Wednesday, August 5, 2009

A Climate Bill That Doesn't Burn Coal

By Margaret Kriz Hobson  

Michael Morris

President and CEO, American Electric Power

In late June, the House passed legislation to cut U.S. emissions of greenhouse gases by 80 percent by 2050. The measure passed after its authors -- House Energy and Commerce Chairman Henry Waxman, D-Calif., and Energy and Environment Subcommittee Chairman Edward Markey, D-Mass. -- won the backing of an unusual coalition of electric utility companies, large industrial firms, farm groups and environmentalists.

American Electric Power President and CEO Michael Morris said he backed the measure in part because of the provisions negotiated by Rep. Rick Boucher, D-Va., to protect continued use of coal. As the action on global warming moves to the Senate, National Journal talked to Morris on his long-term vision for the legislation and the industry.

NJ: What's your take on the House climate change bill?

Morris: American Electric Power has come out and said we could support Waxman-Markey as is. There are things that we do need to see fixed... But we owe it to Congressmen Boucher and Markey and Waxman for the work that they did to give it support. We do want to change it in the Senate, though.

There are a handful of things that we'd like to see tweaked in the bill. I'd like to see if you could set [the timetable for meeting pollution cuts] back a year or two, particularly because it may not get passed until early 2010. And to have [the mandates] all kick in by 2012 -- it would be very difficult to get all the rules and regulations sorted out.

The thing that's very difficult for politicians to understand is these costs go right to our customers. This is all about the U.S. economy, my manufacturing customers, my commercial customers, and most importantly, my residential customers. The free allocation [of emission allowances under the bill's cap-and-trade program] are essential for the utility industry. It gives us the opportunity to do this right. Obama's original position of auctioning off all the credits to help finance his health care dreams was absolutely a non-starter. And fortunately, he saw it to be the case.

NJ: Do you think the legislation treats coal fairly?

Morris: This legislation addresses the issue of coal. It has a practical answer for [developing] carbon capture and storage technology. I think that's essential, and I think it's folly for anyone in the country to believe that we're going to get by without coal-based electric generation. I appreciate that Sierra Club and others think that is a very viable answer. But it simply won't work. You need 24/7 base load power plants. And coal is going to be burned in the world. It's going to be burned in Russia and China and India -- and in America. The bill treats coal fairly in the sense of providing a timeline that will allow CCS technology [to dispose of the carbon dioxide pollution] to be deployed.

NJ: Will you continue to build coal-fired power plants?

Morris: We are in the midst of building an ultra-supercritical coal plant in Arkansas. It will be the lowest heat-rate plant in the country -- that simply means it will use less coal for more megawatt hours out. We'll continue to build coal. We continue to buy more wind. We just signed a small but significant solar contract. Today we make coal energy for about 3 cents per kilowatt hour. Tomorrow, with the carbon retrofit [pollution control equipment], it will probably be more like 6 or 7 cents, maybe 8 cents a kilowatt hour. But the solar contract is 22 and a half cents per kilowatt hour. So there's logic to say that coal is going to continue to play here for the long term.

NJ: You also support provisions that would impose tariffs on imports from countries that aren't cutting their greenhouse gas emissions. How did you get into that issue?

Morris: It would affect my industrial customers immensely. We're among the largest metal melters, electric suppliers, car manufacturers, paper manufacturers in the nation. We came together with the International Brotherhood of Electrical Workers, with the AFL-CIO, with the mine workers and the boiler makers and many other unions on this. We argue that the other countries don't have to have [greenhouse gas reduction] plans that are exactly like the U.S. plan. But if they don't have a plan, then just like me they would have to buy an emissions credit before they could import their steel.

The critical point is that if we don't attack this in a global sense, then you really aren't serious about attacking global warming.