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Xcel CEO: Waxman-Markey Impact Varies

Utility industry executives generally support some form of a federal climate bill, but the proposed bill introduced last month by House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Rep. Edward Markey (see NGI, May 25), may be "too aggressive" for some regions and some individual utilities in terms of meeting greenhouse gas (GHG) emissions reduction goals, according to Xcel Energy CEO Dick Kelly.

Kelly spoke last Friday at the Macquarie Global Infrastructure Conference in New York City. Xcel's eight-state utility operations should not have any major problems in meeting the current bill's requirements, Kelly said.

For many companies the GHG reduction timetable will be hard to meet and the potential rate impacts could be significant, Kelly said. He said he has spent a lot of time in Washington, DC, trying to help the utility industry shape the proposals. Some of the timetables and other provisions will probably be changed, according to Kelly.

The industry generally is in favor of all of the elements of the legislation, including cap-and-trade, GHG emissions limits, energy efficiency and a national renewable portfolio standard (RPS), Kelly said. But the timing for implementation varies among utilities and regions.

"I have spent a lot of time in Washington, DC, working on the negotiations to get us to where we are today with the bill that came out of the House committee," Kelly said. "The industry in general is in favor of having some sort of legislative certainty rather than having the Environmental Protection Agency or some other entity regulate CO2 [carbon dioxide emissions]. For the industry, the bill is a little aggressive."

He noted that the need to have a 3% GHG emissions reduction by 2012 doesn't bother Xcel, but it is a real challenge for many others. "That [3% goal] is extremely difficult for most utilities; it is just too quick, considering 2012 is almost here. And the 17% reduction by 2020 is probably a little aggressive, too. Even President Obama only came up with a 14% reduction by 2020. I think we can get some of these things changed."

Provisions dealing with renewable energy credit allocations decreasing steeply from 2025 to 2030, going to a full auction of credits by 2030, are one area where change is in order, he said. Kelly thinks that is too fast and it should be taken down more gradually over a longer period (2025-2035), considering estimates of when adequate emission reduction technology would be in place.

"There are a lot of things [in the Waxman-Markey bill] we need to work on, and a lot of things we need to change," Kelly said. "This bill will have a huge impact on the industry -- a lot of companies are looking at an added billion dollars a year, or a 20% increase, in rates [starting in 2012]. As far as Xcel, the impact would be much less because of what we have done in the past it is going to be a low, single-digit impact on us, and then, not until around 2014 will it be felt. We're in very good shape."

Kelly said the goal is to get to an 80% emissions reduction by 2050, and the utility industry has agreed with this target, but there is no agreement on how quickly the goals along the way are reached. The 20% national RPS target is going to be "a problem for a lot of people," he said. "The government doesn't understand the differences in the geographical location of various utilities in terms of their access to wind, solar and those types of renewables. We've had a tough time in getting them to understand that, but I think there will be some movement here."

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