Thursday, April 22, 2010

Power Company Preps For Low-Carbon Future

By Margaret Kriz Hobson  

Michael Morris, president and CEO of American Electric Power, is planning for a carbon-constrained future. Morris said his Columbus, Ohio-based power company is likely to build new natural gas plants to comply with future federal limits on the nation's greenhouse gases. That could mean shutting down some of the company's oldest coal-fired power plants. Seventy-three percent of the electricity that AEP sells now comes from coal plants.

But Morris opposes efforts by the Environmental Protection Agency to control greenhouse gases under the Clean Air Act. He argues that if Congress is unable to pass a climate change bill, it should block EPA action. Edited excerpts follow.

NJ: Do you think Congress can pass a climate change bill this year?

Morris: When you speak to Sen. [John] Kerry, you get the impression that there is still some opportunity. When you really listen to Sen. [Lindsey] Graham, it doesn't sound very realistic....

So I don't know whether it's likely or not. The real issue is, if we don't do a climate bill, what should [Congress] do?... Then the game is all about the EPA. The EPA could come out with a reasonable set of requirements that would cause the utilities -- in particular the heavy-carbon utilities -- to make some kind of a deal that might resemble the deal EPA reached with the car industry on CAFE [standards]. There's been some chat about that.

I think the administrator has made it clear that she intends to move on down the road and do the [regulations] that she thinks she has the legal obligation to do. As you know she's gotten a pretty good pushback from [Sen. Lisa] Murkowski.... And she's gotten a middle-of-the-road letter from Sen. [Jay] Rockefeller saying, "Why don't you take a 24-month hiatus?"....

I do think that the White House adviser on environmental matters continues to believe that pressure from the EPA will make those [in industry] who feel they might be in the crosshairs move more diligently to get something done legislatively. But I don't think many members of the Senate are willing to [pass climate legislation.]

Morris: We've made it clear to all three of them that utilities-only doesn't wash. But if it is utilities first -- the original layout was that utilities and transportation sectors would go first, but almost simultaneously first. And then industrials would be impacted a few years down the road. So I think they'll get a tremendous pushback if it's utilities-only.

NJ: Could you support the climate change bill from Sens. Maria Cantwell and Susan Collins, which would require all polluters to buy emissions credits through an auction and would return 75 percent of the auction proceeds to consumers?

Morris: If there is any potential of dollars washing from the middle of the country to the coasts, that's a loser. Think of the magnitude of this program. It would be a jobs bill. They'd have to hire about 10 million accountants just to get it figured out right.

NJ: If Congress doesn't pass a climate change bill, will you be operating in an uncertain business climate?

Morris: No, because we really have a plan that we think fits very nicely inside of the Clean Air Act and the potential changes in the Clean Air Act. We have a cadre of plants that either will continue to run or will be prematurely shut down for environmental reasons. And we have a pretty good feeling for what they'll be replaced with.

NJ: So if legislation is postponed for three years, you won't be concerned?

Morris: No.

NJ: How would you feel if EPA were to begin regulating carbon dioxide emissions?

Morris: I think their endangerment finding is in danger. They based it on the IPCC [Intergovernmental Panel on Climate Change] report which is now under some scientific factual attack. And I think that EPA didn't really do any study of their own on that. They just said, "Based on the [Intergovernmental Panel on Climate Change] report, we find [greenhouse gases] to be an endangerment." And I don't think that carries water when you get to a thoughtful court somewhere in the United States.

NJ: So you anticipate that the issue will end up being decided in the courts.

Morris: It's already there.