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With U.S. Senate majority leader Harry Reid’s (D., Nev.) announcement Thursday that he would not include carbon caps in a watered-down piece of energy legislation, we believe the prospect for a new climate change law is dead. A federal renewable portfolio standard, or RPS, also appears dead. With Republicans forecast to win House and Senate seats in the November elections, Democrats are likely to no longer have the votes to pass climate change and renewables legislation even if party moderates come back into the fold.
For most fully regulated utilities, we think carbon caps and a federal RPS would have had little bottom-line impact. The story is much different for utilities with merchant power generation. For coal plant owners, carbon caps would have squeezed margins and probably forced significant plant shutdowns. We expect utilities like Dynegy DYN, Edison International EIX, and RRI Energy RRI
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