EMISSION-COST TRADE-OFFS AND RATE FEEDBACK FOR ELECTRIC UTILITIES

Actions taken to decrease utility emissions will generally increase el ectric rates and, thus, dampen demand for power. In the present paper, the following questions are addressed: What is the effect of this rat e feedback on the conclusions of emission-cost trade-off studies? In p articular, what reductions in emissions and generation costs could res ult from those rate increases? How might those rate increases affect c onsumer fuel choices, and how important could the environmental conseq uences of those end-user fuel-mix changes be? A comprehensive planning model is used to address these questions for one utility, Seattle Cit y Light. Programs to decrease the greenhouse gas CO2 are evaluated. Th e conclusion is that rate increases due to implementation of environme ntal policies will dampen demands, resulting in lower utility costs an d environmental effects, even though residential customers would use s omewhat more oil, natural gas, and wood as a result of rate increases. However, rate feedback also results in losses of ''customer value''-t he benefit consumers receive from consuming electricity. This value lo ss can partially or entirely offset the benefits of rate increases.