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2007 » Duke Energy Chairman Urges U.S. Senate to Adopt Cap and Trade System to Address Climate Change

Duke Energy Chairman Urges U.S. Senate to Adopt Cap and Trade System to Address Climate Change June 28, 2007

The following testimony was presented by Duke Energy Chairman, President and CEO Jim Rogers on June 28, 2007, to the U.S. Senate Environment and Public Works Committee at its hearing:  “Examining Global Warming Issues in the Power Plant Sector.”

Jim Rogers:

One of my first jobs after law school was as a consumer advocate in Kentucky.  I challenged rate increases proposed by utility companies in the 1970s.

Today, I am here as an advocate for Duke Energy’s 4 million electricity customers in 5 states in the Midwest and Carolinas. These customers rely upon coal-fired generation for 70 percent of their electricity.

I am also here to advocate for the tens of millions of electricity customers in the 25 states where more than 50 percent of their electricity is generated using coal.

To address climate change, we must have a bridge to a low-carbon economy.  To cross that bridge, I have advocated for many years that we need an economy-wide cap and trade program for CO2.

A cap and trade program with appropriate allocation of allowances will protect consumers as we develop technologies to reduce carbon dioxide emissions.

In 1990, Congress provided a similar bridge when it passed the Clean Air Act Amendments – legislation that has dramatically reduced sulfur dioxide emissions. 

As CEO of a legacy Duke company in Indiana in 1989, I advocated for SO2 cap and trade legislation.  I can tell you from first hand experience, it is delivering extraordinary results.  By 2010, Duke Energy and its predecessor companies will have invested $5 billion to retrofit our plants to reduced SO2 and NOX by more than 70 percent.  All of this was done at a much lower cost than we predicted in 1990.

During this period, we were given permission to emit SO2 from our existing generation fleet.  This allowed us to use these plants to produce electricity while advanced emissions technology was developed and installed.

As demand grew, we purchased allowances to serve our customers. Also, over time, as our allocation was reduced, we purchased additional allowances. 

While customers bore the cost of buying these allowances and paying for SO2 retrofits, the cap and trade program protected them from major rate shock and unnecessary economic harm.

Some have suggested that allowances should be auctioned.  But an auction approach would unfairly and disproportionately harm regions that depend on coal – especially the 25 states in the Midwest, Southeast and Great Plains.

Forcing customers from these regions to bear the cost of buying allowances for existing plants, while at the same time bearing the cost of retrofitting and replacing existing plants – would result in a double hit, paying twice for the bridge.  Also, it would be counterproductive to the long term goals of climate change legislation. 

Additionally, it is unfair to allocate allowances based on megawatt-hour output as some suggest.  This would give permits to power plants, such as nuclear or hydro, that have no CO2 emissions.  These plants were conceived and built decades ago, long before anyone raised carbon concerns.   

Duke Energy is the nation’s third largest coal generator, fourth largest nuclear generator and is planning to build two new nuclear units.

From our perspective, there is simply no economic justification to give allowances to nuclear and hydro plants that will not incur any costs to comply with the program.  Doing so would be like giving these companies a printing press to make money, at the expense of other regions of our country.  There is no justification for such a windfall.  

It is also important for us to acknowledge that if we are not serious about building more nuclear generation in this country, then we are not serious about climate change.

Nuclear energy has a demonstrated safety record, it is efficient and economical, and the basic technology is available today. There is no way that we can realistically attain significant levels of carbon reduction and achieve our economic goals without expanding its use.

Chairman Boxer, when faced with a difficult decision, I try to apply the grandchildren’s test. I look at my grandchildren and ask myself, ‘Will the actions I take today create a better life for them and their children tomorrow? When they are grown, will they look back with pride on the decisions their grandfather made, to help ensure a brighter future for them and generations to come?’

Climate change is one of the most important issues of our time. Getting it right – for the customers and your constituents – will be a marathon, not a sprint. 

Let’s go to work now. Thank you.