EPA Rule Changes Will Drive Up Cost of Energy

Gas prices remain below $2 a gallon in most of New Mexico, providing citizens of our state with extra cash for their winter fun. Don’t get used to it. The Environmental Protection Agency is in the process of implementing three rules that a new study by the Rio Grande Foundation and Beacon Hill Institute at Suffolk University says will substantially drive up the cost of electricity in New Mexico.

This comes on top of recent, dramatic increases in electricity prices, thanks in part to New Mexico’s aggressive renewable portfolio standard (RPS). With the state’s largest utility, PNM, looking for a 12 percent rate hike, the RPS forcing utilities to purchase more costly renewables, and the Obama administration’s proposed regulations, electricity rate hikes faced by New Mexicans are only just beginning.

Of course all New Mexicans want a clean environment; most appreciate the EPA’s intentions. Nonetheless, it’s clear that with the exception of a radical fringe, few are clamoring for new federal regulations that threaten the state’s struggling economy.

By any measure, New Mexico’s air is in great shape. According to the American Lung Association’s 2013 “State of the Air” report, three New Mexico cities, Santa Fe, Farmington and Albuquerque, rank among the 10 cleanest nationwide in terms of particulate pollution. Farmington ranked fifth-cleanest despite being downwind of two of New Mexico’s major coal-fired power plants.

That’s bad news for commercial and residential rate-payers alike.

The rules especially target New Mexico’s coal plants, which produce 68 percent of the state’s electricity, and the bulk of base load electricity to the nation’s electric grids. The rule mandates existing coal plants reduce their carbon dioxide emissions by at least 30 percent below 2005 levels by 2030.

To comply with this mandate, the state’s coal plants will be forced to adopt expensive and unproven new carbon capture technology. This will obviously have a devastating impact on the state’s 1,583 workers who work directly in the coal industry. These are well-paying, often unionized jobs.

And the study’s economists highlight how the employment impact will spread far beyond mining. They forecast that under the rule, 5,170 jobs will be lost in New Mexico by 2030, a number that includes those from other sectors which service the coal industry. In other words, this proposal impacts both the truck driver who gets the coal to the furnace and the chef making green chile cheeseburgers for his lunch.

Even the EPA estimates that these new regulations will cost over $50 billion nationally. But it justifies this cost by claiming that they will provide tens of billions of dollars in benefits that will more than offset these costs. The vast majority of these benefits come in the form of improved health.

Quantifying tens of billions of dollars in health improvements is a difficult task at best and a fool’s errand at worst. The EPA has drawn widespread criticism for its use of secret science and stretched assumptions to come up with such a forecast. For example, economists at the Beacon Hill Institute criticize the benefit assessments for incorporating the reduction of particulate matter, which is already regulated under different EPA rules.

Clean air is a worthy goal, something which New Mexicans are lucky to have along with reliable electricity produced by coal. But as this study indicates, wringing the last few pollution particles out of the atmosphere comes at a cost that is too steep for New Mexicans.

Read the article.