FERC Conference Raises Reliability Issues From EPA Rules

On November 29th and 30th, the Federal Energy Regulatory Commission held a technical conference to examine growing concerns about electrical system reliability in the wake of EPA rulemaking. A number of groups, including PACE, are concerned that the combination of rules such as Utility MACT and the Cross-State Air Pollution Rule could degrade America’s capacity for producing reliable and affordable power. FERC organized the conference in part due to growing pressure from members of Congress and advocacy groups.

“We need much better answers to these reliability concerns than we have gotten thus far,” said Energy and Power Subcommittee Chairman Ed Whitfield (R-KY). “Estimates show EPA’s new regulations will force significant amounts of generation capacity to retire or require expensive retrofits. Ratepayers cannot afford to play a guessing game when the stakes are so high. The potential consequences of an unreliable electricity supply could be disastrous to our economy and national security.”

As part of the conference, a number of voices offered testimony to FERC. Thirteen of those comments are summarized below, with links provided to the full testimony.

————

“In August of this year, PJM released an analysis of the potential impacts of EPA’s rules as they were known at the time on coal-fired capacity in PJM. The analysis concentrated on the proposed National Emission Standards for Hazardous Air Pollutants, also known as the Mercury and Air Toxics Standards, or MATS rule, as well as the Cross-State Air Pollution Rule, or CSAPR. The study estimated the amount of capacity revenues, given energy market revenues, which would be necessary to cover required environmental retrofit capital costs, and then benchmarked these costs versus the net cost of new entry for a natural gas combustion turbine to determine the risk of a unit retiring. The study results found that 11,000 MW coal capacity were severely at risk with another 14,000 MW of coal capacity were at risk for retirement.”  Michael J. Kormos, Senior Vice President PJM Interconnection, L.L.C.: Full Testimony HERE

“Current timelines to incorporate those EPA Rules, adversely affect SPP’s development and implementation of comprehensive short and long range plans as a result of the expected disruptive impact on existing and planned resources within the SPP footprint. Additionally, aside from resource adequacy concerns, the current implementation timeline present threats to the reliable operation of the grid.”  Carl A. Monroe, Executive Vice President And Chief Operating Officer, Southwest Power Pool, Inc.: Full Testimony HERE

“Given the large number of units subject to this rule and the fact that utilities have recently announced about 48 GW of coal generation unit retirements; we know that additional time for compliance will be needed and that reliability constraints will occur, especially without additional time for compliance.” Thomas F. Farrell , Chairman and CEO, Dominion, on behalf of EEI: Full Testimony HERE

“EEI is concerned about the reliability impacts of the MACT rule in two different respects: (1) the retirement of units where no further investments will be made and (2) the installation of controls at so many units within a relatively short time period. Our reliability concerns go beyond the impacts of lost generation from retired units, which are likely to be highly localized. Reliability concerns also arise when units are taken out of service to install controls.”  Thomas F. Farrell , Chairman and CEO, Dominion, on behalf of EEI: Full Testimony HERE

“Simply stated, the MACT rule imposes an extremely compressed schedule in which to ensure that compliance work at all units is completed without disruption to electricity delivery. There is much evidence to show that this cannot be guaranteed. This is one reason we believe that an effective, transparent and uniform process is needed to allow individual units additional time to meet the requirements.”  Thomas F. Farrell , Chairman and CEO, Dominion, on behalf of EEI: Full Testimony HERE

“MISO expects generation station retirements to eliminate all generation capacity above minimum capacity requirements. In aggregate the cost of compliance will be on the order of $30 billion. The MISO markets had approximately 116,000 MW of generation and demand resources participating as of the summer of 2011. 72,000 MW of that capacity is coal fired generation; 62,000 MW of this coal capacity will require retrofit investments or replacement.”  Clair J. Moeller, Vice President Transmission Asset Management, MISO: Full Testimony HERE

“Ranges of retrofit costs vary depending on size, vintage and current air quality control equipment installed. It is expected that 28,000 MW will require fabric filters at an average cost of $150,000/MW, approximately 20,000 MW will require additional scrubber type control equipment with an average cost of nearly $450,000/MW, and with 13,000 MW expected to retire as the cost to retrofit these generation stations is the same or higher than the cost to replace them at nearly $667,000/MW.”  Clair J. Moeller, Vice President Transmission Asset Management, MISO: Full Testimony HERE

“Reliability in the Midwest will be severely challenged throughout the implementation period of the proposed rules. The compliance time allowed by the proposed rule and the time required to accomplish the installation of new control equipment or capacity replacement is exactly the same, meaning owners of all these units must remove them from service – simultaneously leaving inadequate generation resources to sustain reliable electricity supply.”  Clair J. Moeller, Vice President Transmission Asset Management, MISO: Full Testimony HERE

“Obviously, 62,000 MW of generation cannot be removed from service simultaneously without interrupting loads in the region. In order for MISO to meet its reliability obligations, generator outage requests will be denied in order to maintain adequate supplies. The generation owners will thus face a conflict between complying with FERC tariff and NERC reliability requirements or EPA air quality rules.” Clair J. Moeller, Vice President Transmission Asset Management, MISO: Full Testimony HERE

“However, reliability is just one aspect of the numerous potential problems caused by the short compliance deadlines required under these EPA rules. These potential problems include cost increases for retail electric utility customers (up to 35 percent in some regions), the closing of plants unnecessarily, the needless loss of good paying jobs, and a shortage of workers, materials and equipment that would result from retrofitting so many power plants in the short time frame currently provided by the rules. In addition, the Commission also is responsible for sales for resale of electric power. If shortages result from the short time frames of the EPA’s rules, the Commission will be responsible for ensuring that the price of energy and capacity remain just and reasonable in the affected regions.”  Nicholas Akins, AEP: Full Testimony HERE

“The industry needs achievable time frames in order to analyze and safely and reliably respond to the EPA regulations. This can be accomplished either through a legislative solution or through implementation of the EPA rule on a schedule that widely applies the one-year compliance extension available to the Administrator (for both major retrofits and for unit retirements) and utilizes the Presidential authority for a two-year extension for national security reasons. This can be coupled with a reliability “safety valve” to address any remaining reliability concerns.” Nicholas Akins, AEP: Full Testimony HERE

“More time is needed for compliance. The unprecedented risk to reliability without recognition of adequate time to comply is a serious risk for the country. …The reliability impacts of implementing the largest change to electric supply in the history of the country cannot be discounted or ignored by the Commission.”  Anthony Topazi, Chief Operating Officer, Southern Company: Full Testimony HERE

“So, as we meet here today there are still multiple versions with implementation plans that could overlap: a state of affairs that could lead to unnecessary program costs to demonstrate compliance and potentially introduce confusion related to compliance and audit activities. Adopting a final set of standards quickly is critical so industry can develop and finalize compliance plans and programs. Version 5 must be the end-state or stable-state for an extended period of time to allow industry time to comply with a non-moving target set of cyber security standards.” Mike Smith, President and CEO of Georgia Transmission Corporation: Full Testimony HERE

“EPA Regulations May Have Significant Impacts on Planning Reserve Margins — For the Strict Case, up to a 78 GW reduction of coal, oil, and gas-fired generation capacity is identified as economically vulnerable during the ten-year period of this scenario. For the Moderate Case, this reduction occurs in 2018; while in the Strict Case, similar reductions occur in 2015.”  Mark Lauby, Vice President and Director of Reliability Assessment and Performance Analysis, North American Electric Reliability Corporation: Full Testimony HERE