A report prepared for a foundation connected with the Edison Electric Institute (EEI), the association for investor-owned utilities, underscores the high cost of current environmental compliance for electric utilities and recommends renewable power generation as a means of reducing the costs and growing risks associated with potential future greenhouse gas mandates.
"While it is extremely unlikely that mandatory [carbon dioxide] controls will take effect during the period examined in this report [i], uncertainty over the eventual stringency, structure and pace of potential [carbon dioxide] emission reductions adds significant risks for utility investment in new baseload generation," the report states. "Given the size and scope of the issue, coupled with the long expected lifetimes of generating facilities, the uncertainty regarding possible greenhouse gas regulation may represent as much risk to utility supply planning as the uncertainty regarding fuel prices."
The report, "Why are Electricity Prices Increasing? An Industry-Wide Perspective," was produced by the Brattle Group for the Edison Foundation, which is affiliated with EEI.
Fuel and purchased power cost increases, the report says, "have been enormous and are the largest cause of recent electric cost increases." The Brattle Group's analysis found that fuel and purchased power costs account for roughly 95% of the cost increases for utilities in the last five years.