Fixing Emissions Isn''t So Bad--K-Fuel etc.UTILITIES: Global warming fix not that pricey, execs say (03/06/2008)
In a simmering feud among major players in the power industry, eight utility executives, including Lew Hay of FPL Group, a prominent Florida utility company, have politely but firmly told their own national trade association to fix exaggerations in a study by private firm Charles River Associates intended to warn Congress about the cost of fighting global warming.
"In the revised analysis, we believe that it will be important to accurately estimate the costs associated with the Lieberman-Warner Climate Security Act," the executives wrote in a Tuesday letter to Thomas R. Kuhn, president of the Edison Electric Institute, which represents the nation's utilities in Washington.
The letter was sent by the executives of some of the nation's top utilities, including the giant PG&E in California and the huge Southern utility Entergy. The letter is indicative of a division within the institute between the companies that contribute relatively little to global warming, because they rely more on cleaner natural gas or nuclear power, and the companies that rely a great deal on dirty coal power, such as Duke Energy.
The institute's report, prepared by the consulting firm Charles River Associates, predicts huge expenses and dire consequences of legislative prescriptions aimed at addressing global warming.
"It appears that EEI has been circulating this material as an effort to scare senators from moving forward with the Lieberman-Warner legislation," Frank O'Donnell of Clean Air Watch wrote the Miami Herald in an e-mail. "In a polite, corporate way, the power execs appear to be wood-shedding EEI CEO Tom Kuhn" (John Dorschner, Miami Herald, March 6).
AEP, Allegheny offered high-returns package to build new power lines
Federal regulators have guaranteed American Electric Power Co. and Allegheny Energy Inc. a market-trouncing return on investment, free of any financial risk, for building a $1.8 billion power line through West Virginia, a move that has angered consumer advocacy groups.
The Federal Energy Regulatory Commission, which sets rates for power transmission, approved a package of financial incentives for the two power giants on Monday in exchange for their building the 290-mile extra-high-voltage line, called the Potomac-Appalachian Transmission Highline, or PATH.
Among the incentives are guarantees that AEP and Allegheny will recover their startup, administrative and construction costs before PATH is in service and new rates have taken effect, and that they will be able to recover all "prudently incurred" costs on the power line if state regulators were to block its construction.
At the same time, FERC has set the power companies' return on equity for new transmission at 14.3 percent.
The rate of return for broad U.S. stock market indexes, such as the New York Stock Exchange Composite and Standard & Poor's 500 indexes, ranged from about 5.5 percent to 6.5 percent last year.
"There's absolutely no risk" for the utilities, said Byron Harris of the Public Service Commission's Consumer Advocate Division, who submitted comments to FERC against the incentive package. "Given all the rate-making treatment that FERC is granting, you don't need to be given such a high rate of return" (Joe Morris, Charleston Gazette, March 6). -- PR