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The EPA is scheduled to release its Mercury and Air Toxics (a.k.a., Utility MACT) Rule on December 16. The rule will establish, for the first time, limits on mercury and other toxic air pollutants from coal-fired power plants.
Although power plant operators would not be required to comply with the Utility MACT rule until 2015 or 2016, members of Congress and some within the electric industry have been suggesting that EPA push back the compliance schedule even further. AEP, for example, has suggested that it may need until 2020 to comply.
I have been reviewing industry earnings call for several years, and in my most recent review of 3rd Quarter earnings calls, I looked closely at how companies are positioned to comply. I was surprised (and pleased) to find that, despite the heated rhetoric, most companies have been assuring financial analysts that they are well on their way in terms of cleaning up their coal fleets.
For example, take Jim Rogers, CEO of Duke Energy, which generates more than 60 percent of its electricity from coal. He recently described his "fleet modernization" program during the company's third quarter earnings call. The company has a number of new power plants coming on-line and is on track to have "nearly 100 percent" of its coal generation capacity equipped with advanced pollution control systems.
A new report out today details positive statements made by 30 power companies indicating that early investments in their power plants have put them in a good position to comply with EPA's new air pollution rules. The report notes that these companies represent 50 percent of the nation's coal-fired power plants, and eleven of the 15 largest coal-based electric power companies. Across the fleet, about 50 percent of coal plants are very well controlled with scrubbers and other pollution control systems. So, let's do the math:
- 70 percent of the nation's electric generating facilities are not affected by EPA's Utility MACT Rule because they rely on natural gas, nuclear, or other non-emitting energy sources.
- 15 percent of the nation's electric generating facilities are coal plants that are already complying or well on their way to comply with the Utility MACT Rule.
- This means that 85 percent of the nation's electric generating fleet is unaffected by the rule or ready to comply.
This leaves me asking, just why is it that some in Congress are considering delaying important health protections for millions of Americans to accommodate a small fraction of the electric generating fleet and a minority of companies?
Among the most vocal companies calling for extended delays of the Rule are AEP, Southern Company, and MidAmerican. I see no sense in delaying important health protections for a few companies that have failed to make investments in cleaning up their fleets. AEP, for example, has only installed scrubbers on about half of its coal fleet.
Furthermore, why delay important health protections when utility companies have record amounts of cash on their balance sheets that could be used to modernize their generating fleets, creating millions of good paying, skilled construction jobs?
A recent Ceres analysis shows that the top 20 electric generators in the U.S. have record cash reserves exceeding $35 billion. This capital is sitting on the sidelines precisely because many companies have been anticipating this new rule, and are ready to invest, as the country struggles with high unemployment.
Recent polling sponsored by Ceres shows that the American public is not interested in further delays. The nationwide poll shows that by a wide margin, voters of both political parties and in all regions of the U.S. support the EPA's new rules to limit air pollution from coal-fired power plants. Two-thirds of the respondents – 67 percent – oppose Congress delaying implementation of the air pollution rules, according to the national survey of 1,400 voters.
So, with most companies standing ready to deploy private capital that creates jobs, and a public that strongly supports the Toxics Rule, it makes more sense to move forward than to postpone or delay.
This post originally appeared at Ceres.org.
Coal-fired power plant photo via Shutterstock.com.
From the perspective of the
From the perspective of the Electric Reliability Coordinating Council (ERCC), a group of energy companies serving millions of consumers nationwide and working on sensible Clean Air policy for over a decade, we can't agree the Ceres assessment.
First, Utility MACT affects some 40% of baseload capacity and almost half of U.S. net generation. To date, FERC’s only analysis of the EPA rules was reported in an August 1, 2011, letter to the ranking member of the Senate Energy and Natural Resources (ENR) Committee, Senator Lisa Murkowski (R-AK). The FERC staff analysis referenced there found that 81 gigawatts of generating capacity is ‘very likely’ or ‘likely’ to be taken off line by 2018 due to coal plant retirements and downgrades resulting from the rule. The recent NERC report shows lower retirements, but only because they backed announced retirements out of the equation. In any event, NERC CEO Gerry Cauley is clear: “To ensure bulk power system reliability, sufficient time and certainty to schedule retrofits of more than 500 units, as well as acquire replacement resources or prepare system reinforcements is needed.”
Second, concern with reliability is widely shared by some 27 states as reflected in briefs filed in the deadline case regarding Utility MACT, letters from governors, and rulemaking comments filed by public service commissioners and other state officials. For example, attorneys general representing half the states noted that Utility MACT “has the potential to undermine significantly the reliability of our Nation’s electrical supply and significantly increase the cost of electricity to the consumer.” Amer. Nurses Ass’n v. Jackson, Civ. No. 1:08-CV-02198-RMC.
Of particular interest are the views of state public utility commissions – the frontline for reliability concerns – around the nation. The Pennsylvania Public Utility Commission found that the rule “could lead to expensive upgrades at greater cost to ratepayers or premature retirement of fossil units which could compromise system reliability.” The Public Utilities Commission of Ohio wrote to EPA that, “The current and foreseeable economic environment indicates that Ohio’s ratepayers will be hard-pressed to absorb rate-shock due to the implementation schedule advanced in the proposed rule.” The Public Utility Commission of Texas found that if the rule had been in effect, “Texans would have experienced rolling outages and the risk of massive load curtailment” during the warm summer months. The Alabama Public Service Commission found that that “compliance obligations and timeline associated with the proposed rule will threaten the reliability of the electric supply in Alabama with similar consequences resulting at the national level as well.”
Third, the reports and statements Ceres cites are suspect. They are largely from economic competitors with a vested interest in decreasing the viability of coal-fired generation and thereby increasing the clearing price of energy for consumers. Consider (a)the generation and transmission of power takes place on an interrelated grid. Reserve margin assessments are based in part on the ability to back up power from one location with power from another. To say that the impact of a plant’s retirement is within reserve margin fails to take into account the probability that the plant’s continued operation – even if only occasional – may be necessary for the stability of operations elsewhere; (b) these assessments must admit that those areas most reliant upon coal-fired capacity are indeed likely to face profound price, supply, and reliability concerns;(c) in the event of extraordinary events,only the additional peak-load capacity supplied by coal-fired facilities are likely to provide the resilience necessary to address potential weather-related blackouts or even cyber-security threats to critical infrastructure; and (d) facile reliance in these reports on EPA emergency authorities fails to take into account the continued disagreements between EPA and the U.S. Department of Energy regarding whether or not emergency orders actually forestall Agency enforcement actions.
For more information, visit us at www.electricreliability.org