Since its adoption on September 6, 2015, the federal Clean Power Plan (“CPP”), the United States’ first comprehensive rule for lowering greenhouse gas emissions, has been a topic of simultaneous praise and criticism. With respect to the impact of the CPP on future electricity costs, there are also significant differences of opinion. Although the Environmental Protection Agency (“EPA”) acknowledges CPP compliance costs of $8.4 billion per year, the EPA contends that the CPP will encourage energy efficiency programs and switching to lower cost fuels that could eventually result in lower electricity costs for consumers. By contrast, non-governmental organizations such as the National Economic Research Associates (“NERA”) estimate compliance costs at approximately $33.5 billion per year and predict an electricity cost increase of between 12 and 17%. In light of such varying predictions related to the impact of the CPP on electricity costs, large consumers of electricity should, at a minimum, pay close attention to individual state implementation plan proposals to assess how these specific proposals may affect their electricity costs.
In addition to the questions associated with the CPP’s impact on future electricity costs, the future of the CPP is also subject to significant uncertainty. On February 9, 2016, the United States Supreme Court issued a stay of the CPP preventing the EPA from enforcing the CPP until legal challenges are resolved by the federal courts. As a result, the Supreme Court will not review the CPP until late 2017 or 2018.
The composition of the Supreme Court at that time will likely be the deciding factor regarding the CPP’s fate. Specifically, since the death of Justice Antonin Scalia, the Supreme Court is considered to have four conservative Justices and four liberal Justices. As a result, the upcoming Presidential election will almost assuredly determine whether or not the CPP will be upheld. A President Hillary Clinton likely means a fifth liberal justice and the CPP surviving challenge at the Supreme Court. A President Donald Trump likely means a fifth conservative justice and rejection of the CPP by the highest court.
Whether or not the CPP is upheld by the Supreme Court, however, the push by some for greenhouse gas reductions will continue. The United States is now subject (as part of the Paris Agreement) to an international commitment to lower its greenhouse gas emissions by 26 to 28 percent from 2005 levels by 2025. In addition, a number of states have adopted legislation and regulations to address climate change solutions or combat greenhouse gases directly. For example, Pennsylvania’s Climate Change Act of 2008 requires Pennsylvania’s Department of Environmental Protection (“DEP”) to draft a Climate Change Action Plan that identifies greenhouse gas emissions baselines and recommends legislative changes to reduce greenhouse gas emissions in the Commonwealth. Other states, such as California, have more aggressive and binding ambitions.
If you have any questions regarding the CPP or state proposals for reducing greenhouse gas emissions and the impact on electricity pricing, please do not hesitate to contact us.