GAO Report Details Concerns About Power Cost, Reliability

In July, the Government Accounting Office (GAO) released a report entitled “EPA Regulations and Electricity,” which detailed the requirements of major EPA rules and their likely impacts on U.S. power plants. Few seem to have noticed the findings of the report. They should have.

Noted for its non-partisan, objective view of complicated public policy, the GAO isn’t in the business of determining whether energy proposals are ‘good’ or ‘bad.’ Their job is to describe likely, measurable reality resulting from policy. That is refreshing, especially in light of the EPA’s penchant for calculating massive, mostly illusory, benefits for the agency’s regulations and downplaying the costs. If we’re going to move forward with policies that could shape the next several decades of American energy, shouldn’t we do so with unbiased estimates in hand?

GAO examined the available data on four EPA rules: the Cross-State Air Pollution Rule (CSAPR), Utility MACT (also known as Mercury and Air Toxics Standards), the proposed Cooling Water Intake Structures regulation, and coal ash rules (formerly known as Coal Combustion Residuals regulations).

So here’s what the GAO report found: 1) As much as 12% of U.S. coal-fired capacity could be retired, 2) electricity price increases due to the regulations could be as high as 13.5% in some regions, 3) regional reliability concerns could result from the rules, and 4) the deadline for completion of necessary retrofits might be unreasonable.

If those points sound familiar, they should be. PACE and others have been sounding such alarms for quite some time. Perhaps the first finding, that EPA rules signal the steady removal of coal as a viable power option, doesn’t bother you. Maybe you believe in the dichotomy of ‘clean’ and ‘dirty’ power sources and that the U.S. is better off using fewer fossil fuels. But the American power grid doesn’t run on belief; it runs on electrons. And someone pays for those electrons. That reality is what makes GAO’s report so deeply meaningful and, frankly, a little frightening. Consider the wording of the GAO report.

“Available information suggests that the actions power companies take to respond to the four key regulations will have costs, and some may be challenging to complete by the regulations’ compliance deadlines. In addition, these actions may have varied implications across the country – increasing electricity prices in some regions and contributing to some reliability challenges.”

Let’s decode for a moment. When GAO writes “challenges,” it means “problems.” When it writes about “varied implications,” it means ratepayers in some states are going to get hammered while others barely feel a thing. Those getting the hammer will be residents of mostly Deep South states and others who rely heavily on coal relative to the rest of America. Those states that today enjoy low electricity rates and have vibrant manufacturing bases. Some might put it another way: mostly states that won’t matter much in the upcoming election.

Sure, the GAO report points out the tools that are available to avoid serious reliability problems, but those tools are wielded almost solely by federal agencies and the president. They are mostly exemptions and special cases, such as Clean Air Act Section 112 that gives the president the authority to exempt certain utilities from compliance. Does that seem likely? And are such tools really all that is standing in the way of significant reliability problems?

Perhaps the most damning finding of the GAO’s report is that the Federal Energy Regulatory Commission (FERC), the very body that is tasked to ensure that American power remains reliable, has not documented the progress of utilities in complying with new EPA regulations and has not been proactive in determining whether serious problems lie down the road. That is inexcusable and should be a wake-up call to congressional leaders like Senator John Rockefeller, who requested the report, and to all others who are contemplating the direction of American energy. It is time for FERC to do its job, even if that means laying some inconvenient truths on the EPA.

GAO’s report reveals a great deal. We encourage our elected officials to give it the attention it deserves.