow to 61.9 percent in 2050.
Duke has defended the company's push for free allowances as a way to "lessen the economic shock" as companies transition to cleaner fuels or technology to meet the new climate requirements. Duke argues they are not "looking for a free ride", according to E&E Daily.
As the debate on comprehensive climate change legislation advances, the fight over allocation of allowances and the merits of an allowance auction will likely become more heated in all sectors of the utility industry.