As many states move toward re-regulation, we speak to commissioners in Illinois, Missouri, Pennsylvania, Texas, and Virginia to learn how policies are evolving—and how far the regulatory shakeup...
The Coming Conflict
Predicting discord in power plant property tax assessments.
sum of variable operations and maintenance costs, fuel costs, and carbon dioxide costs. The percentage change of gross margin for each generator is calculated using past ( i.e., 2006 AEO) and recent projections ( i.e., the “Basic” scenario in EIA’s analysis of the American Clean Energy and Security Act of 2009). The long-term average prices for energy, fuel, and carbon dioxide reflect the average price through 2030 in real 2007 dollars. Long-term average energy prices are calculated from the average electricity price in the “Total Energy and Supply Disposition Summary” table of both projections. Long-term fuel costs for each generator are calculated as the product of the unit’s heat rate as reported by eGrid2007 and the corresponding fuel price from the “Energy Prices by Sector and Source” table of both projections. Variable operating and maintenance costs for general classes of capacity can be derived from the operating characteristics of capacity as reported in the AEO. Carbon dioxide costs are calculated as the product of each generator’s carbon dioxide emission rate and the long-term average “Allowance Price in the Greenhouse Gas Compliance Results” table in the “Basic” scenario of EIA’s analysis of the American Clean Energy and Security Act. After estimating the change in gross margin for each generator, the capacity-weighted average by state is calculated based on each generator’s capacity as provided by eGrid2007.
More generally, however, estimates of gross-margin trends reveal the relative size and directional change of an assessment, should a generator trigger the appeal process today (see Figure 3) .
Any effective policy that penalizes carbon dioxide emissions will transfer value from high-emission generation, such as coal and oil-fired capacity, to zero-emission generation, such as wind, solar, hydroelectric, and nuclear projects. Income streams and asset values for high-emission generators will fall as unrecoverable costs to operate and emit carbon dioxide increase. 7 On the other hand, zero-emission capacity has no obligation to purchase carbon dioxide allowances and will benefit from the expected increase in energy prices.
Under current proposals for federal carbon regulations, states dominated by coal and oil-fired capacity are expected to experience larger negative changes to gross margins, while states with substantial shares of zero-emission capacity likely will see larger positive changes. Due to the aggregated analysis, some individual generators might experience changes that differ from the state average. A nuclear facility in New York, for example, likely will see higher gross margins, even though the state’s average capacity is projected to face lower gross margins.
States that are fairly diversified between high and zero-emission generation likely will face minimal changes on an aggregated basis, since the positive and negative gross margin impacts of these individual generators offset one another. Montana is such a state, with almost a 50-50 split of coal-fired and renewable capacity. Other states with small expected changes in gross margin are those that are dominated by natural gas-fired capacity. Unlike coal and oil-fired units, natural gas-fired units will recover a larger amount of carbon dioxide costs through the projected increase in energy prices, thereby limiting the impact on gross margins. Texas,