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Commission Watch

The AGs' Global Warming Suits:
Fortnightly Magazine - October 2004

even ones that are economically viable, would still mean higher electric costs for those utilities' customers. Moreover, most of the alternatives cited in the lawsuit either cost too much or cannot be supplied in sufficient quantities to provide a viable and economic alternative.

Today, coal is the nation's largest single fuel source for electric generation; While coal prices have increased, they have not suffered from the trebling in price that has affected natural gas, the least carbon-intensive fossil fuel. Coal-gasification-which breaks down coal into its basic chemical constituents- is a promising technology that offers greater efficiency and easier "carbon scrubbing" than conventional coal plants. However, the technology is still experimental and the construction of large-scale coal-gasification plants is just now starting.

The Midwest provides an ideal environment for wind power, which in large-scale developments is cost-competitive in today's electricity markets. But wind-generated electricity suffers from an inherent limitation: If there is no wind, there is no electricity. This does not preclude development of more large-scale wind farms in the Midwest, but it does mean that wind power will always be a limited component of any future generation mix because it needs to be backed up by other generation that can be called on whenever needed. With memories of last summer's blackout still fresh in the minds of many, ensuring reliable supplies of electricity ought to be of particular concern to the plaintiffs.

Improving energy efficiency is also a laudable goal, but it too has its limits. In the last 30 years, the United States has become far more energy efficient, both through investments in energy conservation measures (such as better-insulated homes) and improved technology (such as better motors). More can be done, but it is not clear that the most beneficial investments in greater energy efficiency are in the electric industry. Moreover, energy efficiency advocates have been known to oversell benefits (, "negative cost" technologies) and dismiss some costs (e.g., uncertainty over the how well new technologies perform).

As for biomass, it is hard to imagine that there are enough trees that could be harvested in the Midwest to replace even one large coal plant, let alone many of them. Corn-based ethanol already requires large subsidies to be competitive and there would need to be a significant increase in production to replace coal-plant generation. And, despite continuing technological progress, solar energy continues to be far too expensive to be considered viable.

As for the "justness and reasonableness" of the distribution of benefits and costs, the plaintiffs' lawsuit would clearly not benefit the five utilities' customers, who would be forced to pay higher prices for electricity, through no fault of their own. The lawsuit is asking a select group to bear disproportionate costs to address what may or may not be a global environmental problem, even though their utilities made investments that were prudent.

Consider, too, what would have happened had the utilities not invested in coal plants, but exclusively in more expensive, less CO2 emissions-intensive resources: Their own state regulators would have found those utilities imprudent and imposed financial penalties on investors.