Exelon Chairman, President, and CEO John W. Rowe, on the proposed merger that would create the largest utility in the United States....
We've been dumping the cost on utilities, but ground is shifting.
Among the many components of California's electricity shortage are the air quality laws that restrict allowable levels of emissions. And though we want to relieve that shortage and reduce air pollution as much as possible, the problem is one of proportionality. In California, electric utilities are responsible for reductions in air pollution way beyond their share of emissions. By further reducing emissions from more-polluting sources, we would reduce the burden on utilities and free up more electricity.
Until recently, electric utilities functioned as monopolies; state regulators set the rates and all reasonable compliance costs for emissions control were passed through to ratepayers. Since utilities were monopolies, holding ratepayers "captive" to regulated rates, the cost of cleaning up pollution, as with other costs, stayed hidden. It was politically easier to dump these costs onto utilities than onto other industries, like oil, gas, and auto manufacturing, which fought regulation.
With the restructuring of the industry, however, we've unbundled many of the functions of electricity production and delivery, causing the various components of utility bills to be revealed. In the same way, we should be rethinking the disproportionate cleanup burden we place on electric generators, which are now competitive and no different than the producers of any other product. The political equation has changed, and we are now paying the price for not reworking that equation.
According to data from the California Air Resources Board, electric power generators-utilities and cogenerators-contributed .0025 percent of the state's reactive organic gases (ROG), .003 percent of its carbon monoxide (CO), 2.2 percent of its nitrogen oxide (NO x) and 1.8 percent of its sulfur oxide (SO x) in 2000.
Emissions from motor vehicles, however, are the real eye-opener. Plain old passenger cars, only one of 21 categories of on-road motor vehicles, emitted a whopping 23.5 percent of California's ROG, 30.9 percent of CO, 16.3 percent of NO x, and .02 percent of SO x last year. Mobile sources make up 80 percent of emissions in California and 54 percent-less, but still more than half-nationally.
While older utility coal plants are among the worst polluters (yet have been exempted in many states from Clean Air Act requirements), California, unlike the Northeast and Midwest, has no coal plants, either old or new; its power is generated largely by cleaner burning plants fired by natural gas.
The Clean Air Act sets caps on total levels of emissions for different areas. In the Los Angeles area, for example, a program begun in 1994 uses a system of tradable allowances, with total annual allocations to be reduced year by year through 2003, to control NO x emissions from stationary sources. Since 1998, an increase in fossil fuel power generation has raised the price of emission credits, sometimes dramatically. Separately, some smaller generating units are restricted in their operations to a certain number of hours per year.
What about other sources of air pollution? The heavily polluting petrochemical industry-which makes Houston the smoggiest city in the country-was largely exempted from the