This article appeared in the August 1, 2014 issue of Public Power Daily from the American Public Power Association. By Robert Varela.
APPA tells House panel of concerns about EPA’s proposed rule on carbon dioxide emissions of existing plants
The American Public Power Association (APPA) is very concerned about the potential impacts on public power utilities and their customers of the Environmental Protection Agency’s proposed rule on carbon dioxide emissions from existing power plants, the association told a House panel. The proposed emission reduction goals for some states “are unachievable and would require the early retirement of existing coal- and natural gas-fired power plants, which could result in stranded costs for utilities as well as local reliability impacts,” APPA said in a July 29 statement for a House Energy and Power Subcommittee hearing on the Federal Energy Regulatory Commission’s perspective on the proposed rule.
The proposed rule for existing plants “goes beyond what is permissible under Section 111(d) of the Clean Air Act,” APPA said, adding that it “is disappointed that EPA has decided to set binding state emissions goals rather than leave it to the states to set individual limits that are achievable at the affected source—the electric generating unit.”
APPA cited a number of concerns about the proposed rule:
- Front loading — most of the emission reductions are required by 2020 for many states
- Early action — there is little or no credit for actions utilities have taken to reduce emissions prior to 2012
- Dispatch assumptions — EPA assumes that most existing natural gas plants can operate at a 70 percent capacity factor, but state air permits limit the operation of many plants; states and utilities do not control dispatch in regional transmission organization regions; and it is not clear sufficient pipeline capacity exists.
EPA should have consulted the Federal Energy Regulatory Commission on all of those issues, but there appears to have been little communication between the FERC and the EPA on this proposed rule, especially regarding electric reliability, APPA told the subcommittee. EPA consistently claims that its slate of proposed rules on the electric utility industry will not hurt reliability, but the agency “has no expertise in electric utility operations, and seems not to have given appropriate deference to the experts, including FERC Commissioners and staff, who oversee the reliability of the bulk power system,” APPA said.
FERC has made commendable efforts to highlight the impacts of EPA’s slate of proposed rules, but APPA “is not aware that the agency was consulted in any comprehensive way by the EPA.”
FERC’s approach to the reliability issue “suffers from a major shortcoming — the Commission’s lack of any apparent will to reform the problematic features of mandatory capacity markets operated by” ISO New England, the New York ISO and PJM Interconnection. APPA and many others “have concluded that the basic mandatory capacity procurement construct is not a ‘market’ in any meaningful sense of the word. It is instead a centralized procurement, based on a heavily administered pricing structure, governed by thousands of pages of complex rules, that generally does not produce needed new resources,” the association said.
Implementation of EPA’s proposed rule will entail the construction of new low-carbon dioxide generation, such as nuclear and natural gas plants, but a recent study by Christensen Associates concluded that the RTO markets “do not and cannot address long-term capacity needs,” APPA said. The study also found that “the RTO markets include some design elements that impede long-term investments and long-term bilateral contracts.”
The failure to recognize this reality has kept FERC from adopting fundamental reforms, APPA said. Instead, the commission has agreed to rule changes, such as administratively imposed floor prices on new natural gas or even renewable generation, that “further increase costs and impede needed new resource development,” APPA said. “These capacity markets therefore will exacerbate the reliability and economic costs” of the proposed Clean Power rule.
Photo: House Energy & Power Subcommittee Chairman Ed Whitfield (KY). Copyright/Courtesy House Energy & Commerce Committee, www.flickr.com/photos/energyandcommerce.