June 2, 2015 by Marita
Noon
- One
year ago, Environmental Protection Agency (EPA) Administrator Gina
McCarthy announced the
controversial centerpiece of the Obama Administration’s climate
change legacy: the Clean Power Plan (CPP). The rule is slated for
finalization this summer.
Unions have protested against it.
The North American Electric Reliability Corporation, which is the
international regulatory body devoted to ensuring outage-free
electric service for Canada, the U.S., and parts of Mexico, as
highlighted in a recent
study, believes it risks the reliability of the grid.
States, encouraged by
Majority Leader Senator Mitch McConnell,
are boycotting it.
Yet, the EPA is pushing ahead, touting the plan’s built-in
flexibility for individual states in devising a compliance
plan—uniquely suited to each specific state. If states, as
McConnell advocates, refuse to comply, the EPA will impose a
Federal Implementation Plan (FIP).
While no one knows what the final
plan will be, we can be sure that, at the very least, it aims to
severely reduce coal-fueled power generation and dramatically
increase the implementation of renewables such as wind and solar.
Industry experts expect the CPP will possibly force the premature
closure of hundreds of coal-fueled power plants—and that, alone,
without factoring in the higher cost renewables, will raise costs
to all consumers.
The anti-fossil-fuel movement would
like us to believe we are just replacing one power source with
another. The problem, however, is far bigger.
After attending a recent workshop at
the Federal Energy Regulatory Commission
(FERC),
Phillip A. Wallach, a Fellow in Governance
Studies at the Brookings Institute, wrote a report titled: The
confounding complexities of the Clean Power Plan—reliability
concerns aired at FERC. In it, Wallach addresses the technical
problems that the CPP will have to overcome—which he calls
“staggering.” He, then points out that “the interplay of
federal laws set off by the CPP is enough to make one’s head
spin.”
(FERC),
Phillip A. Wallach, a Fellow in Governance
Studies at the Brookings Institute, wrote a report titled: The
confounding complexities of the Clean Power Plan—reliability
concerns aired at FERC. In it, Wallach addresses the technical
problems that the CPP will have to overcome—which he calls
“staggering.” He, then points out that “the interplay of
federal laws set off by the CPP is enough to make one’s head
spin.”
He
continues: “It can take a remarkable 12-14 years to site a new
high-voltage transmission line. Unless federal regulators (and
possibly Congress) somehow facilitate streamlined development, it
is hard to see how states will be able to achieve big emissions
reductions in time to meet the first compliance goals in 2020.
Amidst this cacophony of legal requirements, states are not
currently able to plan for compliance with any confidence.”
Wallach’s predictions about the
“complex, EPA-mandated process of energy sector transformation”
are hypothetical, but totally believable—especially given the
real-world example of New Mexico’s ongoing experience.
*****
In New Mexico’s Four Corners
region, negotiations regarding bringing the San Juan Generating
Station (SJGS) into compliance with Regional Visibility Rules
under the Clean Air Act have been underway for more than a
decade—with the bulk of the shenanigans taking place during the
past five years. Note: the SJGS’s back and forth with the EPA,
the New Mexico Environmental Department (NMED), and anti-fossil
groups has been over just one small rule that would improve
visibility in wilderness areas and national parks to such a small
degree that it would not be detected by the human eye. One can
easily imagine how this process would be exacerbated by policy so
extensive that it strives to transform the entire energy sector.
You may want to just skim over the
following abbreviated timeline as it will “make your head
spin”—which is my goal. The reality is far more overwhelming
than what I am presenting here. (Thanks to James Crawford
for the use of his background
research on the SJGS.)
The SJGS is a coal-fueled power
plant near Farmington, NM, that produces 1,683 mega-watts (MW) of
electricity through four units. The Public Service Company of New
Mexico (PNM), the majority owner, takes 783 MW for New Mexico
customers. The coal for SJGS comes from an adjacent coal mine
operated by BHP Billiton. The current contract for coal expires in
2017.
To meet Regional Visibility Rules,
the EPA requires that states develop a State Implementation Plan
(SIP) that meets its approval. The NMED submitted its first SIP
back in 2003. However, due to evolving regulations, it was never
approved.
In 2010, the NMED submitted another,
revised SIP but had to withdraw it again due to those changing
regulations. Once again, in February 2011, the NMED submitted a
new SIP for EPA approval—which the EPA ruled was invalid because
it wasn’t approved by the required 2009 date.
The EPA further decreed that because
of sue-and-settle cases brought by Wild Earth Guardians and
others, it was under court order to implement a FIP by January
2011—which the EPA did finally issue in September 2011 (well
after the SIP submittal that wasn’t even considered). Now, the
SJGS was subject to the dictates in the FIP without any due
consideration of the SIP.
