Hearing Finds Little Consensus on Impact of EPA Rules

In a Congressional hearing last week, commissioners from the Federal Energy Regulatory Commission (FERC) and Public Utility Commissions of several states differed in their views of just how many coal plants could be shut down and how this may affect grid reliability if the Environmental Protection Agency (EPA) implements several rules it has already finalized or proposed.

The hearing last week in the House Subcommittee on Energy and Power focused on the EPA’s Cross State Air Pollution Rule, which was finalized on Aug. 8; the utility MACT Rule, proposed on May 3, 2011, and which is expected to be finalized on Nov. 16; the coal combustion residuals rule, proposed on June 21, 2010; standards for power plant cooling water intake structures, proposed on April 20, 2011; and the New Source Performance Standards  for greenhouse gas emissions from electric generating units, which was expected to be proposed this fall and finalized in May 2012.

According to a memorandum compiled by the Republican majority and distributed to members of the subcommittee, the hearing was expected to shed more light on whether the EPA had analyzed the cumulative impacts its power sector rules would have on the reliability of the grid. Members also scrutinized how in touch the EPA was with the Energy Department, FERC and the North American Reliability Corporation (NERC), and regional transmission entities.

At the heart of the hearing was a preliminary FERC staff analysis which had concluded that 40 GW of coal-fired capacity was “likely” to retire, with another 41 GW “very likely” to retire over the next several years, the memorandum said.

That comprised “8% of all electric generating capacity in the United States and 25% of the coal-fired fleet, which provides the majority of the nation’s most reliable and affordable source of baseload power,” the memorandum said. “Further, this combined 81 GW that is ‘likely’ or ‘very likely’ to retire far exceeds any of EPA’s projections. Indeed, EPA’s analysis of the Cross-State Air Pollution Rule and the Utility MACT Rule concludes that only 1 GW and 9 GW, respectively, of electric generation capacity will retire. “

The majority went on to contend that FERC’s findings closely aligned with NERC’s conclusion that the rules would put 33 GW to 78 GW of generation capacity at risk. “Notably, the reliability assessments completed by FERC and NERC—the two organizations responsible for ensuring the reliability of the bulk power system—produced results far exceeding not only EPA’s projections, but also forecasts made by financial institutions, consulting groups, and industry groups.”

All five FERC testified at the hearing held on Sept. 14. FERC Chairman Jon Wellinghoff, a Democrat,  downplayed the assessment, saying it was an “adequate back-of-the-envelope first assessment” of the amount and location of potential generator retirements—but stressing that the “informal assessment” could not be relied upon to determine the rules’ effects on system reliability.

“Depending on the scenario that was evaluated, that informal, preliminary assessment produced varying results, ranging from 40 GW to 81 GW in estimated retirements,” he said. “It is true that the first iteration of the results showed 81 GW as likely or very likely to retire. However, as time passed and Commission staff gained more knowledge about what EPA was proposing and included actual announced plant retirements, those numbers decreased.”

Wellinghoff said he believed if the electric industry were given enough time, it could “plan to meet whatever EPA regulations become final.”

Republican Commissioner Philip Moeller echoed a point made by Republicans in Congress who are seeking to delay the EPA rules. “With respect to reliability, I remain concerned that the timeline for electric utility planning and implementation is not compatible with the EPA timelines for its new regulations,” he said. “Constructing needed transmission assets in this nation is still a very challenging endeavor. Planning, cost-allocation, permitting, siting, and construction are often extremely difficult and controversial, often leading to years of litigation, delay and potentially stranded capital.”

He also argued, however, that FERC should undertake a more formal and rigorous analysis of reliability impacts of EPA regulations, and open the analysis to public comment.  He also said that the debate over the amount of coal generation that may be retired was missing “the larger point.”

“Except for most hydroelectric facilities, our existing electric generation is very likely to be retired in this country within 40 years, to be gradually replaced with newer generating plants,” he said. But instead of concentrating on how many coal plants to retire, “the focus should be on the timing of when specific units are likely to retire and what needs to be done to allow them to retire with the least disruption to the nation.”

All commissioners agreed that it would  be desirable for the EPA to establish a regulatory “safety valve” that would extend compliance deadlines for power plants whose retirement would have adverse consequences on reliability.

The subcommittee also heard from commissioners from Missouri, West Virginia, and Georgia, and from Trip Doggett, president and CEO of the Electric Reliability Council of Texas.

Sources: POWERnews, House Subcommittee of Energy and Power