Climate and energy

Location: House chambers, final action vote
Issue: Major KS utilities and a creative, interesting version of a carbon tax
Bill No.: SB 471, as amended last night by the House Committee of the Whole and passed 78-42
Summary/ Action: Measure failed on final action vote, 51 yea, 74 nay. Measure is lost. (Which means the people who would have benefited under the original measure, which offered tax credits for adoption and live organ donation, are just out of luck, because a large corporation decided to highjack their measure.)

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Before launching in to the record, CEP would like to note: This carbon tax is a fake carbon tax, in that it does not actually reduce CO2 emissions. Reducing emissions is the entire POINT of carbon regulation. This measure will make electricity more expensive, without making it more green.

It will also drastically affect ratepayers in northeastern Kansas, while subsidizing electricity generation in western Kansas.

Background

Last night on the House floor Representative Clay Aurand, a supporter of Sunflower Electric’s proposed 1400 MW coal-fired plants expansion in Holcomb, succeeded in amending SB 471 to include the first carbon tax in the nation.

SB 471 was formerly a pretty innocent little bill dealing with giving individuals tax credits for adoptions and live organ donation. Aurand’s amendment establishes a $37 per ton of CO2 excise tax levied on coal plant operators of 350 MW or more who emit over 110% over the state average of carbon dioxide emissions, as measured on a per MW hour basis.

The proceeds from this excise tax will be offered as a tax credit for those plants who emit less. Only one plant seems to qualify under these regulations, and that is Sunflower Electric. Ironically, the measure also specifically authorizes the Secretary of KDHE to regulate CO2 emissions. Likewise, its very existence admits that the Kansas legislature, as well as the executive branch, considers carbon dioxide emissions problematic.

This amendment primarily affects BPU, the electric provider for Wyandotte County – and also home to a legislative delegation that has proved extremely stubborn. Resisting all sorts of pressure, WyCo legislators have refused to switch their votes to help Sunflower supporters override the Governor’s veto of SB 327, the first Holcomb bill. The amendment also has implications for investor-owned utilities Westar and KCPL.

These three entities are affected because they have some of the older and dirtier coal-burning facilities in the state. The gun is aimed at BPU, but the other two are standing much too close to the target for comfort. If this carbon tax is levied on these utilities, the costs will be passed to their ratepayers. There are mitigation provisions in the amendment, but they are so vague I couldn’t make any sense of them.

Does the amendment to SB 471 have merit? In general, a carbon tax is a good thing, if it (1) actually reduces carbon dioxide emissions, and (2) is phased in gradually, in a revenue-neutral manner.

Carbon regulation – be it carbon tax, or cap and trade – will indeed increase the costs of electricity, which is problematic even for middle-income folks, let alone those on fixed or otherwise limited incomes. Revenue-neutral means to increase these prices gradually – and also, return some of the proceeds of the carbon tax to those most directly affected. According to the policy experts at the Carbon Tax Center:

Revenue-neutral means that little if any of the tax revenues raised by taxing carbon emissions would be retained by government. The vast majority of the revenues would be returned to the American people, with some small amount utilized to mitigate the otherwise negative impacts of carbon taxes on low-income energy users.

However, when you return the revenues of a carbon tax to just one utility – um. That’s not very fair. This is not really a carbon tax, as much as it is a money grab by a special interests group, at the expense of ratepayers not within their own service territory.

For media coverage of the proposed tax so far, see the TCJournal and the Salina Journal. EDIT: ha! And Kansas has already popped up on the Carbon Tax Center radar – see their blog entry. Quotable:

Major flaws in the the tax passed by the Kansas House include: its application to only one plant; its excessive initial level that does not provide consumers with time to adjust; and its failure to provide an upwards trajectory that would provide an appropriate price signal to energy consumers. Its use of revenues to provide an incentive to cleaner plants to reduce emissions further makes no sense. A carbon tax imposed on all emissions in the state would provide a far better incentive for all energy consumers in the state to reduce emissions; both relatively clean and relatively dirty generators would benefit by reducing emissions. There’s no need to waste the revenues on credits. Instead, the revenues should be returned to to the people who live in Kansas through offsetting tax reductions or equal rebates.

The Kansas carbon tax may be a yellow brick road to riches for certain generators or lobbyists, but it is not a yellow brick road to reductions in carbon emissions.

What’s the point of all this…? There are of course many theories. The two most likely candidates: (1) This measure is meant to punish Wyandotte County, and to scare Westar and KCPL into pressuring legislators to vote for Sunflower. And (2) This is a really confrontational way for Sunflower to send a message that they are ready to make a deal – if the financing can be worked out.

(And I am sure that if I walked out into the hall, I could hear at least three more.)

For the proceedings as they – proceed (sorry, my brain’s not in gear yet, late night) – please read more. Once things get started around 9:00 a.m.

Ack! They moved straight to final action! Ack! MH was not ready.

Final action on SB 471.

Explanations of vote. Paul Davis – cannot support selectively applied CO2 tax, it hurts my ratepayers, there are othe rways to do green KS.

Rep. Gatewood – votes no

Rep. Metzger – no

Rep. Olsen/ Merrick – explanation – can’t support this tax incease, KS shouldn’t do this, feds should go in on this first

Rep. Ruff – no

Rep Watkins – no

Colloton – aye

Swenson – no

Peck – no

Sloan – explains vote – this is innovative incentive. to say no to more effcienct coal fired plants is not right. This addresses what Kansans, want, reducing CO2. Sloan and Wilk vote aye

Wetta – changes to no

Metzger votes aye

Svaty – Aurand amendment – this is all about taxes. KS will be first state with carbon tax. We need hearings on major policy shift.

Burgess – no

Treaster – no

Landwehr – no

more but MH misses.

75 voted no on this measure. 51 voted yes.

EDIT: The short-lived (so far) supposed carbon tax made it into Forbes online! Quotable:

First, the House voted 66-49 last month against a proposal for a tax of $3 a ton on excess emissions.

Second, some House members who voted Monday night for the new CO2 tax have been strong opponents of the idea.

For example, Rep. Rob Olson, an Olathe Republican, has argued that an emissions tax would damage the state’s economy, particularly if Kansas was the only state to impose one. He voted for the proposal Monday night — and against the bill Tuesday morning.

‘This issue must be handled at the federal level,’ he said, explaining his vote.

Olson was among 26 House Republicans who voted for the CO2 proposal Monday but voted against it Tuesday. Three Democrats did the same.

Twenty-four of those who switched overnight, all but one of them Republicans, voted in favor of the bill Sebelius vetoed.