Transcript Presentation Title - Charlotte Chamber of Commerce

Federal Climate Change Legislation –
Charlotte Chamber
September 22, 2009
Mike Stroben
Director, EHS Policy
Key Provisions of H.R. 2454 (Waxman/Markey)
• Renewable Electricity and Energy Efficiency Standard

Standard begins at 6% of retail sales in 2012, rises to 20% in 2020

25% of requirement can be met with demonstrated energy efficiency
Can buy renewable energy credits from others or pay an Alternative Compliance
Payment
• Greenhouse gas cap-and-trade program – covers ~ 85% of emissions

Electric generation and fuel producers and importers covered in 2012

Industrial stationary sources covered in 2014

Natural gas local distribution companies covered in 2016

Emission caps expressed as a percentage of 2005 emissions
97% in 2012
83% in 2020
58% in 2030
17% in 2050
2
Electric Sector Allowance Allocation
• The 2012 electric sector allowance allocation is equal to about 84% of
sector’s 2005 CO2 emissions – about 35% of the cap

85.7% of the electric sector allowances allocated to local distribution companies

10% allocated to merchant coal generating units

4.3% set aside for long-term contract generators
• Local distribution company allocation is split 50/50 between historical
emissions and historical retail sales
• Allocation must be used to benefit consumers
• Allocation phases out entirely in 2030
• Duke Energy Carolina customers do relatively well under this
allocation formula because of nuclear generation
• Allocation much improved from where debate began
3
Industrial Sector
• Legislation includes a list of default industrial sectors that are covered
entities
• If not part of one of the listed industrial sectors the threshold for being
a covered entity is 25,000 tons or more of CO2 equivalent emissions

2008 is the test year - once in - always in
• All covered entities have an annual compliance obligation

Must turn in allowances/offsets every year equal to annual emissions
• Allowances allocated only to “energy-intensive, trade-exposed entities”
• In 2011 EPA to publish a list of sectors eligible to receive an allocation
• EPA is to update the list in 2013 and every 4 years thereafter

Allocations set on a per unit of production basis
4
Duke Energy Position on Climate Change Legislation
• Duke Energy supports passage of economically and environmentally
sustainable climate change legislation
• The question of whether GHG regulation is coming is settled

EPA is currently moving to regulate – set to do so in March of 2010
• Duke Energy prefers a legislative approach

EPA lacks the legislative authority to craft an environmentally sound program that
minimizes costs to consumers and our economy
• HR 2454 can be improved

As the legislative process moves forward in the Senate Duke Energy will work to
win improvements to the legislation to benefit our customers
Implementation schedule and cap trajectory
Allocation phase-out
Offset provisions
Cost-containment mechanism (price collar)
5
What Will the Senate Do and When?
• Senators Boxer and Kerry are drafting a bill

Expect it to be introduced the week of September 28th
• Senate EPW Committee to mark-up sometime in October
• Five other committees with jurisdiction might also work on legislation

Finance, Commerce, Energy and Natural Resources, Agriculture, and Foreign
Relations
• Timeline for floor action is uncertain – might not occur in 2009

Copenhagen influence

Health care fatigue

Other legislative priorities
• Expect any bill passed by the Senate to be more favorable to
consumers than HR 2454
• If Senate does at some point pass a bill, House-Senate conference
would try to work out differences
6
Impacts of Legislation
• Duke Energy will face both a CO2 emissions and a renewable energy
compliance obligation
• Develop least-cost strategy to meet both requirements

The North Carolina RPS will help Duke meet the federal renewable requirements

Duke’s energy efficiency initiatives will play a role

Near-term focus will need to be on allowance/offset purchases to make up for the
expected allocation shortfall
Can’t change out the existing generation fleet over night
Allowance/offset prices will dictate near-term compliance costs and cost to
customers

Longer term – new generation deployment will play a key role in compliance
New nuclear
Additional cost effective renewable generation and energy efficiency
New gas-fired generation
7
Impacts of Legislation on Business
• Increased energy costs for everyone

The size of increase will depend on the final program details
More stringent program = higher costs
Allowance allocations to electric and natural gas local distribution companies will
moderate impacts
– Larger allocation = greater cost mitigation
• Direct compliance obligation for sources that are covered entities

Sources that don’t receive an allocation as an energy-intensive or trade-exposed
industrial sector will be required to purchase all the allowances /offsets needed to
cover their emissions

Could be required to install emissions monitoring equipment
EPA regulations will specify how emissions are to be determined
8