EPA's Clean Power Rule Must Ensure Electricity Remains Affordable and Reliable
June 2, 2014
June 2, 2014, Washington, DC—The U.S. Environmental Protection Agency (EPA) has unveiled its much-awaited proposed rule to reduce carbon dioxide (CO2) emissions by existing fossil-fueled power plants.
The American Public Power Association (Public Power) continues to be committed to reducing CO2 emissions. We appreciate that 120 days have been allowed for comments on the rule and will constructively engage with the EPA, in a fact-based manner, to ensure that regulations do not place undue burden on consumers.
Public Power believes climate change should be addressed but Congress, not EPA, should determine the best framework outside of the Clean Air Act to do so while ensuring affordable, reliable electricity from all fuel sources, including coal and natural gas. The Clean Air Act is ill-suited to regulate CO2 emissions. If the EPA moves forward with regulations that call for too much change too fast, we will likely see unnecessary coal-plant retirements without long-term plans for viable, cost-effective alternatives; higher electricity prices; and potential shortage of electricity supply.
“Public power utilities are good environmental stewards. But we need a middle path, one that respects the needs of energy producers and the pocketbooks of energy customers,” said Sue Kelly, president and CEO of the American Public Power Association. Kelly cited the example of Germany’s “all-in” approach to renewables, which has doubled the average residential electric bill since 2000, with a further 40 percent increase projected by 2020.
The electric utility industry in the U.S. has reduced its carbon dioxide emissions by more than 12 percent between 2007 and 2012, without federal rules and regulations. Over the last decade, public power utilities have added new generation resources with lower or no emissions — wind, solar, hydro, biomass, nuclear, and natural gas. These utilities also have been aggressive in supporting efficiency in energy use by customers and encouraging demand response and load management. As utilities continue down this path, CO2 emissions are expected to further decline over time.
However, public power utilities using coal-fired generation — especially units that are now being upgraded and retrofitted to deal with current EPA regulations — need to be able to continue to use those facilities for their remaining useful life. “Regulations have to be considered comprehensively. Otherwise we run the risk of high electricity rates for customers, undue revenue losses for utilities that must be paid for by local communities and other adverse economic impacts, causing an unintended backlash that would help no one,” said Kelly.
EPA’s proposal to allow states to regulate carbon dioxide emissions will face barriers in those regions with restructured electricity markets. According to Joe Nipper, the American Public Power Association’s senior vice president, regulatory affairs and communications, “There are a host of different market and regulatory regimes throughout the country. At the wholesale level, many states are located within the boundaries of regional transmission organizations (RTOs). And many of these states regulate utilities that no longer own generation. States have little regulatory authority over either the rules of these electricity markets or the actions of the for-profit companies that own generating units.”
Nipper noted that the greatest barriers to development of new and lower CO2 resources will be for states located within those RTOs that rely on mandatory capacity markets to incent new investment. Those states’ ability and authority to achieve the optimal balance of reduced use of high-emission resources vs. increased use of low-emission resources and energy efficiency is limited.
Public Power is also concerned that utilities with only one baseload generation unit (coal or natural gas) will find it far more difficult to meet steeper CO2 reduction targets. “We will review the EPA proposed rule language to ensure suitable accommodation for the unique needs of single generation units,” said Nipper.