EPA Carbon Mandate Continues to Concern Policy Makers

Despite being the subject of a stay from a federal court, the EPA’s carbon mandate, known as the Clean Power Plan, remains a topic of debate among state and federal policy makers. Some believe, for example, that EPA’s efforts to regulate carbon dioxide goes too far toward controlling the sources of power available to utilities. One of those concerned voices is Travis Kavulla, President of the National Association of Regulatory Utility Commissioners (NARUC).

NARUC President Travis Kavulla

According to a recent report from Rod Walton of Electric Light & Power, Kavulla testified in a hearing called by House Republicans on what he deems to be EPA picking the winners and losers of energy industry. According to Kavulla, EPA’s Clean Power Plan will disrupt the traditional economics of the electricity market, for example, by favoring renewables over nuclear power. In his opinion, the rule is a top-down approach that overlooks state preferences and market realities.

“The implementation of the Clean Power Plan probably will have the semblance of a political compromise that involves creating a carbon resource plan where politically favored power plants are brought online either through a direct mandate of a state plan, or in exchange for emissions reduction credits or similar instruments created by regulatory fiat and which other generators are required to obtain,” Kavulla said, according to a transcript of his testimony.

“The production of those new power plants then will increase supply in the competitive markets, suppressing the market clearing prices that all resources rely upon for their continuing operations, including other clean energy resources that were previously constructed but which do not obtain credit from the EPA for Clean Power Plan compliance,” he adds. “If this sounds complicated, let me assure the subcommittee: It is.”

Kavulla, who hails from Montana, foresees a major shift in the power supply market if EPA is allowed by the courts to continue its effort to regulate carbon emissions. Montana is one of twenty-four states claiming that EPA is overreaching its authority. In fact, Montana is expected under the EPA’s current proposed rule to cut carbon emissions by 47 percent, one of the highest reductions in the nation. Kavulla, like many other regulators, believes that the states, not federal bureaucrats, should be the ones driving energy decisions that affect utility customers.

“The importance of this state planning expertise is not merely an opinion; it is the foundation of the long-standing legal framework of our country’s electric power sector, which establishes a bright line between the federal and state jurisdiction over generation of electrical energy,” Kavulla’s testimony reads. “While my association has periodically disagreed with the Federal Energy Regulatory Commission—our counterpart on oversight of the power sector—that agency’s actions have usually been undertaken in a spirit of cooperative federalism.

In addition to concerning policy makers on a state level, the Clean Power Plan has also drawn the ire of some in Congress. A week ago, the EPA’s air chief, Janet McCabe, whose office is responsible for implementing EPA’s new carbon mandate, sparred with Rep. Ed Whitfield of Kentucky over the agency’s decision to continue working on the plan despite a stay from the federal court. Whitfield serves as Chairman of the Energy and Commerce Committee’s energy and power panel.

Whitfield expressed concern that EPA shows no sign of slowing down its effort to regulate carbon dioxide from the power sector, despite the stay. For example, although the overall carbon mandate is under a stay from the federal court, the EPA has nonetheless completed a “44-page proposed rule for a voluntary clean energy incentive program that goes with the halted plan.”

“Taking this action is not inconsistent with the stay,” McCabe explained to Whitfield. “The stay precludes EPA from implementing the Clean Power Plan. EPA is doing nothing to implement the Clean Power Plan.”

Rep. Whitfield seems to disagree, and so do many others. As the courts continue to deliberate on the future of carbon regulation, EPA’s actions will be something to watch closely.