Web posted
Monday, March 24, 2008
Electric rates become an issue for coal plants
By JOHN HANNA
AP Political Writer
TOPEKA -- Gov. Robert Bennett learned a hard lesson about how electric rates can move voters. Late in Bennett's 1978 re-election campaign, Democratic challenger John Carlin said rates were too high and blamed the Republican incumbent.
Carlin's campaign delivered fliers that looked like utility bills to voters' homes, and he won the four-person race with 49 percent of the vote to Bennett's 47 percent. Thirty years later, Kansas politicians still seem to remember it vividly.
When Gov. Kathleen Sebelius vetoed a bill last week allowing two coal-fired power plants in southwest Kansas, her message to legislators mentioned their potential carbon dioxide emissions and declared her duty to protect the environment. She and other critics of the bill sense that a growing concern among the public about global warming, which many scientists link to man-made greenhouse gas emissions.
But supporters of the bill answered her by raising concerns about the potential for higher utility bills. Many said Sebelius' action, if allowed to stand, will raise electric rates.
Such arguments are an important part of their attempt to build public support for the two coal-fired plants, which Sunflower Electric Power Corp. wants to build outside Holcomb, in Finney County. They'll need that support to persuade their colleagues to override Sebelius' veto or to pass a new bill.
''The two arguments that you tend to hear over and over again are: Rates will go up and reliability will suffer,'' said Mark Brownstein, a managing director for the national advocacy group Environmental Defense. ''It intimidates a discussion. Certainly, no one wants higher rates or diminished reliability.''
Immediately after Sebelius' veto, a fellow Democrat, Sen. Janis Lee, of Kensington, predicted consumers would suffer. Senate President Steve Morris, a Hugoton Republican, went further, predicting ''a devastating increase in the average Kansan's electric bill.''
Sebelius is clearly aware of fears that her actions will raise rates by, for example, forcing Sunflower and other utilities to use cleaner-burning but more expensive natural gas as fuel. She again floated a proposal she had made in January to allow Sunflower to build one coal-fired plant if the company committed to developing wind energy and conservation programs.
''We recognize that adding additional coal-fired power is likely to lower the high rates currently being paid by some Kansas customers who rely completely on natural gas for electricity,'' Sebelius wrote.
Sunflower wants to build two, 700-megawatt coal-fired plants. But in October, Rod Bremby, Kansas' secretary of health and environment, denied an air-quality permit for the Hays-based utility. Legislators responded with their bill, which would allow the $3.6 project to go forward and strip the secretary of some of his power.
Sunflower and a sister utility, Midwest Energy Inc., serve about 400,000 customers in 55 counties. The 1,400 megawatts of generating capacity created by its project would be enough to supply the peak needs of 700,000 households, according to one state estimate.
But two out-of-state partners, one headquartered in Colorado and the other in Texas, initially would claim about 86 percent of the power. That arrangement is designed to give Sunflower the money it needs to build the plants and help keep its customers' rates in check.
The Sierra Club has accused Sunflower of having a conflict of interest because Earl Watkins Jr., its chief executive officer, and another executive sit on the board of the Western Fuels Association, based in Colorado. The association provides services to member utilities.
It manages two coal mines, and its Internet home page declares, ''Coal is where your power begins.'' It promises members will receive ''a reliable supply of coal.''
But the association is a nonprofit cooperative, and Watkins said it's natural -- and responsible -- for members to play a role in its management.
Sunflower spokesman Steve Miller said the company's focus is keeping its customers' rates as low as possible, and in that context, coal makes the most sense.
Historically, Kansas' heavy reliance on coal-fired power plants has kept its electric rates relatively low.
According to the federal Energy Information Administration, Kansas ranked 38th in the nation for its average electric rates in 2006, at 6.9 cents a kilowatt hour. The national average was 8.9 cents.
Coal-fired power plants supplied about 73 percent of Kansas' electricity in 2006, compared with 49 percent national, according to the federal agency.
But environmentalists contend that coal and coal-fired plants will become more expensive. They note that construction costs are rising and investment firms are becoming more nervous about them. Also, they expect the federal government to impose rules to control greenhouse gas emissions.
''Coal used to be the cheapest way to generate electricity,'' said Stephanie Coal, a Sierra Club spokesman. ''It's an outdated argument. I think they need recognize what's coming.''
Miller is skeptical that Congress will impose rules that will cause electric rates to jump. But Brownstein said such an argument amounts to saying Congress will bail utilities out for making bad financial decisions.
''Where I come from, that's called chutzpah,'' said Brownstein, whose office is in New York.
Chutzpah or not, electric rates are part of the debate over Sunflower's project. Increasing utility bills are an old -- but potent -- issue in Kansas.
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EDITOR'S NOTE: Political Writer John Hanna has covered state government and politics since 1987.
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