Electricity officials say US should use tools to prevent reliability issues

(AP file photo)

Electricity industry officials raised concerns Wednesday that upcoming environmental regulations will force plant shutdowns that could threaten power reliability, but they stressed the government has tools it should use to prevent such problems.

U.S. agencies should use their legal authority to give power plants more time to comply with rules, industry officials told the Federal Energy Regulatory Commission, the nation’s top electricity-system regulator.

“The pieces are there, in my view, for industry to have a successful outcome,” said Paul Koonce, executive vice president of Dominion Virginia Power Co., an electricity generator based in Richmond, Va. He spoke on behalf of the Edison Electric Institute, which represents the electricity sector. “It’s just EEI’s hope that the federal agencies use those tools constructively so we can get there.”

The energy commission was focusing on how four future Environmental Protection Agency rules could affect electric reliability, a term referring to the ability for power suppliers to meet consumer demand. Most discussion centered on two upcoming rules: a proposed air-toxics rule known as Utility MACT, and the already-finalized Cross-State Air Pollution Rule that will require power plants in 27 states to reduce smog- and soot-forming emissions that cross state lines starting Jan. 1.

Compliance timeline

Utility MACT, which EPA expects to finalize by Dec. 16, has raised concerns in industry for its projected costs and compliance timeline. EPA has said the health benefits would far outweigh the costs. The rule has a three-year compliance deadline after its implementation, with a possible extra year that can be granted for some power plants.

Electricity officials said they’re not trying to delay the rule’s implementation.

“The time to comply is really the issue at heart,” said Anthony Topazi, chief operating officer for Southern Company, an Atlanta-based utility holding company that generates the fourth-most electricity in the United States. “That would be in our best interest if we had more time, not a delay.”

Thomas Farrell, chairman of Edison Electric Institute, said the three-year deadline for complying with Utility MACT should be made at least four years for all power plants so they have more time to make preparations such as installing retrofits. Bloomberg News has reported that the EPA is considering such a proposal.

The institute and regional planning officials had differing views on other possible solutions.

Other possible solutions

A group of five regional authorities, including Texas’ main grid operator ERCOT, has suggested adding a provision known as a “safety valve” to the final Utility MACT rule. Generating units that would otherwise have to retire could stay online if deemed crucial to reliability until a separate fix is put in place.

“Assuming we get that additional tool, I think we’ll have what we need in place,” said Michael Kormos, senior vice president of operations at PJM Interconnection LLC, a regional electricity-system authority based in Norristown, Pa.

ERCOT has said it’s concerned about how the two EPA air rules could affect reliability in Texas, especially since a record drought nearly resulted in rolling blackouts over the summer. Texas lawmakers and officials have sparred with the EPA over whether Utility MACT and the cross-state rule would cause blackouts in Texas.

Koonce said Edison Electric Institute doesn’t like the “safety valve” because, he contended, it would require companies to admit some units are running in violation of the law, perhaps inviting lawsuits.

“We don’t think that’s the appropriate way to proceed,” Koonce said.

The group would prefer the president use Clean Air Act powers to issue an executive order allowing the EPA to give a company a two-year exemption for any of the rules, Koonce said.

Localized reliability challenges

Gina McCarthy, EPA’s top air official, has said repeatedly she’s confident the rules won’t cause reliability problems, citing what she contends is 40 years in which the Clean Air Act hasn’t produced any such incidents.

She said “localized reliability challenges” could occur, but added that the Clean Air Act and Clean Water Act both have provisions that can resolve the challenges before actual reliability problems can occur.

“We will work with you to ensure that we provide the public health benefits the law requires, the science demands and technology can supply for us and for the American people,” McCarthy said. “And we’ll do it in a way where we both work together, mindful that we don’t have to choose between goals of clean air and goals of reliable, affordable electricity.”

The Department of Energy is developing a stress test with assumptions more stringent than EPA’s rules, said Patricia Hoffman, assistant energy secretary for electricity delivery and energy reliability. The test, which is due out soon, will show the time needed to install new plants and retrofit existing ones “would generally be comparable to EPA’s regulatory compliance timelines,” Hoffman said in prepared remarks.

Study on reliability

The North American Reliability Corporation, a group of electricity grid operators, recently put out an analysis suggesting that four upcoming EPA rules, including the Utility MACT and cross-state rules, could force power plant shutdowns and retirements that lead to larger-scale reliability problems. The report didn’t assess local reliability.

McCarthy fired back that most of the retirements and shutdowns in the report stem from a flawed assumption that some states would choose the most expensive option for a regulation concerning cooling water. She also said the report assumes nobody would act to resolve any reliability problems that arise.

Mark Lauby, reliability assessment director at NERC, told the U.S. energy commission that McCarthy’s criticisms were “not correct.”

He also defended the assumption on how states would respond to the cooling-water rule as based on how they have acted in the past.

“We assumed they would continue to use that same path forward,” Lauby said.