Resolution 12-05
Sponsors: Ohio Municipal Electric Association; Santee Cooper; Illinois Municipal Utilities
Association
In Support of Flexibility in EPA’s Regulatory Requirements to Ensure Electric Reliability
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Providing reliable electricity at a reasonable price while protecting the environment has always been a
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fundamental responsibility of consumer-owned, not-for-profit public power utilities in the United States.
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The American Public Power Association (APPA) is concerned about the possible adverse reliability
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implications for regional electric systems if recently promulgated and proposed Environmental Protection
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Agency (EPA) regulations go into effect within the time frames now proposed or already mandated.
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These rules include: Utility MACT; cooling water requirements under Section 316(b) of the Clean Water
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Act; coal combustion residuals; New Source Performance Standards (NSPS) for greenhouse gases; Boiler
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MACT; regional haze; and the Cross-State Air Pollution Rule (CSAPR). Of key concern is the Utility
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MACT rule imposing very costly and stringent reductions in mercury, other hazardous air pollutants, and
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particulate matter on coal- and oil-fired generators (finalized in December 2011). There is a need to
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carefully assess such implications and to stage compliance efforts in each region to avoid reliability
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events. The cumulative potential impact of both retrofits and retirements on reliability is troubling. The
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possibility of regional reliability problems is high if a substantial number of coal-fired power plants go
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out of service for extended periods of time in the same time frame to either accomplish the retrofits
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required to comply with the EPA requirements, or to replace the plant with a new natural gas-fired plant.
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The North American Electric Reliability Corporation (NERC), whose mission is to ensure the reliability
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of the North American bulk power system, has projected that, because of the pending EPA environmental
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rules, there will be announcements of plant retirements with potential reliability impacts. FirstEnergy
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Corp. alone recently announced that it plans to retire almost three gigawatts of electric capacity because
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of EPA’s Utility MACT rule. These three gigawatts alone constitute more than 50 percent of the
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retirements that EPA estimated would result nationwide from the Utility MACT rule. Further, state
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officials from across the country have called for more flexibility for plants to complete retrofits than is
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provided under the rule, and for federal protection against civil lawsuits for power plants that have not
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completed installing mandated pollution controls, but are required to keep operating to maintain
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reliability.
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For example, APPA strongly believes that the EPA, in its recent Utility MACT rule, should have granted
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the electric power sector, particularly public power utilities, additional compliance time beyond the
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standard three years provided under the Clean Air Act, and the additional one year available upon state
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requests. APPA explained that such an extension is clearly necessary, given the time required to: (i)
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develop the optimal compliance strategy once the final rules are known; (ii) obtain financing for either
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pollution controls (scrubbers, baghouses, etc.) or other resource options, e.g., new gas-fired generation
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units; and (iii) perform the actual execution of the chosen compliance strategies. Public power utilities
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must deal with a number of unique hurdles during the financing process, including the need to obtain
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local government approvals, and sometimes additional voter approval, to issue the bonds necessary to
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fund retrofits or new construction.
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These steps are in addition to the permitting, siting, and other approvals that all electric utilities must
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obtain. Public power utilities must also comply with state- and locally-mandated administrative
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procedures for the bidding and award of equipment, service, and construction contracts applicable to
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governmental entities, as well as, requirements to solicit input from the general public on the proposed
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project through scheduled hearings and opportunities for written comments. Finally, APPA has
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substantial concerns about supply chain issues. If many electric utilities are seeking to procure
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equipment, consulting and contracting services for retrofits or new construction in the same time-frame,
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smaller utilities are likely to be relegated to a spot further back in line, given the superior purchasing
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power and negotiating clout of larger investor-owned electric utilities, including entire electric utility
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holding companies. All of these factors will require some public power utilities to seek more time to
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comply with EPA regulations like Utility MACT.
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Nonetheless, the procedures outlined in recent documents issued by EPA and the Federal Energy
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Regulatory Commission (FERC) staff regarding the possibility of obtaining a fifth year to comply with
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the Utility MACT rule, for example, do not sufficiently recognize the compliance challenges facing both
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affected public power systems and the larger electric utility industry. The procedures set out in these
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documents are quite narrowly circumscribed, and taken together do not constitute a viable path which
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public power systems, acting in good faith, can use to obtain the additional time they might need to
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comply without being subjected to penalties for non-compliance and citizen lawsuits. Unfortunately,
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EPA has chosen not to use all of the authorities available to the agency to allow sufficient time for
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compliance with Utility MACT and other regulations in order to ensure an orderly, least-cost process of
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achieving the new requirements while maintaining the reliability of the system.
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Given this situation, the federal government should augment the tools available to it in order to ensure
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electric system reliability. One such tool is the emergency authority available to FERC and the
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Department of Energy under Section 202(c) of the Federal Power Act. This authority allows those
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agencies to order specific generating units to operate when an emergency develops and those units are
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necessary to maintain the integrity of the system. However, under current law, complying with such an
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order, including voluntary compliance by utilities not subject to FERC’s jurisdiction, could subject those
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generating units to penalties imposed for violation of EPA regulation.
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NOW, THEREFORE, BE IT RESOLVED: That APPA strongly supports efforts to maintain and
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improve the reliability of the nation’s electric grid; and
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BE IT FURTHER RESOLVED: That APPA urges FERC, in conjunction with NERC, to undertake a
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comprehensive, region-by-region review of the potential adverse impacts of impending EPA regulations
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on the reliable operation of the bulk electric system, and work cooperatively with the EPA to provide the
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industry with realistic and comprehensive procedures that will permit affected public power utilities to
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obtain sufficient time to comply with such regulations without adversely impacting regional or local
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electric system reliability; and
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BE IT FURTHER RESOLVED: That APPA will work with Congress on legislation to provide the
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needed flexibility in the Federal Power Act to ensure that federal regulations do not threaten electric
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reliability, and that all electric generation providers that either are ordered, or that voluntarily agree to
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comply with an order, to operate their generation units to protect local and regional electric system
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reliability are not subject to penalties or other legal liability under federal, state, or local environmental
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laws for their compliance with the order to operate.