Analysis Group’s Tierney says states ready to comply with carbon rule

Source: Monica Trauzzi, E&E • Posted: Tuesday, July 22, 2014

How should utility regulators in coal-heavy states be preparing for U.S. EPA’s proposed regulations for existing power plants? During today’s OnPoint, Sue Tierney, senior adviser at the Analysis Group, discusses a new report focusing on current state policies that could comply with EPA’s existing source regulations. Tierney, a former assistant secretary for policy at the Department of Energy, also gives a behind-the-scenes look at last week’s National Association of Regulatory Utility Commissioners summer meetings.

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Monica Trauzzi: Hello and welcome to OnPoint. I’m Monica Trauzzi. With me today is Sue Tierney, senior adviser at the Analysis Group. Sue is a former assistant secretary for policy at the Department of Energy. Sue, thanks for coming back on the show.

Sue Tierney: Thanks for having me!

Monica Trauzzi: Sue, you recently released a report on EPA’s Clean Power Plan … on EPA’s regulation saying that states that have already put a price on carbon are doing well economically.

Isn’t the bigger question though about states that have not acted yet, the ones who haven’t taken steps on reducing emissions and moving forward with renewables? How do you extrapolate what you found in the report to those states?

Sue Tierney: Well, I think one of the most important messages is that there are ways to design programs that actually are workable with electric system operations and with reducing carbon. One of the things that works in a well-designed program is relying on energy efficiency, and that can happen in states that have a pretty high carbon footprint in their power sector.

But also one of the things we found was that using a multistate approach can work. It can provide an efficient way to comply and it can work with states’ rights without violating things about the electric system and the way that the power system works.

Monica Trauzzi: Which states do you identify as having or that will have the most difficulty in meeting the regulations?

Sue Tierney: Well, interestingly, I think that it’s not really obvious, and here’s why I think that that’s the case. There are, by now, the famous percentage reductions that various states are looking at. And EPA didn’t actually prepare its compliance targets by looking at some percentage.

So there are some states that actually have a pretty high reliance on coal which don’t have to do as much and, therefore, they have a low percentage. And there are some states that have done a lot and they also have to still do a lot more. So I think it’s hard to tell who is going to have a harder time.

Monica Trauzzi: So you unveiled this report at the NARUC summer meetings last week in Dallas. It was an audience of state regulators, some of whom come from states that may struggle to meet these regulations. What was the reaction from the regulators, and what were some of the biggest questions you were hearing from them?

Sue Tierney: Really interesting discussions took place at NARUC and, in fact, the many days were filled with lots of discussions of the Clean Power Plan proposal from EPA.

Some questions were with regard to reliability. Some questions were with regard to fairness issues across states. Some issues were whether the EPA could enforce this at the end of the day, given that there are these four building blocks that range from heat rate or performance improvements in plants all the way over to energy efficiency.

I would say that there were clearly some states that were actually not a big surprise when they said that they were going to sue EPA. And there were some states that said, “Wow, we think we’re very well-positioned in light of our current polices. We’ve looked ahead. We’re going in that direction.” And there was a wide variety of states who have read it and reread it and they’re still trying to figure out what it means for them.

I thought there was a really great example of a state that’s doing a good job, and if you don’t mind, let me just mention that one.

Monica Trauzzi: Please.

Sue Tierney: Arkansas started about a year ago to have the various agencies of state government, the Public Utility Commission, the air office, even the energy office, get together to start talking about what the issues are so they are on the path to understanding it, what they need to do. It’s great! Great example.

Monica Trauzzi: So because there are so many questions, what is your recommendation to utility regulators on what they should be doing over the next couple of months as we go through this public comment period?

Sue Tierney: Well, first of all, figure out what your current plans do for you and, as I say, there are a lot of states who have energy efficiency programs. They have those mechanisms. They could actually ratchet those up. Many states already have renewable programs. A number of states have coal plants that are going to retire and, therefore, that will change the average emissions in their states.

So figuring out what it looks like ahead for you. Then identify what the room to move is.

A second thing is really go deeply into looking outside the four building blocks. There was a lot of discussion at the NARUC meeting about what if we don’t have something in building block No. 3, or etc. And I think there are great examples for thinking outside the box. And if I might, I’m going to just mention several very quickly.

One of them is the EPA never mentions the word “volt-VAR” changes. So that’s one of these things that electric distribution and transmissions companies can do make their systems much more efficient by changing the voltage and the power lines and a way the customers can’t tell. That’s right off the top energy efficiency. Never showed up in the EPA rule — proposed rule. Why wouldn’t every state do something like that?

Right now every state in the nation has a very leaky water system, and water pumping is one of the — water pumping, water treatment, water distribution, huge use of energy. So actually filling leaks means you don’t have to treat as much water, you don’t have to pump as much water. That’s energy efficiency. And as long as you can connect the dots between something going on in your state and lower electric output from fossil units, it ought to be part of the plan.

Monica Trauzzi: So when we finally see the public comments in a couple of months, what are you going to be watching for most closely?

Sue Tierney: How big the trucks are going to be to bring in the comments from various people. There’s going to be a million pages of comments. I heard EPA say that Administrator McCarthy say please start bringing them in soon so that we can react to them. They’ve heard a lot of comments about the methodology, equity issues, practicalities, and they’re really encouraging that people come in sooner versus later.

So I’m going to be looking for practical solutions to problems. There will be a lot of critiques, of course, but I’m going to be looking for practical solutions.

Monica Trauzzi: All right. It’ll be an interesting couple of months. Thank you for coming on the show. Nice to see you again.

Sue Tierney: Thank you, Monica.

Monica Trauzzi: And thanks for watching. We’ll see you back here tomorrow.

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