State regulators sharply criticize Clean Power Plan 

Source: Jean Chemnick, E&E reporter • Posted: Wednesday, February 18, 2015

When it comes to U.S. EPA’s Clean Power Plan, Texas’ best bet might be to “just say no,” its regulatory utility commissioner said today.

EPA would have to provide substantial new “relief” in its final version of the rule for existing power plants in order to give Texas confidence that complying would be a good idea, Commissioner Kenneth Anderson told the winter meeting of the National Association of Regulatory Utility Commissioners.

That’s true, he said, even despite EPA’s announcement last month that it would craft a federal implementation plan for the rule.

“You may be leaving us no option down the road other than simply saying ‘no’ and letting the feds implement their own plan, because initial analysis is that it can’t be any worse,” Anderson told a panel that included EPA acting air chief Janet McCabe.

The Lone Star State’s booming gas and wind industries have led EPA to assign it a hefty requirement under the rule to slash its utility-sector emissions by 40 percent by 2030. That compares with a national average of 30 percent by the same year.

“Not only have we not gotten any credit for all we have accomplished in the last decade, but we’re actually being penalized,” Anderson said.

Much of Texas’ requirement would phase in starting in 2020, because EPA’s draft assumes that states can cut emissions by moving from coal to gas quickly. But Anderson said the switch would require the permitting, siting and construction of new infrastructure, which he said could not be brought online in the time frame EPA envisions.

EPA has hinted that it is eyeing changes to the interim compliance period. But Anderson said the agency must scrap it altogether and allow states to focus solely on the final 2030 requirement.

“Basically, if it is not eliminated, then Texas is left with no other option than ‘just say no,'” he said.

Texas is also concerned, he said, about the prospect of submitting a state implementation plan to EPA based on state policies that would then make those policies federally enforceable. That’s particularly troubling, he said, because environmental groups would be likely to sue the agency to enforce plans.

“We won’t turn our energy efficiency plan over to the Sierra Club,” he said.

The final rule must have some mechanism to allow states to modify their plans or states might choose the federal implementation plan route, he said.

Texas has some experience with FIPs. It was the only state that ultimately refused to implement EPA’s permitting requirement for very large stationary sources of carbon dioxide after 2010, leading the federal agency to take responsibility for those permits. That caused a paperwork backlog that finally spurred state lawmakers to reverse course last year and allow the state agency to begin issuing those permits.

But some Texas policymakers and former policymakers have said the Clean Power Plan might be different. This time, the courts might intervene. And even if they preserve EPA’s authority to regulate power-sector greenhouse gas emissions, federal plans may be limited to what plants can do onsite — a much narrower mandate than the current draft rule envisions.

Anderson spoke on a panel with six other state commissioners from regions with widely different views about the draft rule, which is due to be finalized by midsummer.

Ellen Nowak of Wisconsin took aim at all four of the “building blocks” that EPA used in assessing state responsibility under the rule.

“We don’t think the EPA has constructed a [best system of emissions reduction],” she said.

Nowak and others argued that each of the building blocks is unachievable on its own and competes with the others. For example, Building Block 1 envisions that coal-fired power plants will improve their heat rates, deriving more emissions savings than commissioners said were actually available at plants. But Building Block 2 assumes utilities can then use their coal plants less by running their gas plants at 70 percent capacity.

Alan Minier of Wyoming said his energy-producing state was doing everything it could to block the rule.

Wyoming exports most of its wind power and relies on its robust in-state coal development industry, he said.

“So it should be no surprise to anyone that we are already in full litigation mode with EPA,” he said, referring to a suit filed last August with 11 other coal-heavy states.

But Minier also cited some inconsistencies he saw in the way the draft was constructed. For example, the draft assigns credit for renewable energy to the states that use them — generally as a result of a state renewable power mandate — rather than the state that produces the power.

The proposal might pit states against each other, with producers and clients each arguing that they should get credit at the other state’s expense, he said. “You’re driving people apart,” he said.

He suggested that both states should get some credit for renewable assets in the short term.

Several of the commissioners also made a pitch for more time, not only to comply with the rule but to construct state strategies and enact the policies that would support them.

The commissioners from California and Maryland, meanwhile, told McCabe that the draft rule was generally well-constructed and may even leave room for tougher targets. But they asked that EPA provide credit to states that moved early to control emissions.

Kelly Speakes-Backman, the Maryland commissioner who also leads the Regional Greenhouse Gas Initiative (RGGI), said EPA should provide better information about how a mass-based reduction would be assigned.

She also suggested that EPA borrow RGGI’s approach to the near-term targets, requiring “check-ins” in the early years to ensure that states are staying the course on reductions.

Speaking on a panel immediately following the state commissioners, McCabe and Federal Energy Regulatory Commissioner Philip Moeller acknowledged that the rule would be challenging.

“Some steps will be taken, and those will be hard and challenging,” McCabe said. “There will be disagreements and discussions along the way.”

McCabe, who once served as a regulator in Indiana, said EPA was aware that “things change over time.” The rule would allow states to tweak plans in the face of unforeseen circumstances, she said.

Moeller said the rule must build in some form of safety valve to preserve reliability if a particular unit is needed. This is especially the case, he said, as state plans will be subject to litigation and may take years to come online.

“It’s EPA’s rule, so it would have to be their idea as to how it would be constructed,” Moeller said following the panel. But he said that any safety provision would need to be “transparent and open,” allowing opportunity for public debate.

EPA has said that states can craft plans that will safeguard reliability. Increased use of lower-carbon energy and energy efficiency will offset fossil fuel power plant retirements, it says. But Moeller said there could be temporary emergencies in a variety of states where plants may need to remain in use to provide other aspects of grid reliability, and the rule must provide for that.