Make Sure You Know The Full Price
Before You Make A Down Payment
EPA Regulations, Older Coal Plants, and Rational Planning
Presented by Jim Lazar
RAP Senior Advisor
June 25, 2012 The Regulatory Assistance Project 50 State Street, Suite 3
Montpelier, VT 05602
Phone: 802-223-8199 web: www.raponline.org

Jim Lazar is a RAP Senior Advisor, based in Olympia, WA
• Economist with 34 years experience in utility resource planning, rate development, and financial analysis
• Expert witness in more than 100 rate proceedings on resource planning, revenue requirement, cost allocation, rate design, and energy efficiency.
• Long-time consultant to Washington Public Counsel (1983-2008)
•
Participated in development of energy efficiency programs in Washington, Oregon,
Idaho, Montana, California, Arizona, and British Columbia
• Assisted RAP in many US states, plus Brazil, China, Hungary, India,
Indonesia, Israel, Mauritius, Mozambique, Namibia, Philippines
• Author or co-author of RAP publications on Electricity Regulation,
Energy Efficiency, Pricing, and Emissions Costs.
• Get a copy of “ Incorporating Environmental Costs in Electric Rates ”
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• 1,000 power plants over 40 years old. ~100,000 Megawatts.
• Many will need multiple retrofits to continue operations.
• Even with retrofit for all criteria pollutants, still have high operating costs, limited lifetime, and exposure to CO2 regulation.
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~$300 million for a 300 MW power plant.
About the same as new CCCT Capacity Graphic: Brattle
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Cumulative Retrofit Costs Could
Easily Exceed Any Reasonable Value
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Regulated and Unregulated Owners
Approach the Problem Differently
Regulated Utilities
• Have responsibility for reliability, so concerned about resource adequacy.
• Concerned about recovery of existing sunk costs.
• Concerned about regulatory disallowances.
• Concerned about quarter-toquarter financial results.
• Averch-Johnson effect may induce capital spending.
• Direct role in EE and DR.
Non-Utility Generators
• No reliability obligation.
• No ability to recover sunk costs if unit retired.
• No issue with regulatory disallowances.
• Concerned about short-term and long-term financial results.
• No attraction to capital spending.
• No role in energy efficiency or DR
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There May Be Low-Cost Options
For Capacity and Energy
Capacity: NEISO has invited Demand Response and
Energy Efficiency into the auctions for several years.
NEISO:
$41.20/kW-Year
Energy: Efficiency options abound at costs of $.03 - $.06/kWh
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Some Regions With Greatest Risk
Also Have Greatest EE Opportunities
States With Greatest Exposure to
Capacity Retirement (NERC )
States With Best and Worst EE
Program Achievment (ACEEE)
CA Risk is oncethrough cooling
Graphic: NERC
Graphic: ACEEE
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• Retrofit costs are incurred to allow continued use of coal .
$/kW-Year For
“Capacity” Resources
• They are effectively fuel costs, rates should reflect this.
• If capacity is needed, there are usually cheaper options.
• Demand Response
• Energy Efficiency
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• Technology has improved.
• Emissions matter.
• Old machines wear out.
• Demand Response and Energy
Efficiency are viable alternatives.
Is it smart to spend $100,000 to fix up a
1967 Ford Country Squire?
Or maybe we should buy a new Ford
Escape Hybrid. For $30,000
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About RAP
The Regulatory Assistance Project (RAP) is a global, non-profit team of experts that focuses on the long-term economic and environmental sustainability of the power and natural gas sectors. RAP has deep expertise in regulatory and market policies that:
 Promote economic efficiency
 Protect the environment
 Ensure system reliability
 Allocate system benefits fairly among all consumers
Learn more about RAP at www.raponline.org
Jim Lazar, RAP Senior Advisor jlazar@raponline.org