The chairman of the Public Utility Commission is worried that federal climate-change legislation could pummel the Texas economy, and he asked the company that operates the state's electric grid to study the matter.
Chairman Barry Smitherman sent a letter to Bob Kahn, CEO of the Electric Reliability Council of Texas, asking him to look at the impact of greenhouse gas regulations on electricity prices. Burning coal and natural gas to make electricity emits carbon dioxide, which is linked to global warming.
"I am very concerned about the effects this proposed legislation ... will have on electricity prices in the ERCOT market," Smitherman wrote.
Earlier this week, Rep. Henry Waxman, D-Calif., and Rep. Edward Markey, D.-Mass., posted a draft of legislation that would create a cap-and-trade mechanism to cut greenhouse gas emissions. Companies would be required to reduce their emissions or buy tradable allowances to meet regulations.
The draft doesn't describe how the allowances would be allocated, which is crucial for calculating how much electricity prices might rise.
Smitherman pointed out in the letter that PJM Interconnection, which operates the grid in Pennsylvania, New Jersey, Maryland and surrounding states, conducted a similar study. The study showed that climate-change legislation could boost electricity prices in the region by $7.50 to $45 per megawatt-hour in 2013. The average household consumes about 1 megawatt of power each month, or 1,000 kilowatt-hours.
Smitherman also suggested that ERCOT consider a study by the Western Business Roundtable, which stumps on behalf of business executives. The study concludes that carbon dioxide regulations would slow the economy in the West and cost jobs.
Some environmental experts say fears of massive cost increases are overblown. Jim Marston, head of the Texas office for Environmental Defense, has pointed to the acid rain cap-and-trade program, which wasn't as costly as some business leaders had predicted.
State Sen. Kirk Watson, D-Austin, authored a bill this session requiring the comptroller to evaluate strategies to cut greenhouse gas emissions. He has called on Texas business leaders to create an industry around controlling carbon dioxide, rather than resist federal legislation.
He said at a conference in December: "We cannot seize the promise of the future if we characterize ourselves as victims. We're not a victim in this transition."