The February 2011 SIP called for
compliance-achieving emissions controls costing about $80 million.
The FIP requires a different approach that will cost almost $1
billion—or, PNM could close down two perfectly good, reliable
generating units with years of life left.
The PNM and the NMED filed suit
against the EPA and, after a couple years of legal wrangling,
settled on closing the two units and lesser cost equipment for the
two remaining units. In September 2013, the NMED submitted a
revised SIP, which reflected the agreement; the EPA approved it a
year later.
However, the antis were not happy
with this agreement for replacing the lost electricity which, for
the PNM, would be met by assuming a greater share of the
electricity from the two remaining units (remember: the PNM didn’t
use all that was generated; there are other owners, some of which
plan to leave), constructing a new natural gas peaking plant,
bringing in nuclear power from Arizona, and adding 40 MW of solar.
They wanted the deficit made up strictly with renewables. (In
fact, the antis want all four units closed—this, after the PNM
already spent $320 million in 2009 on extensive emissions
remodeling.)
Just before the October 2014 Public
Regulatory Commission’s (PRC) meeting to approve the SIP,
environmental groups filed a series of legal blockades that
ultimately changed the agreed upon plan.
Finally, in January 2015, the PRC
held hearings on the plan almost everyone agreed
on
—environmentalists protested outside
the hearing and demanded the closure of all four units. Addressing
their views, Paul Gessing, President of New
Mexico’s free-market think tank, the Rio Grande
Foundation, said:
“The radical anti-modern-society types were out in force … While
the PNM plan is not perfect, the radical anti-energy crowd would
love nothing more than to completely kill New Mexico’s
economy.”
—environmentalists protested outside
the hearing and demanded the closure of all four units. Addressing
their views, Paul Gessing, President of New
Mexico’s free-market think tank, the Rio Grande
Foundation, said:
“The radical anti-modern-society types were out in force … While
the PNM plan is not perfect, the radical anti-energy crowd would
love nothing more than to completely kill New Mexico’s
economy.”
In April, a hearing examiner advised
the PRC to reject the plan unless changes were made. His concerns,
according to the Associated Press report,
were in part because the PNM didn’t have a “contract to
provide coal for the plant beyond 2017.” The adjacent coal mine
is the subject of negotiations between current owner BHP Billiton
and several proposed new owners.
On May 5, a deal was
struck. Westmoreland Coal Company would purchase the
mine and take over operations—resulting in a $300 million
savings over the next 6 years for PNM and its customers. However,
the PRC must approve this deal before the sale goes through.
Business leaders, coal miners, power
plant workers, and elected officials from the Four Corners area
have united in support of the plan that would allow the SJGS to
continue operating. At a recent Albuquerque City Council meeting,
Ray Hagerman, Four Corners Economic Development
CEO, “emphasized that 740 jobs—400 coal miners and 340 power
plant workers—would be jeopardized if the plan is not approved.”
According to the Farmington Daily Times,
Hagerman said:
“The generating station and the coal mine that feeds it also
represent around 2,400 indirect jobs.” Unemployment in the
region would double.
Because getting all parties on board
— including minor-percentage owners in the SJGS such as the City
of Anaheim and the Utah Associated Municipal Power Systems — is
essential to approval of the deal, the PRC voted,
on May 27, to give the PNM more time to finalize an ownership
restructuring agreement. Sources tell me that many of these
co-owners don’t meet regularly, and the new July 1 deadline has
the potential to scuttle the entire decade-plus procedure.
Hagerman believes:
“If the utility supplies regulators with the documentation they
need, then approval of the plan is likely.”
PNM spokesman Pahl Shipley,
according to the Farmington Daily Times: “reiterated
that the revised plan, with new tentative agreements in place,
represents ‘the most cost-effective path forward, balancing
reliability, affordability and environmental responsibility. The
ownership restructuring and coal supply agreements would further
increase the cost benefit to customers.’”
While there will be a “cost
benefit to customers,” rates will still increase. The PRC
hearing officer “warned that the changes spurred by the partial
closure of San Juan would result in substantial rate increase for
customers over the next 20 years.”
In a recent op-ed in the Albuquerque
Journal, Carla Sontag, executive director of
the New Mexico Utility Shareholders Alliance, addressed the
cost factors: “It is estimated that the shutdown will cost about
$5.25 a month for the average residential customer. PNM plans to
replace lost power generation with cleaner energy sources and
significantly less coal. Those costs will be filed with the PRC
later, and that increase would take effect in 2018.… The
PNM recently filed its first rate increase in almost five years.
Beyond the need to maintain system integrity, the biggest driving
force behind the increases is environmental initiatives.”
Environmental groups acknowledge a 7% increase to monthly bills.
So, now we wait.
