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February 2015 Policy Study, Number 15-3

   

Obama-Inspired EPA Carbon-Dioxide Regulations May Bankrupt Iowans

   

Iowa Specific Impact Projections

   

 

Beacon Hill also generated state-specific cost-benefit projections for all three aspects of the CPP regulation, existing and new coal power-plants and mercury emissions.  By 2030 the cost of Iowans’ electricity from existing power plants will go up by 14.45 percent, resulting in a loss of 9,338 jobs, a loss of $95 million in new business investment, and a loss of almost a billion dollars ($913 million) of disposable income for Iowa families.  Retrofitting existing coal power plants to capture or reduce significant levels of CO2 is very expensive.

 

For new coal-burning facilities, the costs are less – but still significant.  Electricity from these plants will be 3.6 percent higher in 2030, resulting in the loss of almost 2,500 jobs, $29 million in new investments, and $366 in disposable income. 

 

When the costs of complying with the very expensive mercury provisions are included, the total costs to Iowans by 2030 are estimated at $549 million, resulting in a 2 cent per kWh or 25 percent price increase in electricity for our homes, a loss of 15,650 jobs, almost $200 million less in new business investments, and over $1.6 billion in reduced real disposable income.[21]

 

When broken out by the approximately 1.2 million households in Iowa today, the Beacon Hill analysis projects about a $460 per year increase in energy (electricity and heat) costs when the compliance impacts on existing coal power plants, potential new coal plants, and for mercury provisions are counted.

 

 

Beacon Hill Analysis

The Cost and Economic Impact of New EPA Rules on Iowa (2012 $)

Net Benefits (cost)

2030

CO2 Rule for New Power Plants (millions $)

$82

CO2 Rule for Existing Power Plants (millions $)

$156

Utility Mercury Emissions (millions $)

$312

Total Net Cost to Iowa  (millions $)

$549

Electricity Prices (cents per kWh)

1.9

Percent Change (%)

25%

Total Employment (Jobs Lost)

15,650

Investment (millions $)

$184

Real Disposable Income (millions $)

$1,673

Source:  The Economic Effects of the New EPA Rules on the State of Iowa, The Beacon Hill Institute, September 2014, pp. 2-4.

 
One result of CPP, presumably desired by the EPA and ObamaEnergy, is a change in the source of our electricity and heat.  Under the EVA scenario, the energy generation mix change for Iowa is as follows:

 

Iowa Generation Mix Comparison:  2012 vs. 2020 CO2 Case

 

2012

2020

Change

Coal

61%

49%

-12%

Natural Gas

3%

17%

14%

Renewables

26%

25%

-1%

Other

9%

8%

-1%

Source:  "U.S. Generation Mix Comparison: 2012 vs. 2010 CO2 Case," EVA, p. 24.

 

Iowa is a “regulated” electricity market, which means that power companies are legally allowed to charge customers a rate for their power based on both the cost of capacity facilities and the cost of generation.[22]  

 

The EVA projection for our cost changes between 2012 and 2020 reflects significant price increases of 63 percent because of the move from coal to natural gas.  This is a change from just over $20 per megawatt hour of electricity to over $33 per hour.[23]  As a state, our total spending on electricity under the ObamaEnergy CPP will increase from $3.5 billion in 2012 to $4.4 billion by 2020, held constant in real 2012 dollars, or a 23 percent increase in spending on a basic necessity of life.[24] 

 

 

Electricity Production Cost in Regulated States ($/MWh): 2012 vs. 2020 CO2 Case*

 

2012

2020

Increase

United States

$21

$43

$22

Iowa

$20.28

$33.11

$12.83

* Per megawatt hour (MWh) and in real – 2012 – dollars

Source:  EVA, p. 26.

 

Even though the EVA study was funded by Peabody Energy, and thus might be alleged to overstate the costs to favor the energy industry, their analysis only projects an average electricity cost increase of 8 percent, or approximately $100 per year, for individual Iowa families. Their projections show that much of the cost increases will be borne by industrial and business customers.[25]  This, fortunately is not as high as the 80 percent cost increases for families anticipated in coal-heavy states such as Illinois, Mississippi, Oklahoma, Oregon, or Texas. 

 

According to EVA, the business and industry electricity cost increases projected for Iowa are in the 17 percent range, from 5.3 cents to 6.2 cents per megawatt hour in real, 2012 dollars.[26]  One can anticipate that increased production and manufacturing costs will be passed on to consumers and thus paid through higher prices on consumer goods, versus a direct home energy cost.

 

On the natural-gas-supported-heating side, a key consideration in the upper-Midwest, upper-plains states such as Iowa, the ObamaEnergy plan will have more onerous results.  Total costs in Iowa for natural gas are projected to rise from $1.7 billion to $4.1 billion in 2020, a 144 percent increase.[27]  For an average residential customer this increase will be almost $300 per year ($274) in real, 2012 dollars, or a 44 percent increase.[28]  Nationwide the increase is expected to be about $190, or from $675 to $865 per year, a 28 percent increase.  The table below shows this data.

 

 

Household Electricity and Natural Gas Costs Under ObamaEnergy, 2012 vs. 2020

Electricity

2012

2020

Percent Increase

Iowa

$1,139

$1,235

8%

United States

$1,288

$1,390

8%

 

 

 

 

Natural Gas

 

 

 

Iowa

$608

$882

45%

United States

$675

$865

28%

Source: EVA, pp. 29 and 37.

 

When the separate electricity and heat cost increases projected by the EVA report are combined, the average total household energy costs for Iowans under the ObamaEnergy Clean Power Plan will move from $1,747 per year in 2012 to $2,117 per year in 2020, an overall 21 percent increase ($370) in costs.[29] Our projected health benefits, according to the EPA will be $7.

 

   

 

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