Is Luminant, née TXU, selling CAPP cities a bill of CO2 goods?

Coal-fired electricity could clash with green image of cities, and carbon cap-and-trade, and what other rats might be in the bin?

In exchange for locking in electric rates for 24 years with electrical provider Luminant (the generation part of the old TXU and now part of Energy Future Holdings after its buyout by KKR and – lest we forget – Goldman Sachs, ) via the Cities Aggregation Power Project, Cedar Hill (and other participating cities) are getting a minimum of 60 percent coal-fired electricity.

THAT is how the cities avoid the volatility of commercial electric rates priced on natural gas rates.

But, a number of Dallas-Fort Worth cities were members of the Clean Air Coalition. If any of them have signed on to CAPP, how does coal-fired electricity square with this?

And, if President Obama and the incoming Congress pass a carbon cap-and-trade system, coal-fired electric prices are surely going up. Is there an "out" in the contract for Luminant if that happens? Was the possibility even discussed?

It appears that, according to the city of Cedar Hill, and from what I've seen in the CAPP contract (though I haven't looked at it recently), there is no such provision.

All good news on the economic side for Cedar Hill and other cities. But, what if we go beyond cap-and-trade to a full-blown carbon tax? Luminant still appears on the hook... unless it deliberately tries to break the contract.

Luminant has said in the past it's OK with such a system, as long as it did not single out utilities. And, I am sure electric utility lobbyists would take care of that.

Also, Luminant touts its carbon dioxide offsets; if enough cities sign up for CAPP, will it have to build another wind farm to offset all the carbon from its coal-fired plants running nonstop, even if the coal-generated electricity, and its lower price, is only 60 percen t of the total electric delivery?

And, beyond that, neither the old TXU, nor KKR or Goldman Sachs, got rich by either being stupid or by being generous. If they're offering cities like Cedar Hill cheap electricity, there's a catch somewhere.

Getting 2/3 of the money up front does help pay off its LBO debt quickly, but it still seems risky to price even the coal-generated 60 percent of power that cheaply, and unless it gets a LOT of cities to sign up, just the up-front money can't do that much debt-clearing.

Oh, and in case you have forgotten, or did not know, here is a reminder of just how dirty the Luminant coal-fired plants are in terms of mercury emissions – four of their plants produce 5 percent of all mercury pollution in the country.