Last week, FERC held the eastern regional technical conference on “Environmental Regulations and Electric Reliability, Wholesale Electricity Markets, and Energy Infrastructure.” The purpose was for the commissioners to hear the specific issues created by EPA’s Clean Power Plan (CPP) relevant to the states, utilities, generators, consumers and transmission operators covered by ISO-New England, Inc., PJM Interconnection LLC, New York Independent System Operator, the Southeastern Regional Transmission Planning, South Carolina Regional Transmission Planning, Florida Reliability Coordinating Council, and the Northern Maine Independent System Administrator.
The overwhelming theme of the morning was that, to effectively comply with the CPP, the states, and state commissions, need more time. Most of the speakers recommended that EPA do away with the interim (2020-2029) compliance goals, complaining that there isn’t time between the likely date of the final rule (mid-summer 2015) and 2020 to plan for retirement of existing resources, and to permit, finance, and construct new natural gas combined cycle plants and the natural gas infrastructure on which these new plants will depend. James Frauen from Seminole Electric Cooperative noted that the draft rule would require Florida to rely “almost completely” on natural gas, all of which must be imported. According to Frauen, the one new gas pipeline currently proposed to be built in Florida is already 91% subscribed. (Not to mention that, in regulated markets, the premature retirement of coal plants means stranded assets which must be paid for by the same ratepayers who must finance the new sources.)
Mike Kormos, VP of Operations for PJM, frankly stated, “[PJM] needs time and transparency.” He explained that he couldn’t predict the impact of the CPP on reliability because of the unknowns. “We don’t know what the final rule is,” he continued, “we don’t know what will be in the state implementation plans, and we don’t know how the market will respond.” (Note that PJM modeled regional implementation of the CPP using the draft rules though at least one state complained that such modeling was premature.)
Which begs the question: what is the rush? Why not give the states more than one year to propose their SIPs and more than just two years for regional SIPs? Keep in mind that the Regional Greenhouse Gas Initiative (RGGI) – a voluntary agreement – took close to five years to develop. The answer may be found in the collision of politics and policy.
That President Obama has made the reversal of climate change, and particularly reduction of greenhouse gas emissions, a cornerstone of his second term should come as no surprise. Between his 2008 statement that “under my plan. . . electricity rates necessarily would skyrocket,” and his 2009 pledge in Copenhagen to reduce emissions “17% below 2005 levels by 2020,” he made his intentions clear. After failing to get climate change legislation through Congress in 2010, he turned to EPA. Despite rumors that the rules had to wait until after the 2012 election, it now seems unlikely that they would have been ready before then. What does seem likely is that the Administration wants to have the rules – and the SIPs – firmly in place before Obama leaves office, in January 2017. Hence, the rush.
When the final rule is issued this summer, as EPA continues to promise it will be, the states will have one year to file their SIPs, unless this requirement is stayed pending litigation. After EPA reviews the SIPs, the states will have roughly two to three years to begin implementation. The states will be in the same Catch-22 that they found themselves in with the Affordable Care Act: Cash-strapped states may waste time and resources planning for a law that could be thrown out or substantially altered by the courts, but otherwise, they risk that the law will survive legal challenge and, by not having a SIP in place, will be subject to a less-flexible federal program.
Senate Majority Leader Mitch McConnell (R-KY) weighed in on the side of delay, warning states that submission of SIPs could subject them to “federal enforcement and expose [states with SIPs] to lawsuits.” If the states don’t cooperate, McConnell reasons, it will “give the courts time to figure out if [the CPP ] is even legal, and it would give Congress more time to fight back.” Supporters of the CPP responded that states who fail to design their own compliance plans will be at a “huge disadvantage.”
Meanwhile, the clock is ticking. As FERC Commissioner Philip Moeller pointed out, “we don’t have a whole lot of time … because summer’s coming.”