EPA “Doesn’t Live In The Energy World”

EPA “Doesn’t Live In The Energy World”

Posted by Joshua Sharf in Colorado Politics, Economics, Energy, PPC, Regulation on May 14th, 2012

In a recent hearing of the U.S. House of Representatives Energy and Commerce Committee, EPA administrator Gina McCarthy said under questioning by U.S. Rep. Cory Gardner, R-Colo., and Committee Chairman Ed Whitfield, R-Ky., that her agency – despite issuing regulations that will have a profound affect on electricity production in the United States – “doesn’t live in the energy world.”

“Tri-State is a wholesale electric power supplier in Colorado that is owned by the 44 cooperative, generating – transmitting electricity and has come to my office multiple times trying to talk about their compliance with EPA’s Utility Max standards and…their estimate is that it would likely cost them $1 million …I’m asking you to comment on the rural co-ops which are non-profits.

Ms. McCarthy confirmed that some ratepayers would see their rates increase by about 3%, which the EPA calculated to be about $3 a month for the average family, there was this exchange between the panel and her:

Rep. Gardner: ”And so that – the only way they can do that is to pass those increased costs on to their ratepayers?”
McCarthy: “I have trouble answering that question because I don’t live in the energy world, but my understanding is that compliance can be achieved by lower demand, as well as increased generation, fuel switching, and a number of techniques.”
Whitfield: “I think that’s the point that we’re trying to drive home. You’re right, Ms. McCarthy, you do not live in the energy world. But then you make extrapolations on gigawatt issues that are a reliability concern based on the chart I saw. DOE rolls over in acceptance of your electricity generation, or lack thereof, analysis, and when you have the people in the field who are disputing that analysis on the gigawatt issue, we’re debating with an environmental agency, not our Department of Energy. And if the analysis was close to what industry, financial people, FERC (Federal Energy Regulatory Commission), EEI (Edison Electric Institute) say then, we would cut some leeway.
“But the administrations proposal – actually, the environmental rules – and the effect on the electric grid, of 10 gigawatts, is laughable. And so, you can do all the analysis on emittants you want, but we reject the premise that you are experts in electricity generation, the cost of building plants, and developing those.”

Rep. Whitfield’s point is that the opinions of actual experts – which seem to be in broad agreement that the EPA rules run the risk of reducing the US’s overall electricity output – are being subordinated to the judgments of the EPA, which, by its own administrator’s admission, doesn’t live “in the energy world.”
Is it true? Well, the EPA estimates a loss of 10 gigawatts (GW) of electrical generation nationwide as a result of its new rules. This estimate is indeed not only out of line, but well out of line, with a variety of other estimates from Credit Suisse (50 GW realistic, 60+ GW possible), Friedman Billings Ramsay (45 GW), the North American Electric Reliabiliy Corporation, or NERC (33-70 GW), the Midwest Independent Transmission System Operator, or MISO (13 GW immediate, up to 61 GW retrofitted), and the Institute for Energy Research (34 GW).
It’s one thing to be independent of the industries you’re supposed to be regulating. But even independent regulatory bodies shouldn’t be making rules based on assumptions and models whose results virtually nobody in the field takes seriously. Maybe the EPA should live a little more “in the energy world,” a world it so closely regulates.