The U.S. climate bill would not do enough to protect consumers from future energy costs and gives away too many permits to power and natural gas distribution companies to pollute with carbon dioxide, environmental groups said.

Backers of the bill, including many big power companies and moderate environmental groups, have touted it as legislation that would protect consumers.

The bill would do that, they claim, by initially distributing tens of billions of dollars worth of permits to pollute with greenhouse gases in a cap-and-trade program to local power and natural gas distribution companies.

Then those companies would be required to use proceeds from selling the permits to keep energy bills low for consumers through rebates and other means.

President Barack Obama had preferred auctioning 100 percent of the permits to raise funds to help consumers. But after compromises, only about 15 percent of the permits would be auctioned.

The bill, which could come to a vote before the full U.S. House in weeks, would cut greenhouse gas emissions 17 percent below 2005 levels by 2020.

But giving the credits away to companies presents problems because the firms would be regulated by state public utility commissions that in the past have faced charges that they were influenced by the companies, environmentalists said.

Can we trust local utility companies to manage billions of dollars in value in a responsible manner that benefits consumers and reduces global warming pollution? Frank O'Donnell, president of Washington based nonprofit Clean Air Watch, said in a white paper released on Wednesday. Those commissions are political bodies.

The bill says the funds should be used for the benefit of ratepayers. But the bill's language is vague and power companies, which often have power distribution wings, could decide that building a new fossil fuel-powered plant would help lower bills, O'Donnell said.

Not all green groups agreed that the risks were big.

Groups like ours will need to be vigilant to make sure the bill does not lead to windfall profits for power companies and lapses in consumer protection, said Nathaniel Keohane, director of economic policy and analysis at the Environmental Defense Fund.

But the fact that one can come up with worst case scenarios doesn't mean to me that we don't go ahead with what is otherwise a very sensible approach to allocations, of the pollution permits, he said.

SIPHONING OFF

The bill would require natural gas distribution companies to invest some of the proceeds in energy efficiency projects in households such as attic insulation and better windows to help consumers trim their use of energy.

But electricity distribution companies would not be required to offer energy efficiency.

Seth Kaplan, vice president for climate advocacy at the Conservation Law Foundation in Boston, said unless the bill is changed consumers could miss out on millions of dollars of savings from efficiency over the long term and that their power use would remain unnecessarily high.

In addition, more than 5 percent of the allocations under the bill would be given to merchant power plants, many of which are deregulated, and oil refineries.

If you siphon off the value of the (permits) and give them to a merchant generator, or if a commission siphons them off and protects a coal plant, that is taking money that should go into consumer value, Kaplan said.

(Editing by Christian Wiessner)

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