By Tennille Tracy
WASHINGTON--Dominion Resources Inc. (D) Chief Executive Tom Farrell warned Monday of dramatic fluctuations in electricity prices if the Obama administration moves forward with new limits on greenhouse gas emissions.
Speaking before a congressional hearing, Mr. Farrell said that proposed limits on greenhouse gases will force U.S. power plants to abandon coal as a way to generate electricity and rely more heavily on cleaner-burning natural gas. With less diversity in the fuel mix, power plants and ratepayers will be exposed to potentially wild fluctuations in natural-gas prices, Mr. Farrell said.
There is "ample evidence that fuel diversity has a direct and important impact on the affordability and reliability of electric service," he said before members of the House Energy and Commerce Committee during a field hearing in coal-rich Virginia.
U.S. plants currently rely on a mix of coal, natural gas, nuclear and hydropower to generate the bulk of electricity. Of those, coal emits the most air pollution.
In May, the Environmental Protection Agency proposed to cap the amount of carbon-dioxide emissions at future power plants to 1,000 pounds per megawatt hour. This level can be achieved by burning natural gas. If coal is used, it requires the use of technology that captures carbon dioxide before it is released into the air.
That technology is not yet available commercially, but the EPA proposal gives power plants several years to install the technology and still meet the standards.
Mr. Farrell said the EPA will eventually try to cap carbon-dioxide emissions at existing power plants--a move that could have a much greater impact on the power grid and utilities. The EPA has so far sidestepped questions about whether or when it will try to regulate emissions at existing coal-fired plants.
Mr. Farrell said the EPA should loosen the standard to 2,000 pounds per megawatt hour. A tighter standard that forces operators to abandon coal represents an "undesired national policy," he said.
The EPA says power plants are already in the process of using technology or fuels that are required under its greenhouse-gas standards. So the impacts of the proposed limits are minimal, the agency says.
Power plant operators have already started to rely more heavily on natural gas in large part because natural-gas prices are cheap.
The EPA determined in 2009 that greenhouse gas emissions pose a threat to human health--a finding that was held up earlier this month in a landmark appeals-court decision. Power plants are the largest stationary source of carbon-dioxide emissions.
Republicans have been critical of the Obama administration's efforts to cap greenhouse gases, saying the EPA was not granted the authority to regulate those emissions under the Clean Air Act.
The EPA was under a court-ordered deadline to propose carbon dioxide standards for new power plants after being sued by environmental groups. The organization is expected to propose similar standards for oil refineries in the near future.
Write to Tennille Tracy at Tennille.Tracy@dowjones.com