How Obama Power Plant Plan May Affect Rates

President Obama has been saying for five years that he is committed to reducing global warming through reduction of greenhouse gas emissions. He recently announced a plan to limit emissions from existing power plants. The plan is controversial but could mean a total emissions reduction of as much as 40%. Customers naturally wonder how this may affect their power rates over time.

It is not clear at this point how rates will be affected but a good guess is that coal-based utility rates will increase in the short-term, causing more and more people to turn to alternative energy sources, which may (or may not) mean decreased rates over time. Let's break that down:

- The rules that will limit greenhouse gas emissions on power plants could cause a reaction from utility companies that rely primarily on coal. They could request rate increases as a result of the hit they take from this new legislation.

- Many people will opt to switch to natural gas and renewable resources in order to keep their costs down. They may also switch to alternative energy suppliers that can offer better rates in a competitive market.

- Over time, the coal-based plants will likely re-focus on renewable resources and greener energy alternatives. It is tough to know what kind of investments this will require and how that will affect rates.

For the time being, the issue of rates should not be of huge concern to customers. The legislation is controversial and facing some opposition that will tie it up for awhile. Additionally, the EPA usually waits at least a year after these types of announcements to begin implementing the new rules, which means that power plants will have some time to figure out their reactions. Even after they do so, it takes time to request rate increases. In the meantime, remember that reduced greenhouse emissions in this country is a positive thing and you can actually do your part by looking at alternative energy suppliers in your area.


Publish Date: 2013-07-31 11:16:29

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