Neb.’s rural nature adds twist to compliance planning

Source: Rod Kuckro, E&E reporter • Posted: Thursday, January 7, 2016

Nebraska epitomizes the tension present in many state governments weighing compliance with U.S. EPA’s Clean Power Plan.

The governor and attorney general of this red state are in litigation with the federal government over the rule to force emissions cuts from power plants.

Its environmental regulator and major utilities, however, are doing their precautionary duty to craft compliance options aimed at mitigating possible effects on the state’s electricity ratepayers and reliability.

Nebraska faces a 40 percent reduction in its rate of carbon dioxide emissions by 2030 under the final EPA rule, a significant increase from the 26 percent reduction that was initially proposed.

It’s also unique in that it’s the only state served entirely by publicly controlled, nonprofit electric utilities. By law, they are required to provide power to the largely rural population at the lowest possible cost.

“We’re holding all options open at this point in time. We really haven’t centered on where we’re going to land,” said Jim Macy, director of the Nebraska Department of Environmental Quality.

In mid-February, Macy plans as many as nine meetings over three weeks around the state to “get public opinion on this and see what the ratepayers think,” he said in an interview.

Joe Citta, the environmental manager at the state’s largest electric utility, the Nebraska Public Power District, said NPPD supports the attorney general’s challenge “to make sure that certain portions of the rule are legal.”

“But you cannot wait and see what happens on the lawsuits,” Citta said. “You have to look at how can we put together a good state plan and let the lawsuits run their course.”

Warm welcome for trade

Citta has already met with other utilities, the DEQ, and officials with the state energy office and governor’s office.

His utility has also been working closely with the Southwest Power Pool, a regional transmission organization serving 14 states.

He said he welcomes any effort by the SPP to “put together a regional trading scheme” for carbon as a compliance mechanism with the CPP.

“Being able to trade is definitely a positive outcome of the final rule,” whether it’s part of a coordinated regional scheme or because the state develops a “trading ready” compliance plan that would enable trading with any other state with a similar plan, Citta said.

If “you don’t have to go it alone,” there is an “opportunity for savings,” Citta said.

Trading regimes such as those for EPA’s acid rain rule or the Cross-State Air Pollution Rule “allow a lot of flexibility, as they help to keep costs levelized across the nation,” he said.

“We don’t know what the impact is until we actually see the lawsuits sort out and get the plan put together,” Citta said.

“It will change of the way we do business, and there probably will be some impacts to cost. But it’s way too premature to say what those impacts are going to be,” he said.

Citta’s counterpart at the Omaha Public Power District shares the concern about possible costs.

“Additional regulations and regulatory oversight usually don’t end up in cost savings. There’s more overhead, there’s more administrative fees, or it causes changes in your entire infrastructure that cost money to implement,” said Russ Baker, manager of environmental and regulatory affairs at OPPD.

Still, “we’re going to comply with them, and we’re also going to look for the opportunities that present themselves through that compliance and try to leverage them to our benefit, as well,” he said.

He, too, questions EPA’s authority to administer the rule but wants to work toward developing a compliance plan. “We see that there’s great value in being able to work collaboratively as a group of utilities,” Baker said.

Pushing for more time

But “we think we need more time,” he said, which is why he would like the state to seek an extension in submitting a compliance plan to EPA.

OPPD is well on its way to cutting its carbon emissions, Baker noted, pointing to a decision to retire three coal-fired units at its North Omaha Station this year and switch the remaining two units to natural gas by 2023.

The utility is also adding 400 megawatts of wind power, with a goal of getting 33 percent of its electricity from renewables in 2023. The share of coal-fired power will have dropped to 15 percent the same year, from 31 percent in 2018.

“We read the tea leaves and the signals from the market about where things are going,” Baker said.

OPPD is not alone among Nebraska utilities in taking steps to change its generation fleet.

NPPD and Lincoln Electric System, which along with OPPD provide roughly 90 percent of Nebraska’s electricity, are moving in a similar direction, said Duane Hovorka, executive director of the Nebraska Wildlife Federation.

With enormous untapped potential for wind power, Nebraska “will be able to meet the new CPP standards fairly easily,” Hovorka said.

Whether Hovorka’s view is shared by other stakeholders may become clearer after DEQ holds its outreach meetings in February.

DEQ’s Macy said the sessions will be part of a “very transparent and deliberative process” on how the state develops a “Nebraska carbon mitigation plan.” He also plans to launch a website devoted to the CPP.

“We’re looking at an extension so that we have adequate resources and time to analyze Nebraska’s needs,” Macy said.

Between late April and late June, “we will be making our final recommendation on a probable course for Nebraska, seek consensus on that and move forward on asking for that extension,” he said.

Last year, the state’s unicameral Legislature enacted a law requiring any compliance plan developed by the DEQ to be submitted to lawmakers along with an assessment of its effects. The law also required the Nebraska Energy Office to develop a strategic energy plan for the state.

But this year, the Legislature is only in session 60 days, concluding April 20.

An extension would make state compliance easier if the DEQ recommends changes in state law to support a plan, he said.

“So getting legislation through this year is not very likely,” Macy said.