Duke Energy CEO: Cap-and-Trade Plan Would Raise Electric Rates 40%

By STEPHEN POWER
WASHINGTON -- The chief executive of Duke Energy Corp., one of the nation's biggest power companies and a major source of greenhouse gas emissions, said Friday that a proposal by President Obama to place a price on carbon emissions would drive up electricity rates in some areas of the U.S. by 40% and warned that it could also lead to "a redistribution of wealth" from Midwestern industrial states to coastal states.
Duke Energy CEO James Rogers said he was also concerned that some of the roughly $646 billion that Mr. Obama hopes to raise by making companies pay for the right to pollute would be diverted to causes unrelated to fighting climate change.
"My view is they'll try to use the money from Ohio and Indiana to subsidize the West coast and the Northeast and to use it for purposes that are different from addressing the climate issue," Mr. Rogers said Friday in an interview with The Wall Street Journal.
Mr. Rogers was referring to a provision in Mr. Obama's budget proposal that calls for the adoption of a cap-and-trade system in which the government would set limits on the amount of carbon dioxide and other greenhouse gases that industries can emit. Under such a system, companies would have to buy and sell rights to emit those gases.
Mr. Obama's proposal, which was released Thursday, projects that the U.S. government could raise roughly $645 billion from auctioning off emissions credits between 2012, when the system would kick in, and 2019. Mr. Obama's proposal calls for using about $120 billion of that revenue to pay for new spending on various low-carbon technologies. His proposal calls for returning the rest of the money "to the people, especially vulnerable families, communities and businesses to help the transition to a clean energy economy."
Mr. Obama's aides say his plan would provide a refundable tax credit of up to $400 for working individuals and $800 for working families, with credits phasing out between $150,000 and $200,000 for a married couple, and between $75,000 and $100,000 for an individual.
The cap-and-trade system is a key part of Mr. Obama's broader strategy to reduce U.S. emissions of carbon dioxide by roughly 80% from 2005 levels by 2050. His proposal assumes a starting price of $20 per ton for carbon emissions, an amount that his aides says is conservative and would likely rise.
Mr. Rogers, whose North Carolina-based company is the third-largest coal user in the country and the third largest source of U.S. carbon dioxide emissions, said that even at $20 per ton, electric rates in Indiana would rise 40 percent, and in Ohio by as much as 25 percent. In contrast to California, which relies on coal for just 1% of its electricity supply, Indiana and Ohio states rely on coal for more than 80% of their electricity supply.
Mr. Rogers suggested that rather than return money to consumers on a per-capita basis, the government should give the vast majority of auction revenue back to the states through public utility regulators.
"Let the local regulator, who understands the system and who approves our prices -- let them make the determination" on how the money should be returned to customers, Mr. Rogers said. "I know how Washington works -- when the money comes in, at the end of the day, there will be a fight over that money. And it won't be used to reduce emission in this country."
Write to Stephen Power at stephen.power@wsj.com