EPA is roughly four months into the public comment period for its proposed Clean Power Plan ("Plan") to reduce greenhouse gas emissions from existing power plants.
Although the public comment period on the Plan will remain open until the first of December 2014, states and regulated entities have already raised numerous concerns about the legality, feasibility, and electric reliability impacts of the Plan during EPA public hearings and in litigation challenging the Plan.
As currently proposed, the Plan would establish statewide limits on carbon intensity in pounds of carbon dioxide emissions per megawatt-hour ("lb/MWh"). The statewide limits are based on EPA's determination of the potential for increasing renewable energy deployment, projected demand-side management savings, and utilization of natural gas-fired power plants. As authority for the Plan, EPA relies on Clean Air Act § 111(d), which calls for EPA to develop a procedure by which states establish standards of performance for existing sources of certain air pollutants.
Our prior article outlined some legal concerns with EPA's reliance on CAA § 111(d), especially in light of the United States Supreme Court's recent analysis of CAA authority in UARG v. EPA. In addition to challenging EPA's basic legal authority for the Plan, electric utilities, state environmental agencies, and state electric regulatory agencies and system operators are raising concerns with the details of the Plan.
A handful of those concerns are summarized below.
Inappropriate Baseline. EPA's selected baseline year (2012) is not an appropriate frame of reference for determining historical emission levels and setting state goals. In fact, no single year is appropriate as a baseline, and 2012 was especially unusual in terms of capacity factors for combined cycle and coal facilities in many areas. States and electric utilities are urging EPA to use an earlier, multiyear baseline.
Unrealistic Building Blocks. State budgets in the Plan are based on an unrealistic assumption of achieving a 6 percent efficiency improvement across coal units and an average capacity factor of 70 percent for natural gas combined cycle facilities. The Plan also assumes renewable energy expansion and customer energy efficiency increases that are well above achievable levels in many states.
Difficulty Translating State Limits. The Plan gives states the option of translating EPA's rate-based goals (lb/MWh) into mass-based caps (lbs), but there is no clear method of translation in the Plan. States may have difficulty ensuring consistent methods, assumptions, and outcomes among the different types of limits.
Conflicts with Existing Trading Programs. Many states will prefer multistate emission trading programs as a means of compliance, especially states that already have carbon trading programs like the Regional Greenhouse Gas Initiative. However, the details of the Plan may not be consistent with existing trading programs due to differences in baseline periods, planning horizons, and allowance budgets.
Infeasible Compliance Period. States and electric utilities are concerned that the Plan does not allow sufficient time for planning and implementation of measures to reduce emissions. The first state submissions to EPA would be due just one year after a final rule is expected. More detailed plans would be due one or two years later, depending on whether a state chooses to be part of a multistate plan. After submission of a state plan, EPA budgets just one year for its own review and approval process. Considering that the proposed interim compliance period begins in 2020, electric utilities will have very little time after EPA approval of final state plans to implement the required measures.
Electric Reliability Concerns. The short compliance period may compromise electric reliability because there will not be enough time to build the new generation and transmission capability needed to compensate for projected unit retirements. Changes in the long-term supply and pricing of natural gas could exacerbate these negative impacts on electric reliability.
State Authority. By influencing the operation of power plants and the electric system as a whole, the Plan treads on areas that are traditionally reserved for the authority of state electric utility agencies and system operators.
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