April 4 (Bloomberg) -- U.S. utilities, breaking with their own trade association, urged Congress to impose mandatory restrictions on emissions of carbon dioxide, a gas that contributes to global warming.

Exelon Corp. and Duke Energy Corp., the two largest U.S. utility owners, joined PNM Resources Inc. and Sempra Energy at a Senate hearing today to support creation of federal limits on U.S. greenhouse gas emissions.

``Customers and shareholders need greater certainty,'' said Ruth Shaw, president of Duke's nuclear subsidiary. The company is in the process of evaluating how it will spend ``many billions of dollars'' to provide power for its growing customer base over the next 50 years, said Shaw, and wants to know what future carbon limits will be.

Backers of mandatory caps face opposition from politicians and from some in their industry. President George W. Bush in 2001 abandoned a campaign pledge to limit emissions of carbon dioxide, or CO2, from power plants, and he withdrew the U.S. from the Kyoto Protocol, an international treaty that would have required emission reductions.

The utility industry's official stance, through its trade group, the Edison Electric Institute, opposes government-imposed restrictions in favor of voluntary efforts to reduce emissions.

The burning of coal and natural gas to generate electricity is the largest single contributor to carbon emissions in the U.S., the nation with the most greenhouse gas emissions.

Domenici, Bingaman

The Senate energy committee heard from 29 witnesses today, commenting on a Feb. 2 proposal by its Republican chairman, Pete Domenici, and its senior Democrat, Jeff Bingaman, both from New Mexico, to set mandatory limits.

The senators asked whether limits should be imposed on particular industries or economy-wide, and how to allocate emission allowances for those who exceed targets.

``Designing and implementing a mandatory system will be very difficult, both politically and economically,'' said Domenici. ``Consensus will be a very difficult thing. But we need to start somewhere. This conference is our starting point.''

Shaw and other supporters of mandatory caps are in direct conflict with utility companies such as Southern Co. and American Electric Power Co. Both Southern and American Electric have larger collections of coal-fired plants and would incur high costs to reduce carbon dioxide emissions to meet mandatory caps.

Southern's View

A representative of Southern, Senior Vice President Chris Hobson, told the senators that mandatory caps were not necessary, and that the industry should continue to invest in technology that can generate power with lower emissions, including coal gasification plants and new nuclear reactors

``Even in the absence of a mandatory program there are substantial efforts under way to bring these technologies to the point of deployment,'' Hobson said. ``A mandatory program, in our view, is not necessary to make that happen.''

PNM's CEO, Jeffry Sterba, warned new technology solutions ``may happen a lot more slowly if it remains solely voluntary.''

``We cannot delay and cannot count on a strictly voluntary approach,'' said Duke's Shaw.

The Clean Energy Group, which includes Entergy Corp., Calpine Corp. and PG&E Corp., even suggested the utility sector should be the first to be subject to mandatory caps. It would be a ``good first step'' before caps are established economy-wide, said Michael Bradley, executive director of the group.

`Personal Views'

``There is a diversity of views within the electric power sector,'' Edison Electric's President, Tom Kuhn, said in an April 3 telephone interview. Statements from utility CEOs in support of limits are ``personal views,'' he said.

There is a ``very, very strong consensus position now that everyone agrees on,'' Kuhn said, referring to his group's formal opposition to caps.

Opponents of mandatory caps say even if there is no law this year, there will probably be caps in the future.

``There certainly is enough public pressure and enough Congressional discussion that it is likely we will see some form of regulation, some sort of legislation around carbon,'' David Ratcliffe, CEO of Southern, said at a press briefing March 29.

Patchwork

Bingaman said he doesn't expect anything to be signed into law this year because of Bush administration opposition and a shortened legislative calendar ahead of Congressional elections in November.

There is ``discord and disagreement among power companies'' with ``very strong positions based on very specific interests,'' James Lucier, senior analyst with Prudential Equity Group LLC. ``Usually you don't see any major legislation like this get through until industry gets together and has a plan.''

Efforts to address greenhouse gas emissions and battle climate change on a state and regional level have increased the need for Congressional action, especially for companies that operate in multiple states.

``We are concerned about the patchwork of state regulatory programs that are going forward,'' said Michael Murray, director of legislative policy for California-based Sempra. ``There are over 20 states considering some sort of climate action program.''

Lawmakers in the Northeast are exploring a regional program to curb emissions and regulators in California have proposed limits on electric utilities to meet state goals for lower greenhouse gas emissions.

`Time to Act'

``We think we will get a better solution that looks more like a win-win if we work cooperatively with policymakers to come up with legislation to deal with this challenge,'' PG&E Chief Executive Officer Peter Darbee said at a March 30 media luncheon.

``The committee has held hearings on climate change issues for nearly 30 years,'' said Elizabeth Moler, executive vice president for Exelon. ``The first one was in 1978 when I was still on staff. It's time to act.''

To contact the reporter on this story: Tina Seeley in Washington at tseeley@bloomberg.net.

Last Updated: April 4, 2006 18:33 EDT