Power Generation

Electric Rates Will Skyrocket Under EPA Plan

A Guest Column by MEI President Patrick Sullivan recently published by the Clarion Ledger on 9/14/14

Mississippians should be aware of what’s brewing in a new proposal from the U.S. Environmental Protection Agency (EPA). If implemented as planned, the added costs to Mississippi households, businesses, and the overall economy will be shocking. Hopefully, good sense will prevail, but we should not assume such.

EPA’s unprecedented plan to alter fuels used for electric power generation in states under the guise of carbon dioxide (CO2) emissions reductions is simply not economically feasible. The economic impacts will be ruinous to U.S. competitiveness. Further, by EPA’s own admission, CO2 levels will not be significantly reduced by the proposed scheme, so this appears to be the next jab in the ideological fight against traditional energy sources that provide about 95 percent of American energy.

Instead of reaping the benefits of the most diverse energy supply in the world, the Administration, through EPA, is proposing a plan I estimate will result in $14.2 billion in unnecessary power plants constructed in Mississippi between 2018 and 2025. Mississippi electric ratepayers will pay the costs off with added interest over a couple of decades through higher electricity rates, much higher.

Virtually overnight, innovation in American oil and natural gas production has made our country the most energy rich in the world when also including abundant U.S. coal reserves, the world’s largest nuclear power fleet, and the variety of renewable energy assets. Coming out of a painful recession still mired in recovery, the logical policy direction is to leverage American strengths, like innovation, our people, and now an abundance of energy, into manufacturing growth and a 21st century industrial economy. Energy and manufacturing jobs typically pay 2-3 times the average private sector wage. However, EPA is proposing a contrary direction.

Here’s how it could go if they get their way. All conventional coal plants in Mississippi will be prematurely retired. These plants are largely paid off and producing affordable power because coal is an inexpensive fuel for power generation. Next, 13 percent of all electricity produced in Mississippi will be required to come from renewable sources. A fair economic case may exist someday for this scenario, but today, the added costs total $14.2 billion.

To put this in perspective, Mississippians altogether pay slightly less than $2 billion each year in state individual income tax. Of course, low income families will be hit the hardest as the economy is dragged down. Energy costs like electricity, natural gas, and gasoline, make up a much higher share of low-income household budgets than higher income households.

There’s also a fairness issue among states. Kentucky’s targeted emissions level for the regulatory period is nearly 3 times higher than Mississippi’s, so clearly, the proposed CO2 standards are not about health.

Analyzing the EPA proposal causes lots of head scratching, but the absurdity is almost laughable. Because EPA seems to arbitrarily want 13 percent of Mississippi’s electricity to come from renewable sources, some 21,000 acres will need to be covered with solar panels, creating a series of ecological deserts across the state. Another 48,000 acres will need to have giant wind turbines. The area requirement is the equivalent of covering the entire City of Jackson in energy production, and because of their intermittent nature, these resources will only generate power 15-20 percent of the time.

Obviously, the EPA proposal is not grounded in reality. Emissions reductions are achievable, as evidenced over the past 30 years, but consideration of the economic impacts should be required and expected.

Mississippi’s Power Generation

Mississippi already enjoys significant economic activity rooted in the energy sector and has the assets and resources to realize further economic growth from energy and energy-related technologies.

Today, nearly all of the electric power generated in Mississippi is sourced from three fuel sources- natural gas, coal, and nuclear. Similarly, these three fuels account for the vast majority of power generation in the United States and in the rest of the world.

new energy MS mix

Most of the fuel used for electricity generation in Mississippi is imported from other parts of the United States.

As a general rule, electric power is most efficiently used closer to the source of generation. Therefore, having adequate generation assets near all demand centers, along with a robust transmission and distribution system for delivery and interconnection with other segments of the electricity grid, is necessary to meet peak demand requirements. The map below depicts fuel generation assets in Mississippi.

Elec Power Asset Map