Businesses brace for energy cost increases

New data from Kentucky’s regulated electric utility companies shows that the U.S. Environmental Protection Agency’s war against carbon emissions will increase costs for American businesses and families. In a meeting of  Kentucky’s Interim Joint Committee on Natural Resource and Environment, utility company representatives explained how the host of newly passed and proposed regulations on the business community will affect our economy. Data provided by LG&E and KU Energy, the state’s largest electric utility company in terms of number of customers, shows the company would be facing more than $3.3 billion in costs to comply with air mandates and potentially another $700 million for the proposed Coal Combustion Residual Rule. The threat of that cost increase being passed on to consumers has now become a reality. These proposed cost increases led the company to file for a rate increase on June 1 with Kentucky’s Public Service Commission. KU customers could see an increase up to 12.2% by 2016; and LG&E customers could see an increase up to 19%. The company is also proposing switching many of its coal-fired facilities to natural gas to potentially save on compliance costs which would hurt Kentucky’s many coal producers and their employees. Kentucky’s other electric providers, including Big Rivers in western Kentucky, are feeling the sting, too. Big Rivers, which supplies electricity to two of Kentucky’s largest aluminum producers, could spend more than $700 million dollars to comply with mandates.

It estimates this could lead to wholesale electricity rates increasing by nearly 40%. All these costs are in addition to what Kentucky’s electric utilities have already  spent on cleaning up their emissions. East Kentucky Power Cooperative, for example, has spent more than $1.8 billion in recent years on new plants featuring clean coal technology and retrofitting existing plants. Kentucky Chamber President & CEO Dave Adkisson is warning Kentucky businesses and residents to take notice.

“The cost of these new regulations is simply too much for most businesses to absorb on their own. Our utility companies have already warned us that a portion of this cost will be passed down to businesses and consumers alike, proving that this is not just about large industrial customers but also small businesses and anyone who literally flips on a light switch, turns on an air conditioner or uses a refrigerator,” said Adkisson.

But there is even more to this issue than the immediate cost to businesses of complying with these new and proposed regulations. For decades Kentucky has enjoyed some of the lowest energy rates in the country, due in part to its high coal production. This is a major incentive for businesses of all sizes to locate to the Commonwealth. A dramatic increase in energy rates could cause some companies to reevaluate the economic benefit they receive from locating their business not only in Kentucky, but in the United States. These onerous regulations could destroy years of growth in the Commonwealth.

 “The EPA has chosen to make significant policy changes in Washington, D.C. without Congressional approval or oversight,” said Adkisson. “The Chamber believes economic decisions of this magnitude deserve the rigor of the full legislative process and should not be circumvented to accomplish a one-sided agenda.”

The Chamber’s Energy and Environmental Council has been working diligently to stay on top of this ongoing battle. The Chamber testified twice last fall against the proposed Coal Combustion Residual Rule and submitted significant comments on the Clean Air Transport Rule.