Get ready to pay a whole lot more to keep the lights on.
Congress currently is working to pass a huge energy bill. The centerpiece is a system to force energy utilities to purchase government credits to offset their greenhouse gas emissions. This would in effect be an energy tax on the American people as the utilities pass the increased costs along to consumers and small business owners.
The plan is called "cap and trade" and it refers to a new trading market that Congress wants to create. The government will set limits on the amount of greenhouse gases businesses are allowed to emit (the "cap"), and then businesses will purchase credits to offset their emissions.
Businesses that reduce their emissions below the cap will be free to sell their credits to other businesses (the "trade"), a system with the potential to make trading mortgage derivatives look like a good idea.
However, in the initial phases, more than 80 percent of the credits will be given away by the government, rather than auctioned off as originally planned. The credits will go to big businesses hand-picked to garner enough support to pass the bill out of the House Committee on Energy and Commerce.
Even President Obama admits current cap and trade proposals will cause energy rates to rise. "Under my plan of a cap and trade system, electricity rates would necessarily skyrocket," he told The San Francisco Chronicle last year. At the same time, the House Committee on Ways and Means estimated we would lose anywhere from 1.8 million to 5.3 million jobs.
That's because big businesses will pass the cost on to small businesses and consumers in the form of higher prices. An analysis by the Massachusetts Institute of Technology of a less-restrictive bill in the last Congress estimated electricity rates would go up at least 40 percent.
And that would be devastating to small businesses. Consider the stories we've already heard:
A trucking company owner in Ohio spends more than $4 million a year on his energy bills. If his costs increase 40 percent, he'll be spending $5.6 million a year just on electricity and fuel. In order to absorb the new energy costs, he said he would have to raise his prices, as well as cut hours and employees.
A marketing and exhibit company annually spends about $120,000 on energy costs, seeing no decrease despite investing in a $40,000 "smart technology" heating-ventilating-air conditioning system. This company wants to open a second location in Illinois, but the owner says with expected cost increases, including healthcare, property insurance and legal counsel, it may be impossible to expand.
The Pennsylvania owner of four athletic clubs spends about $600,000 a year to power the heating-ventilating-air conditioning systems and lighting the facilities. If that cost goes up 40 percent to $840,000, he says his only choice will be to close his business.
Everyone wants cleaner air and a better environment. But we all need to do our part to help. Putting the burden on those who can least afford it is not the way to go.
Dan Danner is president and CEO of the National Federation of Independent Business in Washington, D.C.
