MMUA Levels Criticism of EPA 'Clean Power Plan'

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MMUA Levels Criticism of EPA 'Clean Power Plan'

December 22, 2014

    The issue of the authority of a branch of the federal government to decree sweeping change has come to the fore, and the electric utility industry is no stranger to the phenomenon.

    On June 18, 2014, the U.S. Environmental Protection Agency (EPA) published a Proposed Rule in the Federal Register that will have a tremendous impact on the electric utility industry, including MMUA’s members. The proposed rule, which is intended to address climate change concerns, would establish emission guidelines for existing electric generating units. The EPA cites section 111(d) of the Clean Air Act as its authority to issue this transformative regulation, known as the ‘Clean Power Plan.’

    As of early December, the EPA had received some 1,600 comments on the issue. MMUA’s voice was part of the (often discordant) chorus.

    In its comments, MMUA said it prefers congressional action to address climate change but in the absence of legislation expressed a willingness to work with EPA to improve the Proposed Rule. MMUA offered practical examples intended to help make the final regulation more workable for the states, for EPA, and for public power utilities.

    While expressing a willingness to work with EPA, MMUA said the Proposed Rule is deeply flawed in many respects.

    The Proposed Rule, said MMUA:

    • violates the Clean Air Act’s clear division of responsibility for regulatory decision making between the federal government and the states;

    • violates the Clean Air Act’s preservation of state sovereignty and local control of public power utilities;                           

    • reads into the Clean Air Act the type of enormous and transformative expansion of EPA regulatory authority that the U.S. Supreme Court, in the UARG v. EPA case, found to be lacking without “clear congressional authorization.”

    MMUA endorsed the legal and technical commentary, questions, and critiques offered by the Utility Air Regulatory Group (UARG) on the Proposed Rule as well as those submitted by American Public Power Association (APPA).

    Like them, MMUA asserts that the Proposed Rule is inconsistent with the requirements of the Clean Air Act because it would violate the Act’s clear division of responsibility for regulatory decision making between the federal government and the states, eliminating the broad discretion Congress granted to the states when it enacted section 111(d) of the Act. Instead, the Proposal seeks to assign all of that discretion to the Agency itself.

    Similarly, the Proposed Rule shows little regard for the division of federal, state and local authority with respect to the governance and regulation of the electricity industry. EPA, although it has no clear authority to address any of these governance and regulatory matters concerning the electric utility industry, would assume total autonomy in this area.

    In the Proposal, the Agency has asserted new-found authority to become the primary regulator of electric power within the United States, including regulating (i) the dispatch of electric generation, (ii) the amount of renewable power to be built, and (iii) requiring customers to limit their electricity consumption. This is exactly what the Supreme Court has previously stated the EPA could not do, said MMUA, and EPA’s proposed rules are deeply flawed legally.

    Thus, EPA oversimplifies the difficulty of implementing the Proposal’s portfolio-based building blocks under existing state laws. This would fundamentally reorder state choices on the governance of public power utilities and undermine the local control that has been the bedrock principle of the nation’s public power utilities for over a century.

The Proposed Rule, if implemented in its current form, would have such enormous and potentially disruptive impact—economically, and with respect to principles of federalism and the separation of regulatory authorities—that it appears more than overly ambitious in its reach.

    New Source Review. The first ‘building block’ of the Proposed Rule outlines measures to be taken to reduce CO2 emissions through heat rate improvements at affected power plants which will reduce the amount of fuel used to produce the same amount of electricity. The EPA explains that these heat rate improvements can be achieved through equipment upgrades or by installing new equipment. These are the type of projects targeted as triggers for compliance with the Clean Air Act’s New Source Review (NSR) requirements. The EPA has previously determined that a project’s potential to improve an EGU’s efficiency strongly supports a finding that the project is not excluded from NSR requirements as “routine maintenance, repair or replacement.” This has led to NSR enforcement actions and citizen suits targeting the exact type of projects that the Proposed Rule would now seek to require EGUs to undertake.

    EPA should eliminate the threat of protracted NSR litigation and provide a clear statement that any upgrade necessary to implement Building Block 1 does not trigger NSR.

    Building Block 2 is based upon flawed assumptions.

    MMUA pointed out numerous flawed assumptions that underlie EPA’s Building Block 2 (fuel switching from coal to natural gas), due to natural gas availability and price, permitting issues, compliance issues with operating combined cycle units at high capacity factors, and operational issues arising from the repurposing of units that were designed and installed to provide grid support for intermittent renewable generation.

Many of the natural gas-fueled power plants in Minnesota were sited and built in locations that required grid support for the extensive intermittent renewable generation built by MMUA members and other utilities. The Proposed Rule calls on these units to forgo their designed purpose and operate as baseload generation, contrary to the needs of the local electric grid. This failure on the part of the Proposed Rule to understand this fact will have serious consequences on the reliability of the electric system for our member communities.

Operating variability, ramping due to the utilization of highly intermittent renewable resources of solar, wind and biomass per preferential market dispatch and Minnesota law necessitate a re-evaluation by EPA of affected units available for re-dispatch.

In addition, even baseload and intermediate-load units’ dispatch is governed by demand and dispatch order based on market pricing and unit availability. As experienced this past winter, November 2013 through April 2014, unit dispatch widely fluctuated within regions in the state of Minnesota due to natural gas curtailments caused by natural gas pipeline capacity issues and natural gas availability.

    •   EPA’s Best System of Emission Reduction (BSER) computations do not reflect practical reality. EPA ignores the fact that there is an optimal investment point for CO2 reduction measures over which further investment in a particular measure becomes uneconomical, even in the context of compliance.

    •   Unrealistic assumptions regarding renewable energy. Each utility has a unique situation that must be assessed before determining to what degree renewable energy can be deployed. The Proposed Rule estimates for renewable resources needs to reflect the increasing costs of integration with the increased penetration of these resources.

MMUA’s 22-page comments were largely the work of Executive Director Jack Kegel, Director of Engineering and Policy Analysis Robert Jagusch and Director of Government Relations William Black.