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Federal Climate Change Legislation – Charlotte Chamber September 22, 2009 Mike Stroben Director, EHS Policy.

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Presentation on theme: "Federal Climate Change Legislation – Charlotte Chamber September 22, 2009 Mike Stroben Director, EHS Policy."— Presentation transcript:

1 Federal Climate Change Legislation – Charlotte Chamber September 22, 2009 Mike Stroben Director, EHS Policy

2 2 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

3 3 Electric Sector Allowance Allocation The 2012 electric sector allowance allocation is equal to about 84% of sector’s 2005 CO 2 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

4 4 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 CO 2 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

5 5 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)

6 6 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

7 7 Impacts of Legislation Duke Energy will face both a CO 2 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

8 8 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


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