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Wind Energy Weekly - July 21, 2006 “While it is extremely unlikely that mandatory [carbon dioxide] controls will take effect during the period examined in this report [i.e., over the next decade], uncertainty over the eventual stringency, structure, and pace of potential [carbon dioxide] emission reductions adds significant risks for utility investment in new baseload generation,” the report states. “Given the size and scope of the issue, coupled with the long expected lifetimes of generating facilities, the uncertainty regarding possible greenhouse gas regulation may represent as much risk to utility supply planning as the uncertainty regarding fuel prices.” The report, “Why are Electricity Prices Increasing? An Industry-Wide Perspective,” was produced by the Brattle Group for the Edison Foundation, which is affiliated with the Edison Electric Institute (EEI). Fuel and purchased power cost increases, the report says, “have been enormous and are the largest cause of recent electric cost increases.” The Brattle Group’s analysis found that fuel and purchased power costs account for roughly 95% of the cost increases for utilities in the last five years. The report states that electric generators spent about $3.5 billion on compliance as far back as 1999, and that, according to an EEI survey of recent 10K annual reports, electric utilities spent at least $3.2 billion in 2005 on environmental capital investments. Moreover, the report cites fuel costs (which for wind are zero), as an increasing risk factor. “[T]he ramifications of higher gas commodity prices and the related effects on the prices of coal, emission credits and wholesale electric power are tipping the balance toward greater risk for regulated gas and electric utilities and for those generators most dependent on natural gas,” the report states, directly citing an analysis from a major credit rating agency. To view the report, go to www.eei.org .
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