During its May open meeting, the Federal Energy Regulatory Commission (FERC) issued an order outlining the process it will follow for advising the Environmental Protection Agency (EPA) on requests from power generators for an additional year to comply with the EPA’s recently promulgated mercury and air toxics standard (MATS). In a major step toward reconciling the missions of the nation’s energy and environmental regulators, FERC outlined the procedural and analytical framework that will guide its evaluation of whether specific, documented reliability concerns warrant an additional year for a unit to run before it must come into MATS compliance.
In brief, the MATS rule is a significant and far-reaching new air toxics rule that will broadly impact approximately 1,400 oil and coal fired units located at 600 power plants. For a detailed explanation of MATS, see Hogan Lovells’ Environmental Alert titled, “EPA promulgates important new mercury and air toxics rule.” Pursuant to the Clean Air Act, units will have three years from the effective date of the MATS rule to comply, and a fourth year may be allowed by the permitting authority on a case-by-case basis, if necessary to install controls. However, the EPA has declared that units may request an additional (i.e. fifth) year to come into compliance by obtaining an Administrative Order (AO) from the EPA.
According to the EPA’s MATS enforcement response policy, the agency would issue an AO under section 113 of the Clean Air Act for sources that must operate in non-compliance (such as units that would otherwise be deactivated or for which installation of controls has been delayed) to address a specific, documented electric reliability concern. In making the final determination of whether such a reliability concern exists, the EPA said that it will rely on the advice of FERC, which has statutory authority to issue and enforce mandatory reliability standards to ensure the integrity of the nation’s bulk power system.
On 30 January 2012, FERC staff issued a white paper outlining a proposed process to guide FERC as it advises the EPA on individual requests for extensions of time to comply with the MATS rule. For a detailed description of the white paper, please see Hogan Lovells’ Energy Alert titled, “FERC gives power plant owners an opportunity to weigh-in on critical procedure governing compliance with MATS rule.” In the white paper, FERC cautioned that its role was limited to advising the EPA, and that the final determination of whether to issue an AO rests solely with the EPA.
FERC’s approach for advising on MATS extensions
In order to inform its analysis and subsequent advice to the EPA, FERC states that each unit requesting a fifth year to comply under the AO process must submit to FERC a copy of the AO filing made to the EPA. This filing to FERC should include the same information that the unit provided to the EPA. The EPA requires applicants for AOs to submit specific information, including, inter alia, a description of the reliability risk if a unit does not continue operation, a statement of concurrence by the planning authority addressing this risk (or, alternatively, an explanation for why the planning authority does not agree that such a risk will be posed by the unit’s absence), and copies of any written comments from third parties supporting or opposing the operation of the units after the MATS compliance date. FERC states that it will treat this as an informational filing, which will be assigned an individual docket number. And, although FERC will not allow third parties to intervene in such proceedings, it will nonetheless consider comments submitted to the unit owner/operator regarding the appropriateness of an AO request. FERC’s Office of Electric Reliability will be responsible for processing each filing.
With respect to the reliability analysis performed by planning authorities, FERC made it clear that it will not mandate that they perform any specific types of analyses. Nevertheless, FERC provided a list of information that is readily available and which FERC, itself, uses to evaluate potential violations of reliability standards. Such information includes:
- system planning and operations studies;
- system restoration studies or plans;
- operating procedures; and
- mitigation plans required by the reliability standards.
FERC concluded that it “is not requiring any specific analysis be done or indicating that this information must be submitted or what the EPA should consider, but rather what the Commission would find informative when reviewing potential violations of Reliability Standards.” With respect to its review of the planning authority’s analysis, FERC will defer to the planning authority’s expertise and review the analysis included in each informational filing to ensure it was “reasonable and sufficiently supported by the information supplied.” FERC also noted that, although unlikely, it may seek additional information from AO applicants.
FERC explained that it will conduct its review pursuant to its general investigatory powers under Federal Power Act section 307(a). Consistent with the EPA’s analysis of the AO request, FERC will examine whether, under the circumstances presented, there might be a violation of a FERC-approved reliability standard. FERC noted, however, that a finding of a potential violation of a reliability standard is not tantamount to a final agency action that could result in penalties or other enforcement action. Rather, in this context, a finding that circumstances might result in a violation constitutes a “preliminary view” about a “possible hypothetical circumstance in the future.” In addition, FERC’s advice to EPA may address additional topics that, in FERC’s view, are essential for EPA to consider as critical to reliability. Upon a vote by its commissioners, FERC will submit its advice through written comments to the EPA along with any differing views by individual commissioners.