Will America's Poor Pay for Obama's Coal Plan?

04/27/2015 02:28 pm ET | Updated Jun 27, 2015

In an economic climate that's already challenging for the everyday consumer, a new problem looms: higher electricity costs, perhaps much higher. While it's often hard to pinpoint why a product or service increases in price, it's easy to identify the cause for this price hike: the Clean Power Plan.

In June 2014, at the direction of President Barack Obama, as part of his overall strategy to combat global climate change, the Environmental Protection Agency, to quote The Washington Post, "proposed a rule designed to cut carbon dioxide emissions from existing coal plants by as much as 30 percent by 2030, compared with 2005 levels." The 645-page rule, called the Clean Power Plan (CPP), was based on authority the EPA claimed it has under the Clean Air Act.

At present, 31 percent of country's carbon dioxide emissions is produced by the electricity sector. (Transportation accounts for 27 percent; the rest is attributed to industry, agriculture, and residential and commercial use.) The CPP rule, expected to be finalized this summer, targets 523 plants, specifically the 63 percent that are 40 years old or older. Each state must develop a plan to reduce carbon dioxide emissions produced by these plants to a level set by the EPA. The reduction rates range from modest (11 percent for North Dakota) to substantial (72 percent for Washington). If a state fails to develop a plan, the EPA will devise one for it.

Coal generates nearly 40 percent of the electricity used in the United States. That number is expected to drop to 30 percent by 2030. Because of coal's vital place in the national energy picture, reaction to the CPP has been noteworthy. Murray Energy Corporation, other energy companies, and 14 states filed a lawsuit in the U.S. Court of Appeals in the District of Columbia, arguing the EPA does not have the authority to create the CPP under the Clean Air Act. "At stake is the environmental agency's proposed rule," The New York Times noted, "[which] could ultimately shut down hundreds of coal plants."

Laurence H. Tribe, Obama's mentor at Harvard University School of Law who has become an outspoken critic of the CPP, mounted a forceful argument at a hearing on April 16. Tribe believes the EPA purposely misread a section of the Clean Air Act to give itself license to write the rule. "The EPA is coloring outside the lines," said Tribe, who represents an energy company. "They're trying to make law, no execute law. They are commandeering the states. States are not to be treated as puppets." The judges agreed with Tribe, but, as The Times observed, "[they still] appeared dismiss the first legal challenge to President Obama's most far-reaching regulation to slow climate change."

Separate from the current legal action, some local politicians are suggesting states boycott the rule. "The other refusal to comply," Kenneth C. Hill, director of the Tennessee Regulatory Authority, wrote in The Wall Street Journal on April 21. "This also places the feds in a legally tenuous position that is fraught with political repercussions."

Should the CPP survive political and legal challenges, one fact is clear: the price of electricity will go up. The U.S. Chamber of Commerce projects the new rule will cost businesses $50 billion a year. Much of that cost will be passed on to the consumer in the form of soaring electricity rates. A study conducted by NERA Economic Consulting concluded that, from 2017 until 2031, customers would spend $560 billion more for electricity. Forty-three states will see double-digit price hikes. States less reliant on coal will see increases of 10 percent. States more reliant will be the hardest hit. Utah will see an increase of 20 percent, Wyoming 18 percent.

Consider Ohio. "In 2013," one report states, "coal provided almost 70 percent of Ohio's electricity.... Ohio's average electricity price...last year was almost 10 percent below the national average.... Modeling by NERA Economic Consulting projects that the CPP will cause a 10 percent increase in retail electricity prices for Ohio consumers, with a peak year increase of 18 percent."

This means that not only will utility bills go up, so will the price of numerous other items, from consumer goods to groceries. Higher prices will hit hardest the people who can afford them the least -- the middle class and working poor, already struggling to get by. Perhaps that's why last May seven Democratic senators, including Mark Warren of Virginia and Claire McCaskill of Missouri, sent a letter to the president expressing their concern over the CPP.

"We strongly recommend," the senators wrote, "that you evaluate more appropriate ways to regulate emissions.... Long-term thinking is essential to ensure that every U.S. citizen will have access to affordable and reliable energy while encouraging energy solutions that lower our carbon footprint."