10.24.2022

TOMB: Latest RGGI Lawsuit Highlights Increases in Electricity Prices

by Gordon Tomb

Already struggling to cope with higher energy bills, Pennsylvanians are now experiencing double-digit rate hikes this fall. In September, some suppliers increased electricity prices another 19 percent, citing inflation and energy costs. Pennsylvanians need relief, but Gov. Tom Wolf’s unilateral action will drive energy bills even higher. Worse yet, a new lawsuit highlights how Wolf’s plan—while claiming to help the environment—will, in reality, increase emissions.

Despite a majority opposition from the state legislature, Wolf is forcing Pennsylvania to participate in the Regional Greenhouse Gas Initiative (RGGI)—a compact in which member states impose a carbon tax on energy production. By discouraging energy production in Pennsylvania, the carbon tax would shut down some of the most efficient coal and natural gas operations in the world, and a new lawsuit argues that the governor’s plan will lead to an increase in CO2 emissions.

The petitioners, all of whom operate gas-fired power plants in Bucks, York, and Westmoreland Counties, are among the dozens of businesses, labor unions, trade organizations, and politicians asking the court to stop Pennsylvania’s participation in RGGI.

Pennsylvania natural gas producers are among the cleanest in the world, as measured by methane emissions from their operations. Of the top nine hydrocarbon-producing basins in the United States, the Appalachian Basin, which includes Pennsylvania, emits the least methane per unit of energy produced.

And while U.S. coal-fired plants are among the least polluting worldwide, Pennsylvania operators have invested billions of dollars in equipment to further reduce water and air pollution. The Homer City power plant, for example, spent $750 million over the past decade on reducing pollutants.

But RGGI would undo our progress toward cleaner energy by imposing prohibitive costs on Pennsylvania energy producers.

RGGI requires power plants to purchase carbon allowances, and those have more than quadrupled in recent months. For just a portion of 2022, estimated allowance costs have risen to $847 million from the Wolf administration’s original forecast of $198 million.

“The (administration’s) modeling of the price of CO2 allowances…was wildly off base,” wrote the petitioners. “Among other failures, the (administration) did not adequately consider the impact of speculative traders, like hedge funds, purchasing CO2 allowances as an investment.”

Costs imposed by RGGI will force Pennsylvania plants to decrease energy production, opening the door for less efficient plants in non-RGGI states to replace them. Overall emissions will increase because less efficient plants must burn more fuel to produce the same amount of electricity—generating higher emissions of carbon dioxide and pollutants like sulfur dioxide.

The petitioners note that “most of the benefits…arising from Pennsylvania joining RGGI will be lost or shifted to other areas due to increased emissions in other states.”

Prior studies have confirmed that transfer of emissions from RGGI states to non-RGGI states.

Quadrupling carbon allowance prices also means that RGGI will further inflate electricity costs. Energy producers will have to pass the increase in costs to consumers.

Moderate estimates see RGGI increasing consumer electricity prices by roughly $2 billion over nine years. This is a “best-case” scenario that Pennsylvanian families cannot afford.

RGGI is currently on hold thanks to a preliminary injunction, and the petitioners are integrating their lawsuit with other cases aimed at stopping the state’s participation. Due to pending court action, it is unlikely that companies will need to purchase carbon allowances until the next governor’s term.

But Pennsylvania’s participation in RGGI—with its far-reaching consequences—shouldn’t rely on lone-wolf tactics. The state legislature has taken the first step toward introducing a constitutional amendment that would prevent any governor from unilaterally imposing regulations, like RGGI, despite legislative disapproval.

If approved by the legislature and a majority of Pennsylvania voters, this constitutional amendment could safeguard families from ineffective and expensive regulations like RGGI.

This commentary was first published in Delaware Valley Journal on October 21, 2022 and can be accessed here.

CO2 Coalition Senior Advisor Gordon Tomb is a senior fellow with the Commonwealth Foundation, a Pennsylvania-based free-market think tank.

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