HELENA – In their fight against federal rules to cut carbon emissions, the coal industry and its allies are producing studies saying the rules mean big price increases for electricity consumers in Montana and elsewhere.
The most commonly quoted industry study, by NERA Economic Consulting, an international consulting firm headquartered in New York, says the rules will increase electric bills in Montana by an average of 16 percent.
Yet critics of the study say it relies on discredited data, greatly overstating the cost of energy-efficiency measures, which likely will be a key element of lowering carbon emissions from coal-fired power plants.
“If you don’t use that number (in the study), then energy costs are going down,” says Anne Hedges, deputy director of the Montana Environmental Information Center, a group supportive of the rules. “It really confirms what we’ve been saying: That you’re going to see benefits for consumers.”
In the NERA study, its claim of higher costs for consumers rests largely on its cost estimate of energy-efficiency programs, and the assumption those costs will be borne by utility ratepayers.
The NERA study uses an energy-efficiency cost 50 percent higher than estimated by the Environmental Protection Agency, and at least twice as much as some other estimates.
If lower estimates are used, consumers would see much smaller increases in overall electricity costs – or perhaps no increase at all.
Supporters of the EPA rules concede the rules will cause higher prices for electricity, but say energy-efficiency programs likely to be part of the rules will mean less consumption, offsetting consumers’ overall costs.
NERA Economic Consulting ignored several telephone calls and emails asking for further explanation of its study.
Chuck Denowh, spokesman for a Montana coalition that represents the coal industry and opposes the EPA rules, says he believes the study is reliable, noting that NERA took its energy-efficiency costs from a 2012 study by a pair of respected economists.
“I think the EPA has an interest in using the most favorable numbers they can,” he said last week. “We need to use the best data available. ... I think the NERA analysis went to great lengths to make this as accurate as they could.”
The EPA rules, proposed in June, call for a 17 percent reduction in carbon emissions from power plants in Montana by 2030. Montana has nine coal-fired power plants that produce the bulk of carbon emissions in the state.
The rules won’t be final until next June, after which each state, including Montana, will devise its own plan to meet the targets.
The EPA says states can use several steps to reduce carbon emissions. One of those steps is increasing “energy efficiency,” which means launching widespread conservation measures that reduce power consumption and thus reduce power generation and emissions.
Energy-efficiency measures can include using more LED bulbs, improved heating-and-cooling systems, more efficient household appliances and building codes that lead to low energy consumption.
The NERA study assumes utility ratepayers will finance these programs, and attaches a cost.
The cost comes from a 2012 study by Hunt Alcott and Michael Greenstone, economists at New York University and the University of Chicago, respectively. However, a “white paper” financed by an energy-efficiency group the same year says the Alcott-Greenstone study overstates the cost to consumers of efficiency programs.
NorthWestern Energy, Montana’s largest electric utility, says the budgeted cost of efficiency programs it has offered to customers is about two-thirds the cost used by the NERA study.
However, NorthWestern spokeswoman Claudia Rapkoch says expanding such programs could be more expensive, because the easier, “low-hanging fruit” of efficiency programs have been implemented.
Kyla Maki, clean energy program director for the Montana Environmental Information Center, notes that the NERA study assumes consumers will pay the entire cost of energy-efficiency programs. It’s possible utility owners would be required to foot some of the bill, others say.
Hedges and state environmental officials also note that the final EPA and state rules won’t be completed until 2016, and say studies predicting the rules’ impact on electricity prices and consumption are premature.
Hedges says Montana has great flexibility under the rules to meet its goals and will strive to choose a plan that has the least impact on consumers.
“This whole (NERA) study, in my mind, is nonsense,” she says. “They’re assuming we have no choices to make, and we have an endless number of choices. Why would we choose the one that is most expensive? We wouldn’t.”
Denowh says impacts should be studied now, based on the proposed rule, so citizens and businesses have an idea what costs they’re facing.
“We know it’s going to be a costly rule for states like Montana,” he says. “Common sense tells us that ... a major intervention into our energy markets by the government is going to cost consumers.”