New report reveals how Clean Power Plan can reduce electric bills

By Katie Fletcher | February 03, 2016

Synapse Energy Economics Inc., a research and consulting firm, recently released a new report that reveals how EPA’s Clean Power Plan can reduce emissions and consumer electric bills. The report published on Jan. 14, “Cutting Electric Bills with the Clean Power Plan,” examines state-by-state impacts of various compliance options and found that using strong energy efficiency policies in state implementation plans can produce significant electricity bill savings for consumers while reducing carbon pollution.

“We found that if states comply with the Clean Power Plan through strategies that encourage cost-effective energy efficiency, households can expect to save an average of $17 per month on their electric bills by 2030 compared to a reference case that does not comply with the rule,” said lead author Patrick Knight. “In short, the Clean Power Plan saves money for consumers in states that maximize energy efficiency and clean energy investments.”

Since the finalization of the CPP, states are now required to meet targets that together would reduce national electric sector emissions to about 32 percent below 2005 levels. States are now free to begin implementation by developing compliance strategies to reduce carbon emissions from power plants.

For the study, Synapse modeled emission reductions under three scenarios of the future electric system: a business-as-usual “Not-CPP-Compliant case, a “Synapse-CPP” approach to CPP compliance that emphasizes cost-effective energy efficiency, and a “Low-EE-CPP” approach to CPP compliance that emphasizes new renewable and expansion of existing natural gas combined-cycle generators.

The greatest bill savings take place in states that do not currently have requirements for future energy efficiency savings and states with high levels of poverty, relative to the national average. For states with energy efficiency standards already in place, savings range from $2 to $17 per month. For states that do not currently have energy efficiency standards or other programs supporting efficiency measures, electric utility bill savings in 2030 can range up to $44 per month. Of the eight states with the largest bill savings, five have poverty rates higher than the national average.

The report found that even the states that require the largest emission reductions do not have higher bills than they would without CPP compliance. For example, in the data Synapse collected, many of the states with the largest emission reduction in 2030 compared to 2005 levels—such as Alabama, Florida, Tennessee, Texas and Wyoming—are some of the states that save the most on their monthly electric bills. Synapse attributes this to CO2 emission allowance trading. States can choose to either reduce electric emissions within their own boundaries or purchase emission reduction allowances from out of state—whichever is cheapest.

“Our analysis confirms that energy efficiency is one of the most cost-effective ways to reduce and avoid emissions from power generators,” Knight said. “The Clean Power Plan provides states with significant flexibility to harness this resource in their compliance plans in a way that protects consumers.”

Synapse also conducted an analysis of the impacts of Clean Power Plan compliance with intensive investment in renewables and energy efficiency on electric-sector emissions and costs. The results were presented in the policy brief, “The Clean Power Plan: Green and Affordable.” The more in-depth report on consumer electric bills serves as backup information for the factsheet, which focuses on state-specific modeling results and documents the assumptions and methodology of the analysis.

In the brief, Synapse modeled both a Not-CPP-Compliant case, and a scenario in which all states are engaged in trading to meet a mass-based emissions cap that includes new sources (Synapse-CPP).

Besides explaining what energy efficiency has to do with the CPP and how much difference it makes, the brief mentions there are several strategies for getting direct credits for energy efficiency in mass-based approaches. The mass-based Model Rule of the CPP suggests allocating up to 5 percent of allowances to low-income energy efficiency measures for use in the first few years of compliance. However, states can choose a mechanism that provides stronger incentives to new energy efficiency measures. For example, states can give allowances directly to those providing efficiency measures, and they can auction allowances and give the revenues to efficiency providers.

The full report can be downloaded here.