Former US EPA chief urges utilities to help shape air policies

Hollywood, Florida (Platts)--7Nov2005

US investor-owned utilities need to get involved early to help shape
state or federal regulations on carbon emissions and climate change and
abandon its opposition to any changes in current policy, former Environmental
Protection Agency administrator Christine Todd Whitman told a meeting of
industry executives Monday before a group of investor-owned power utilities.

     "It's important not just because it's the right thing to do, but it makes
good sense for business," Whitman said at the Edison Electric Institute's
Financial Conference in Hollywood, Florida. "It's not an easy task," she
added. "You're standing at a time of real uncertainty in the utility industry
and the government is sending a host of mixed messages."

     While legislation on carbon emissions and clean air have had mixed
successes in Congress and lawmakers seem ambivalent about imposing national
environmental standards, those standards still are on the precipice of change
and that change is starting to occur with the states, Whitman said. "If the
states are a laboratory, we are moving toward a national carbon policy,"
Whitman said. 

     There are 45 programs in 30 states addressing climate change and
the carbon emissions that could lead to it. Eighteen states have policies that
require a percentage of energy be produced from renewable sources and many
states are joining together in regional groupings to reduce greenhouse gas
emissions. 

     But the states' leadership in adopting stringent environmental standards
in the absence of a national standard causes its own problems for the
industry. "The lack of harmony makes it difficult to make long-term
investments," she said.

     Whitman added that the best way to go would be to support a national
standard, an action that could prompt some states to back off developing their
own standards. "I do sense there will another run at [national environmental
standards] and it's going to be bipartisan," so electric utilities will have
to come to the table and try to help establish environmental standards or a
cap on carbon emissions the industry can live with, she said. 

     "The best way to protect yourself is to be proactive and act now to
strengthen your position as responsible environmental leaders," Whitman said.
"When legislative and regulatory language is being drafted, you want to be
there." 

     Environmental policies can have a very negative impact on the electric
utility industry's bottom line, but it's the clearest example of the need for
utility companies to be actively engaged in the discussion, Whitman said.

     Although the US hasn't signed on to the Kyoto Protocol and passage of any
clean air legislation remains up in the air, most politicians accept that the
climate is changing and people have an impact on that change, she said. The
public also has reached a broad-based consensus that climate change is an
issue. It isn't to the extent of the environmental movement of the 1970s, "but
climate change is definitely on people's minds," Whitman said.

     And it is on investors' minds as well. Some investor groups are
persuading power companies to adopt environmental goals ahead of government
action. 

     Despite this, the public doesn't rank the environment as its highest
priority. Their concern, Whitman said, "hasn't affected their sense of
urgency. They know they're concerned, they just don't know how concerned to
be."

     One force that may be resulting in what Whitman called a "patchwork
quilt" of state regulation is public ambiguity regarding environmental
concerns. While they are unsure how concerned they need to be over the
environment, they become very concerned when a liquefied natural gas terminal
or a nuclear plant is proposed near where they live. 

     "One thing about Americans, we are very good at saying no, and that's
part of the problem," she said, noting that the public tends to oppose new
nuclear plants despite changes that make the fuel far safer than it was in the
1970s. She added that the future of energy is a fuel mix, because renewables
will never make up more than 20% of that mix. "We ought to do it quicker and
do it more, but it will never be 100%," Whitman said.

     Nuclear, from an environmental point of view is the cleanest, Whitman
said, "but the reality is public perception that the technology hasn't
changed. "I don't think we'll see a broad-based shift to nuclear unless we
educate people better."
                              ---Valarie Jackson, valarie_jackson@platts.com

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