Co-op Commitment to Member Owners
I heard from a Commentary reader about his thoughts on the EPA carbon regulation for existing power plants. This reader wrote that it’s obvious the electric co-ops don’t like the EPA rules. The reader was in support of higher electric rates so people would use less electricity. I imagine other readers have similar thoughts so I want to share my response.
First of all, I would describe our view on the EPA carbon regulations for existing power plants as one of concern. To achieve the reduction targets set in the rules, a significant number of existing coal plants will necessarily be shut down and replaced with lower carbon generation resources. The costs of the replacement power and the stranded costs of the recent investments in coal plants that have not reached their useful lifetime, and will be borne by our co-op member-owners. Coal is the lowest-cost fuel to make electricity, accounting for more than 70 percent of co-op power produced by Dairyland Power Cooperative, the power supplier for nineteen of Wisconsin’s twenty-four distribution co-ops. Simply put, if you increase the cost for the lowest-priced source of electricity, you will certainly increase electric bills.
Electric co-ops have a different responsibility to our member-owners than do other utilities. Our consumer member-owners purchase the power from our plants and also have an investment in those plants and co-op infrastructure based on their purchases from the co-op over time. Co-ops have a responsibility to keep our member-owners informed about issues that will effect their investments and how it may affect their cost of power. How much is too much of an electric rate increase? It's difficult for me to say. For a few of our co-op members, money is no object to protect the environment. However, for the majority of our rural members, they live on fixed or lower than the state median incomes. Some are already struggling to pay their bills.
We can support EPA regulation that is based on existing, commercially available technology. Dairyland Power Cooperative has invested more than $325 million in equipment at its existing coal plants in the last decade in order to meet clean air standards currently in place. In this case, the regulation came with a solution and a timeline for implementation that allowed phase-in within reasonable timeframes to balance environmental concerns with sticker shock using available technologies. By the way, these types of technologies are not your off-the-shelf solutions; each must be manufactured for site specific parameters. Hence the need for longer time frames for compliance.
In addition, Dairyland has expanded its renewable portfolio from 1-12 percent, leading the Wisconsin Public Service Commission to it as the number one electricity provider in the state working toward the renewable portfolio standard. Electric co-ops have also been leaders in energy conservation and efficiency programs, encouraging our members to use less energy. Electric cooperatives were among the first utilities in the nation to implement electric demand reduction programs (off-peak storage water heating and dual fuel programs for example) to reduce the need to build power plants and to save our members money on their electric bills.
The EPA rule is very complex and we are just at the beginning of the rulemaking process. Stay tuned as we peal the “onion” to understand the EPA calculation for state-specific carbon reductions and evaluate how Wisconsin may be able to comply.