Bloomberg News

American Electric Foresees Plant Closures on Obama Plan

May 29, 2014

American Electric Power Co. (AEP:US), the top U.S. coal-burning power plant operator, expects to be challenged and shut some of its largest units if the Obama administration proposes a 25 percent greenhouse-emission cut.

The company would likely have to retire plants that can’t be relied on to deliver electricity if the U.S. Environmental Protection Agency requires such steep reductions by 2030 in proposed rules to be unveiled June 2, Chief Executive Officer Nick Akins said yesterday in an interview.

“We would see that as a particular challenge,” Akins said at Bloomberg’s headquarters in New York, adding that such a target would be “very aggressive.”

The rules, a core part of President Barack Obama’s plan to fight climate change, could cost the U.S. economy $50 billion a year by forcing more than a third of the coal-fired power capacity to close by 2030 and eliminate 224,000 jobs, the U.S. Chamber of Commerce said yesterday. Supporters predict it will create jobs and lower power bills.

The U.S. Chamber of Commerce report “makes unfounded assumptions about the EPA’s upcoming proposal for commonsense standards to cut the harmful carbon pollution from power plants,” Tom Reynolds, a spokesman for the EPA, said in an e-mail statement.

EPA declined to comment on speculation about specific emission reductions that will be proposed in the draft rule, Liz Purchia, a spokeswoman for the EPA, said today in a telephone interview.

Cheaper Bills

New carbon limits could save customers $37.4 billion on electric bills in 2020, while creating more than 274,000 jobs from energy-efficiency investments, according to a report by the Natural Resources Defense Council. The analysis was based on a NRDC proposal to cut greenhouse gases about 25 percent by 2020 from 2012 levels.

The regulation may give states broad leeway in how to cut emissions and endorse a path that goes beyond cuts at power plants, three people familiar with the plan said last week.

American Electric Power has reduced carbon emissions from its plants 21 percent since 2005 by closing older coal units and replacing them with natural gas-fueled generators, Akins said. An additional 25 percent cut from last year’s baseline would be “a pretty dramatic change,” he said.

Power plants release more than 2 billion tons of carbon dioxide in the U.S. a year, accounting for more than 40 percent of such emissions. The new rules are anticipated by environmental groups pressing Obama to make good on a pledge to take bold steps in the effort to reduce the risks of climate change.

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net

To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net Carlos Caminada, Stephen Cunningham


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Companies Mentioned

  • AEP
    (American Electric Power Co Inc)
    • $53.97 USD
    • -0.08
    • -0.15%
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