A National Meltdown

Deck: 

Discordant global-warming solutions may end up burning utilities.

Fortnightly Magazine - October 2006
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California Gov. Arnold Schwarzenegger’s surprise move in September to regulate his state’s carbon emissions has the entire industry buzzing over what might come next, such as a national carbon plan. California’s legislation to reduce carbon-dioxide (CO2) emissions by 25 percent by 2020 is forcing a renewed debate over global warming that some believe may force Congress to move forward with a national plan. Such thoughts are fueled by grave concerns over the alternative—that states, left to their own devices in regulating carbon, will pass a patchwork of inconsistent rules that harm the economy.

How will utilities in the next 10 years manage a multi-billion-dollar infrastructure buildout, higher interest rates/cost of capital, diminishing free cash flows, state renewable mandates, and political pressures to keep rates or power prices low, all while complying with carbon emissions programs that emphasize higher-cost fuels?

This question will define the utility industry. Meeting the challenges may depend on whether a national carbon program that regulates carbon emissions is established.

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