Alabama Industrial Energy Consumers

AIEC testifies before the EPA to fight proposed carbon rule

On July 29 and 30, the EPA held public hearings on its proposed regulation of carbon dioxide from power plants. The Alabama Industrial Energy Consumers appeared before the EPA to oppose the rule. Following is the text of the official testimony:

EPA

“I am James McLemore. I am an attorney in Montgomery, Alabama. I am here representing the Alabama Industrial Energy Consumers, or AIEC, our client for over twenty years. We oppose the carbon rule.

AIEC is a voluntary association of 14 industrial companies which are high load customers of the Alabama Power Company. Collectively they consume nearly 5 billion kWh of electricity each year from Alabama Power. It is not unusual for a company in this customer class to spend 50 to 60% of its operating budget on electricity. And considering that industrial customers consume 40% of all electricity generated by Alabama Power, you can appreciate the concern we have for the proposed carbon rule.

The special sensitivity of industrial customers to changes in the regulation of electricity, and in turn the economic well being of our state, is obvious. For that reason, well over 30 years ago we parked ourselves before the Alabama Public Service commission to work with, or fight as it may be, alongside the Alabama Attorney General to keep electric utilities in check while also protecting our economy and the environment.

That’s right. I said “and the environment”. We all agree that electricity regulation is not simply about price, but is about balance. In the last few years Alabama Power asked the Public Service Commission to approve purchase power agreements for 400 Megawatts of wind generation, as well as biomass projects and other renewable energy projects. These projects threatened upward pressure on energy prices. Yet by working together, we and Alabama Power found a balance which promoted clean energy while protecting the availability of reliable, affordable electricity, and stability of prices. That’s in addition to the $3 billion dollars Alabama Power spent this past decade for clean energy systems and technology. That’s a cost borne by us, the customers.

All this is to say that working together to balance our respective and important interests is hard work and it takes time. And it works in Alabama. The proposed carbon rule, on the other hand, throws this dangerously out of balance. The proponents of the rule admit that electric rates will rise significantly. “Don’t worry,” they say, “the economy can safely absorb this impact over time.” They are dead wrong. Here’s why.

Three years ago we commissioned a study by the Center for Business and Economic Research at the University of South Alabama to measure the impact of large industry upon the economy of Alabama and the effect of changes in energy price. It proved what I said at the outset. Large industry is our lifeline and it is highly sensitive to swings in energy rates. The study used direct impact multipliers developed by the U.S. Bureau of Economic Analysis, known as RIMS II. Impact multipliers for earnings and employment for manufacturing were 35% and 45% higher, respectively, than non-manufacturing industries. Manufacturing accounts for 85% of all Alabama exports. From another perspective, the share of manufacturing output to total economic output in Alabama is over 16%; in comparison the United States manufacturing output to total output is less than 12%. Manufacturing ripples through our state economy and leads other business sectors in relative levels of wages, share of employment, and exports.

The study also showed that price elasticity of demand for electricity is much higher for large industry than other business sectors. This means that spiking electric rates which would result from the carbon rule will hit Alabama hardest at its economic core – manufacturing. As the study showed, a rise in electricity prices relative to other geographic regions threatens the long term commitment of companies which choose to locate here. That’s not absorbing the impact of the carbon rule; that’s losing industry – the heart of Alabama’s economy.

We are here to plead that you follow the model that works in Alabama. Return to the work table with the utilities and industry. Abandon the melodrama. Seek proven, not specious, solutions that promote clean energy without crippling manufacturers and ruining the economic well being of our citizens.”

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