Questions & Answers about the Carbon Dioxide (CO₂) Tax Proposal

Why are the Administration and Congress considering a proposal to tax CO₂?
There is a growing belief that the use of fossil fuels, including electricity generated from coal and natural gas, is a cause of global climate change. The Administration and Congress, in an attempt to control emissions like CO₂, have proposed legislation to limit these emissions by introducing a cap on the amount of CO₂ that can be emitted. The proposal would also create credits that utilities and other emitters may be required to purchase if they are unable to reduce emissions to the new levels. This could force the cost of electricity to increase significantly. Because the U.S. depends upon fossil fuels such as coal, natural gas and petroleum for a majority of our energy needs, any cost increase will be felt economy-wide.

How would this CO₂ Tax, or Cap-and-Trade, proposal raise my electricity bill?
This depends upon our leaders in Washington and how they respond to the concerns of people like us. President Obama’s Administration and the U.S. Congress are considering proposals that would impose a new cost on various uses of energy, including coal for electricity generation. These efforts are aimed at addressing climate change, but would come at significant cost to customers and the economy. If this proposal takes effect, Cheyenne Light Fuel & Power customers could see their electricity bills increase 34 percent to 85 percent or more. Congress has alternatives for addressing climate change that pose lower risks to consumers and the economy.

Wyoming’s U.S. Senators John Barrasso and Mike Enzi have resisted legislation that would implement a cap-and-trade program for CO₂ emissions with no cost protection for customers. Their continued support and the support of others in both houses of Congress will help ensure that any legislation to further regulate emissions from energy usage protects electricity customers from undue cost increases.

Why would my electric bill increase if Congress and the Administration were to pass a CO₂ Tax?
In the name of improving the environment, some in Washington believe that coal should be more costly to use as an energy source.

The cap-and-trade proposal would impose a tax or cost on the use of energy sources like coal. Coal, like most energy sources, creates emissions, including CO₂. The cost of a CO₂ tax would increase the cost for utilities to provide electricity. As a regulated utility, we pass actual costs like CO₂ taxes through to our customers in the form of higher prices.

There are significant problems with targeting coal with this tax and not protecting customers. The following protections could help reduce the negative impacts of a cap-and-trade program:

• Making emissions credits free initially
• Phasing in the portion of credits which are auctioned
• Investing in advanced clean coal technology

Why would the Cap-and-Trade proposal result in higher rates in states like Wyoming?
Electricity customers in our region of the country depend on electricity from coal, which has been targeted to be taxed at a higher level than generation fuel sources used in other regions including the East and West Coasts.

Wyoming and most of our neighboring states in the middle of the country have some of the most affordable power. Like you, customers across the region depend upon coal to fuel most of our electricity needs. Even as we diversify our energy mix to include more renewable energy sources like wind or solar power, coal will be required to continue to supply reliable, affordable electricity.

How would the Cap-and-Trade proposal impose a tax on CO₂ emissions?
A cost would be imposed per ton of CO₂ produced – most likely in the form of a federal CO₂ tax through a “cap-and-trade” program. Under a cap-and-trade program, total emissions of CO₂ in the United States would be limited (capped) at a certain level. In order to emit a ton of CO₂, utilities would be required to have an “emissions credit.” Some in Washington favor auctioning all of the emissions credits immediately. Utilities would then be forced to pay for these credits, creating additional costs to generate electricity. This would result in large cost increases for electricity customers, whose electricity is provided from coal-fired power plants.

How could electricity customers be protected from additional costs from a Cap-and-Trade proposal?
The National Association of Regulatory Commissioners (NARUC), Edison Electric Institute, and others in Washington favor initially granting emissions credits free of charge to existing emitters of CO₂ and then gradually increasing the portion of the credits that are auctioned. Cheyenne Light Fuel & Power agrees that this would lessen the immediate impact of a large cost increase, and it would also allow time for the development of technologies to reduce the need to buy CO₂ emissions credits.

What is Cheyenne Light Fuel & Power doing today to help maintain affordable electricity?
For over 125 years, Cheyenne Light Fuel & Power has pursued an energy mix that provides the best value and service to our customers.

Cheyenne Light Fuel & Power relies on coal as our primary source of energy because it is abundant, affordable, and available. In fact, about two-thirds of the electricity we supply to homes, businesses, and communities comes from our coal mine and energy generation complex near Gillette, WY. As we work to secure energy independence, the nation’s 250 year supply of coal will be an important part of the energy mix.

In order to meet our area’s electricity demands, Cheyenne Light Fuel & Power has employed advanced technologies to improve efficiency, conserve resources and reduce emissions. Cheyenne Light Fuel & Power continues to pursue the next generation of clean coal technology for your future needs. However, those advances take time and money to develop and fully implement. Imposing the costly burden of a large CO₂ tax could set back the development of important clean coal and other projects.

How is Cheyenne Light Fuel & Power helping to conserve energy and protect the environment?
Just like you, we love where we live. We understand that we need to conserve our natural resources for the next generation to enjoy as well.

Utility companies face the ongoing challenge of balancing their customers’ need for affordable, reliable electricity with the need to protect the environment. Cheyenne Light Fuel & Power operates some of the cleanest coal plants in the nation at our Gillette energy complex. We also promote energy efficiency and weatherization, and initiated a community tree planting program called The Power of Trees. We have added renewable wind generation near Cheyenne, WY to supply some of your electricity. However, wind blows intermittently, and is not a reliable source for our primary (base load) generation needs. We demonstrate respect for our land, water and air as we comply with the spirit as well as the letter of important environmental laws.

How would the money raised from a CO₂ Tax be used?
There are various suggestions about how to use the revenues collected from the tax. Some have suggested using the funds for the federal government to spend on programs unrelated to energy. We believe if a tax were to pass, the proceeds should be used for energy research and defraying energy cost increases for customers.

What can I do to prevent Washington from imposing an unfair CO₂ Tax?
Your voice counts. When you write or call your U.S. Senators or Members of Congress, they listen. We are thankful that our Wyoming Senators Mike Enzi and John Barrasso have all resisted passing legislation that would implement a cap-and-trade program with no cost protection for customers. You can make a difference in whether or how Washington passes a new tax that would increase electricity bills. When you thank your Senators and urge your Representatives to take a similar stance, they can use your support to influence others in Congress. You can visit our Web site for tips on how to let your voice be heard.

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