WASHINGTON, June 23, 2015 – During a Senate Environment and Public Works subcommittee hearing Tuesday, lawmakers heard testimony from panelists who ardently disagreed over whether the EPA’s Clean Power Plan (CPP) would or would not lead to a regressive “tax” on energy consumers.
Sen. Shelley Moore Capito, the Republican chair of the Clean Air and Nuclear Safety Subcommittee, said in her opening statement that states like her own West Virginia – which is relatively poor and produces far more energy compared to other states – would not fare well under the CPP.
“Coal provided 96 percent of West Virginia’s electricity last year,” she said, and the price of electricity was 27 percent lower than the national average. If the CPP is implemented, she asserted, the state’s electricity prices would rise between 12 and 16 percent and power plant closures would leave many without work.
Combined, the results would deal a massive blow to over half of West Virginians who are poor or middle-income, she said.
According to a study commissioned by the industry-supported American Coalition for Clean Coal Energy, U.S. households that earn less than $50,000 annually will devote an estimated 17 percent of their after-tax incomes to residential and transportation energy in 2016. Households that make less than $30,000, will put 23 percent of their after-tax incomes toward energy bills in 2016.
Capito and several witnesses at the hearing said that these statistics show rising energy prices or falling incomes – either or both scenarios could happen if the CPP were implemented, they said – would disproportionately burden low- and fixed-income families and elderly people, creating a regressive “tax.”
This “regressive” effect would happen, they said, for two primary reasons. First, any costs that plants incur in the process of complying with the new CPP greenhouse gas emission standards would ultimately be passed on to the consumer. Second, lower-income families are more vulnerable to energy costs than higher-income families because energy represents a larger portion of their household budget.
Eugene Trisko, an energy economist and attorney, told the committee that fixed income seniors are among the most susceptible to energy cost increases “due to their relatively low average incomes and high per capita energy use.”
Joe Martens, the commissioner of New York’s Department of Environmental Conservation, testified that Trisko’s assertions were simply not true. Instead, he said, the CPP would not impose a regressive cost burden on consumers, but would lower electricity rates.
Martens said his state teamed up with a bipartisan group of Northeastern and Middle Atlantic states to establish the Regional Greenhouse Gas Initiative (RGGI), a cap and trade program, in 2005. Since then, they have collectively reduced their state carbon emissions by 40 percent, he said.
“Our program was a resounding success,” he told the senators, and was achieved while the states’ economies “grew approximately 8 percent over the period from 2005 to 2013, adjusted for inflation.”
Industrial electricity rates were 50 percent higher than the national average when the program was implemented in 2006, and in 2014 they were 13 percent below the national average, he said. Funds generated through the program went toward energy efficiency projects that Martens said saved 100,000 low and moderate income families in New York over $80 million in energy bill savings.
“Our experience informs us that EPA’s projection that the CPP will lead to lower, not higher, electricity bills is likely to be true if states choose smart, cost-effective approaches to achieve EPA’s targets,” Martens said. “One of the advantages of the CPP is that EPA leaves policy decisions to the states.”
Capito introduced a bill, called the Affordable Reliable Electricity Now Act (S 1324), in May that would gut the CPP. The bill has 32 co-sponsors, of which 31 are Republicans and one, Sen. Joe Manchin of West Virginia, is a Democrat.
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