On June 18, 2014, EPA published proposed regulations under President Obama’s Climate Action Plan setting emission guidelines for states to follow in establishing plans to reduce carbon emissions from existing electric generating units. The proposed rule also sets state-specific rate-based goals.

In addition to the proposed rule, EPA made available technical support documents for consideration by states and stakeholders. On Oct. 28, 2014, EPA published a notice of data availability (NODA) which discussed technical aspects of the proposed rule for consideration by stakeholders in providing comments to EPA on or before Dec. 1, 2014.

On Nov. 26, 2014, the Kentucky Energy and Environment Cabinet (Cabinet) submitted comments on the rulemaking package describing it as one that “will arguably have the most significant and far-reaching impact to environmental and energy policy that we have seen in 40 years” and urging EPA to narrow the numerous options identified and provide a second comment period to allow meaningful input. In developing its comments, the Cabinet sought input from various state government agencies and other stakeholders conducting 25 stakeholder meetings with organizations representing utilities, environmental groups, manufacturing and large electricity consumers, coal associations and business associations.

The Cabinet focused its comments on concerns regarding likely economic impacts of the proposed rule; factors that could affect a state’s ability to meet emissions targets; unintended consequences; state flexibility; and specific comments on the NODA. The Cabinet voiced its “serious concerns about rising electricity costs and the threat they pose to our manufacturing economy” and requested EPA conduct a rigorous cost/benefit analysis that includes factors such as the risk of reliance on natural gas given its historically volatile costs and consumer sensitivity to changes in electricity prices. The comments identified technical and/or legal vulnerabilities in EPA’s approach for setting state goals for emission reductions, including grid reliability and stability given the proposed rule’s reliance on intermittent renewable energy sources.

The Cabinet further commented on the short time frame of the proposed rule which requires state plans to be submitted by June 2016.

The Cabinet proposed that states should be allowed three years from the final rule for submittal of a state plan and that computation of state goals should be based on a three year average of data between 2005 and 2012, rather than on 2012 data alone, in order to eliminate fluctuations in energy demand and production and to give credit for emission reduction actions taken prior to the proposed 2012 baseline. The Cabinet further commented that EPA’s Oct. 28 NODA introduced possible fundamental changes to the proposed rule that create uncertainty for states regarding what state goals will be set by the final rule, thereby further delaying the state planning process.

The Cabinet’s comment letter can be found at:http://eec.ky.gov/Documents/Ky%20EEC%20111%28d%29%20Comments%20Nov.%2026,%202014.pdf. Pursuant to the President’s Climate Action Plan, EPA is mandated to finalize the rule by June 1, 2015.