Fact Checker: Mining trade group's ad warns of huge hike in electric bills

Published May 24, 2014 9:47 pm

Fact Checker • Analysis shows there's little justification to the claim that people will see costs nearly double.
This is an archived article that was published on sltrib.com in 2014, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

"Hear that? . . . That's the sound of people opening their electric bills to discover they've nearly doubled. . . . An 80 percent cost hike? That's something we better get used to if extreme new Obama administration power plant regulations take effect."

— A radio ad sponsored by the National Mining Association regarding Environmental Protection Agency regulations on new coal-plant carbon emissions.

This is a case study of how a trade group takes a snippet of congressional testimony and twists it out of proportion for political purposes.

In a radio ad and in print advertising ("Ready for 80% Higher Electric Bills?"), the National Mining Association is claiming that electric bills will jump 80 percent because of pending regulations for new power plants. The source supposedly is an Obama administration official, but the claim falls apart under close scrutiny.

The Fact Checker takes no position on the EPA regulations, which some contend will increase the cost of the electricity and make it difficult to build new coal plants, but this ad does not pass the laugh test.

Coal produces about 40 percent of the nation's electricity, in part because it is cheaper than other forms of energy. The EPA has proposed regulations to limit carbon dioxide emissions from new coal plants: no more than 1,100 pounds of carbon dioxide per megawatt-hour of power produced, compared to an average of 1,400 to 1,700 for current new coal plants.

Under a process known as carbon capture and sequestration (CCS), the new plants would need to capture about 20 to 40 percent of their carbon dioxide emissions.

On Feb. 11, a pair of clean-coal officials from the Department of Energy appeared before the House Energy and Commerce Committee and backed the administration's argument that such CCS systems are commercially viable. At one point, a lawmaker asked Deputy Assistant Secretary Julio Friedmann about estimates (referenced on DOE's website) concerning the initial costs of such technologies.

Referring to "first-generation technology," Friedmann replied: "We're looking at something on the order of $70 to $90 a ton. In that context, that looks something like a 70 or 80 percent increase on the wholesale price of electricity. For the second generation technologies which we're developing, it's our strong expectation that number will be roughly half. We'll be looking at something like a four-year $50 a ton cost."

The House panel blasted out a news release with the headline about the "70 to 80 percent" quote and a clip from the testimony, but the remarks attracted little notice beyond right-wing blogs. Bloomberg News wrote a short article, and Fox News made a reference to the figure.

But reporters missed the fact that later in the hearing Friedmann clarified that, in giving these estimates, he was referring to "a high fraction of capture - basically 90 or 95 percent capture." (He also made a distinction between a coal gasification facility, where full recapture could initially boost wholesale costs by 40 percent, and a pulverized coal power plant, which could boost wholesale costs as much as 80 percent.)

With a capture rate of 50 percent, which is closer to the EPA rule, the "actual integrated cost is much less and that's relevant with respect to how you can deploy either marginal units or smaller fractions of capture on the newer existing fleets," Friedmann said.

In other words, the "80 percent" estimate had nothing to do with the EPA rule. Indeed, Bloomberg noted that the EPA has proposed requiring all new coal plants to trap "some carbon-dioxide emissions." The EPA's proposed rules also make clear the agency rejected "full recapture" (above 90 percent) because it would be too costly, which is why it instead proposed "partial recapture" CCS technologies.

Meanwhile, note that Friedmann was referring to wholesale price estimates. Even if he had been talking about the impact of the EPA regulations, it is quite a stretch to assume that any increase in costs at a plant would translate into the exact same increase at the retail level, given that utilities often have a fleet of power generation plants - such as existing coal plants, natural gas plants, nuclear plants, or wind and solar facilities. Rates, in other words, would not be based on a single new power plant that uses carbon capture technologies. (EPA has not released proposed rules for existing power plants, but officials have said the rules would not require CCS technologies.)

The radio ad at one point tries to give itself some cover by saying the "US Department of Energy says they could push wholesale electricity costs up 80 percent." But then it then makes an unjustified leap that homeowners' electric bills have "nearly doubled."

Nancy Gravatt, NMA spokeswoman, defended the ad. "The '80 percent increase' was widely quoted in all the media and widely covered, it is not something we misconstrued or misquoted," she said. "The doubling of a person's electricity bill is our best estimate on what the impact might be for an average consumer based on realistic scenarios. It's based on analyzing the impact of EPA regulations, which are taking out the nation's most low-cost electricity, which is coal-based and purchased on long-term stable contracts, and replacing with other, less predictable and more costly sources that are often purchased on the spot market."

She pointed to a recent Los Angeles Times article about "a growing fragility in the U.S. electricity system" as a "result of the shutdown of coal-fired plants, reductions in nuclear power, a shift to more expensive renewable energy and natural gas pipeline constraints." California's electricity prices could increase 47 percent over the next 16 years, the article said, citing a study, though that figure also stems from "heavy investments in transmission lines" and other factors.

There's little justification for this radio ad to claim that people will see their electric bills nearly double because of the EPA rules on new coal plants. The NMA has seized upon a high-end wholesale estimate for "full recapture" carbon capture and sequestration technologies which the EPA specifically rejected — and then leveraged that factoid to make a wholly unsupported claim that the same increase would be reflected in retail prices.

The EPA's proposed regulations, along with other factors, may boost the cost of electricity, but the NMA should not rely on such bogus, hyped evidence to make its case.