NCPA - National Center for Policy Analysis

Electricity May Not Get Cheaper

June 8, 1998

Consumers may never realize the hoped-for lower costs from deregulation of the electric utility industry, according to a report by Resource Data International, Inc., a consulting firm.

The RDI report, commissioned by the Edison Electric Institute, says air quality rules pushed by the Environmental Protection Agency and -- even more -- the requirements of the Kyoto Global Warming Treaty will result in additional costs. The hardest-hit segment in the electric power industry will be the nation's lowest-cost, coal-fired generators.

Specific regulatory actions analyzed in the DRI report are the EPA's new standards for particulate matter and ground-level ozone, and efforts to deal with interstate ozone problems and regional haze. To comply with these regulations,

  • It will cost $21.8 billion, in 1997 dollars, to retrofit pollution control technologies at existing power plants over the next 10 to 15 years.
  • Retrofitting power plants with these new technologies will reduce their thermal efficiencies and increase operating and maintenance costs.
  • Many coal-fired plants would shift to natural gas, with increased demand raising natural gas prices for electric companies 15 percent by 2010, and raising wholesale electricity prices 11 percent or $15.7 billion a year.

Furthermore, living up to the commitments of the Kyoto Protocol would require shutting down 36 percent of U.S. coal-fired electricity generation, says RDI. Even without the requirements of the Kyoto treaty, the U.S. faces a shortfall in electricity supplies by 2010.

Source: "New Environmental Initiatives Will Undermine Gains from Electricity Deregulation, Study Says," EPA Watch, June 8, 1998.


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