The Projected Impacts of the Clean Air Interstate Rule on Electricity Prices in Indiana

This paper examines the impact of various nitrogen oxides (NOx) and sulfur dioxide (SO2) emission control scenarios on the projected prices of electricity in the state of Indiana. The scenarios represent different methods for achieving the reductions in NOx and SO2 emissions mandated by the United States Environmental Protection Agency (EPA) under its Clean Air Interstate Rule (CAIR). The analyses were performed using a traditional regulation forecasting model that equilibrates between price and demand. Thus, the effects of price changes on demand levels were captured. Price impacts are presented at an overall average level as well as by customer class. The impacts of various assumptions made in the selection of the scenarios are analyzed. This paper does not attempt to compare the cost of emissions controls to the benefits of reduced emissions.