3724 West Avera Drive
PO Box 88920
Sioux Falls, SD 57109-8920
Telephone: 605.338.4042
Fax: 605.978.9360
www.mrenergy.com
March 2015
Environmental Protection Agency Clean Power Plan
Threaten MRES Resources, Consumers and Reliability
U.S. Environmental Protection Agency’s (EPA) proposed “Clean Power Plan” regulations:

threaten the continued operation of the sole baseload generation resource of Missouri River Energy
Services (MRES) – and could “strand” the existing value of, and new EPA-required investments in,
that plant;

create an inflexible regulatory regime in which the multi-state operations of MRES do not comport
with the state-by-state scheme proposed by EPA;

pose significant rate increases for MRES member communities that are exacerbated by the frontloaded interim emission targets;

risk system reliability by forcing the shut-down of numerous baseload power plants without sufficient
time provided to construct needed infrastructure for baseload replacements; and

strand investments in existing renewable resources – and discourage new renewable investments –
because, under EPA’s plan, such projects can only be considered compliance options if located in the
same state as the emissions reduction requirement. Because utilities and states do not know whether
renewables built in one state by a utility (e.g. Iowa) may be credited towards emissions by that same
utility in another state (e.g. Minnesota), the utility will delay in investing in renewable energy until
the uncertainty is resolved.
Background on Existing and Planned MRES Resources
MRES member communities own more than 16 percent of the coal-fired Laramie River Station (LRS) power
plant in Wheatland, Wyoming. This low-cost, baseload resource is a critical component of our power supply
and has 20-30 years of remaining useful life. Under its regional haze regulations, EPA has overturned the
State of Wyoming’s compliance plan and ordered the plant owners to install expensive upgrades that will
cost MRES $125 million. MRES and our partners in LRS have appealed EPA’s action.
MRES also has considerable investments in renewable resources. We either own or have contracts for wind
projects in Iowa, North Dakota, and Minnesota. In addition, we are building the Red Rock Hydroelectric
Project in Iowa, and have preliminary permits for additional hydro projects in Iowa and the Gregory County
Pumped Storage project in South Dakota. We also have a contract for 30 megawatts of non-carbon dioxide
emitting energy from the Point Beach Nuclear Plant in Wisconsin.
EPA Clean Power Plan is Fatally Flawed
The EPA lacks the legal authority to propose this Clean Power Plan rule. Under the Clean Air Act, Section
111(d) applies only to sources that are not otherwise regulated under the Act – which clearly is not the case
with coal-fired power plants. Further, the proposed Clean Power Plan usurps authority from the states and
the Federal Energy Regulatory Commission (FERC), violates the Federal Power Act, and amounts to an
unconstitutional taking of private property and violation of the Supremacy Clause.
In addition to the legal flaws, the proposal is unworkable and will produce potentially disastrous
consequences.

State-Based System is Not Viable: Under the Clean Power Plan, EPA sets mandatory emission
reduction “goals” that each state must meet. While EPA asserts the system is flexible, it is neither
flexible nor workable. MRES’s only regulated emissions source – LRS – is in Wyoming. All of our
customer load and renewable resources are located in other states. Without the ability to alter
operations of other plants or use “credits” from renewable and energy efficiency resources located in
other states, the only available option is to shut-down LRS, which will increase rates.

Investments Stranded: If LRS is retrofitted to meet EPA regional haze requirements (this equipment
must be installed by 2019), MRES could still face the likelihood that the EPA’s Clean Power Plan
could force us to shut down one of the three units at LRS. That would mean our investment in the
retrofit for regional haze for that unit would be stranded. Also, MRES renewable resources (wind and
hydro) are not located in Wyoming – where our only affected plant is located. Because those nonWyoming renewable resources may not be used to offset our carbon dioxide emissions in Wyoming,
those investments will also become stranded. Ratepayers will bear the burden of these stranded
investments.

Timeline Unachievable: Under the Clean Power Plan, on average two-thirds of the 2030 final
emissions reduction target must be met by 2020. Regardless of which building block(s) is/are used,
there simply is not the time needed to make the necessary investments in infrastructure (power plants
retrofits or construction, transmission lines, gas pipelines, etc.), nor meet permitting and siting
requirements. Moreover, there is inadequate time for states to develop and implement compliance
plans – especially since state legislatures will need to amend or pass new laws to facilitate some of
the options.

Consumer Costs Will Skyrocket: EPA brushes aside the impacts on consumers and the economy by
minimizing long-term costs and overstating projected benefits. In contrast to this rosy assessment, if
LRS – the least-cost resource in the MRES generation mix – is forced to shut down, retail rates in
MRES member communities will increase 20 percent just from this EPA regulation.

Reliability Threatened: Coal-fired generation provides 40 percent of the nation’s electricity – and
the majority of its baseload power. Reducing the use and availability of baseload coal-fired power
plants, shifting to greater reliance on intermittent renewable resources, and increasing reliance on
natural gas-fired power plants create considerable risk to the reliable operation of the bulk power
system. Changes in power flow, reduced ability to follow changes in load, and increased reliance on
delivery of a single fuel source (natural gas) combine to pose significant reliability risks. These risks
are compounded if the interim 2020 targets remain – since there is not sufficient time to build needed
transmission and gas pipeline infrastructure to address these changes. Both FERC and the North
American Electric Reliability Corporation (NERC) have expressed grave concerns over reliability
and have urged the EPA to work with both of these federal entities to adequately address reliability
concerns and capacity shortages.

Death by a Thousand Cuts: The EPA needs to take a holistic look at the regulatory requirements it
imposes. Absent such a system, utilities are forced to respond to individual regulatory mandates not
knowing what the cost of other regulatory requirements will be.
MRES Recommendations
MRES believes Congress, not EPA, should establish the framework for addressing climate change. If the
Clean Power Plan proceeds, MRES urges the following changes to address the significant flaws:
1. The 2020 interim target should be eliminated. The target creates too steep of a “glide path,”
provides inadequate time for states to act, and fails to provide sufficient time to build needed
infrastructure. If the interim target is not eliminated, the emission levels should be greatly relaxed
and the timeline significantly extended.
2. Utility portfolio compliance should be facilitated. Given the multi-state location of utility emissions,
resources and load, the proposed state-based system is severely flawed. In addition, the state-based
system fails to recognize that renewable energy and energy efficiency credits are the property of the
utility that made the associated investments. A utility portfolio approach should be used instead.
Under a utility-driven approach, states should set emission limits for any utility with an emitting plant
within that state, and then allow the utility to use any and all mitigation steps (including out-of-state
actions) to meet the emissions target. Alternately, significant incentives are needed to encourage
multi-state compliance plans.
3. Provide a reliability “safety valve.” Radically changing the sources, fuels and location of generation
could create significant reliability problems. If NERC, the regional reliability organizations, or
regional transmission system operators foresee a major risk to reliability, areas facing significant
reliability risk should receive compliance delays to prevent severe disruptions.
4. Emissions baseline should be expanded. Using a single year, as EPA proposes, does not accurately
account for changes in system operation, weather, or other events. Because 2012 was a good water
year, there was above-average hydropower generation that reduced use of coal-fired power plants in
the region. Moreover, operational anomalies existed in three of our four states. Use of a three-year
emissions average would produce a better baseline.
MRES asks its delegation to urge the EPA to withdraw the proposed Clean Power Plan, or in the
alternative, to revise the Plan to incorporate the changes outlined above.