Will the PRC approve the plan? Will
good-paying jobs be saved? Will cost increases be minimized? Will
the anti-fossil fuel groups sue? Will New Mexico have enough power
for the future?
*****
This is a New Mexico story. It is
about just one power plant in a sparsely populated state. It is
the story of that power plant, in that state, trying to meet just
one EPA regulation dealing with regional visibility—even though
improvements will not be detectible to the human eye. (The
American Lung Association’s 2015 State of the Air report just
ranked Farmington number 1 for cleanest metropolitan areas in the
country for 24-hour particle pollution and number 2 for cleanest
metropolitan areas in the country for annual particle pollution.)
Under the CPP, similar scenarios
will have to take place in every state, over every coal-fueled
power plant—not with just one regulation, but with a massive
plan designed to transform the entire energy sector. The CPP,
which is not yet final, is supposed to be implemented in less than
five years. This New Mexico story is a taste of what is to come:
years of legal wrangling, cost increases for consumers, loss of
good-paying jobs—for reductions in CO2emissions that
will make no temperature difference on a global scale.
It makes my head spin.
- See more at:
http://www.cfact.org/2015/06/02/epas-clean-power-plan-a-recipe-for-consumer-confusion-cost-increases-and-confrontations/#sthash.sc7GPaDA.dpuf
A taste of things to come for electricity consumers and generators
One year ago, Environmental Protection Agency (EPA) Administrator Gina McCarthy announced the
controversial centerpiece of the Obama Administration’s climate change
legacy: the Clean Power Plan (CPP). The rule is slated for finalization
this summer.
Unions have protested against it. The North American Electric
Reliability Corporation, which is the international regulatory body
devoted to ensuring outage-free electric service for Canada, the U.S.,
and parts of Mexico, as highlighted in a recent study, believes it risks the reliability of the grid. States, encouraged by Majority Leader Senator Mitch McConnell, are boycotting it.
Yet, the EPA is pushing ahead, touting the plan’s built-in flexibility
for individual states in devising a compliance plan—uniquely suited to
each specific state. If states, as McConnell advocates, refuse to
comply, the EPA will impose a Federal Implementation Plan (FIP).
While no one knows what the final plan will be, we can be sure
that, at the very least, it aims to severely reduce coal-fueled power
generation and dramatically increase the implementation of renewables
such as wind and solar. Industry experts expect the CPP will possibly
force the premature closure of hundreds of coal-fueled power plants—and
that, alone, without factoring in the higher cost renewables, will raise
costs to all consumers.
The anti-fossil-fuel movement would like us to believe we are just
replacing one power source with another. The problem, however, is far
bigger.
After attending a recent workshop at the Federal Energy Regulatory Commission (FERC), Phillip A. Wallach, a Fellow in Governance Studies at the Brookings Institute, wrote a report titled: The confounding complexities of the Clean Power Plan—reliability concerns aired at FERC.
In it, Wallach addresses the technical problems that the CPP will have
to overcome—which he calls “staggering.” He, then points out that “the
interplay of federal laws set off by the CPP is enough to make one’s
head spin.”
(FERC), Phillip A. Wallach, a Fellow in Governance Studies at the Brookings Institute, wrote a report titled: The confounding complexities of the Clean Power Plan—reliability concerns aired at FERC.
In it, Wallach addresses the technical problems that the CPP will have
to overcome—which he calls “staggering.” He, then points out that “the
interplay of federal laws set off by the CPP is enough to make one’s
head spin.”He
continues: “It can take a remarkable 12-14 years to site a new
high-voltage transmission line. Unless federal regulators (and possibly
Congress) somehow facilitate streamlined development, it is hard to see
how states will be able to achieve big emissions reductions in time to
meet the first compliance goals in 2020. Amidst this cacophony of legal
requirements, states are not currently able to plan for compliance with
any confidence.”
Wallach’s predictions about the “complex, EPA-mandated process of
energy sector transformation” are hypothetical, but totally
believable—especially given the real-world example of New Mexico’s
ongoing experience.
*****
In New Mexico’s Four Corners region, negotiations regarding
bringing the San Juan Generating Station (SJGS) into compliance with
Regional Visibility Rules under the Clean Air Act have been underway for
more than a decade—with the bulk of the shenanigans taking place during
the past five years. Note: the SJGS’s back and forth with the EPA, the
New Mexico Environmental Department (NMED), and anti-fossil groups has
been over just one small rule that would improve visibility in
wilderness areas and national parks to such a small degree that it would
not be detected by the human eye. One can easily imagine how this
process would be exacerbated by policy so extensive that it strives to
transform the entire energy sector.
You may want to just skim over the following abbreviated timeline
as it will “make your head spin”—which is my goal. The reality is far
more overwhelming than what I am presenting here. (Thanks to James Crawford for the use of his background research on the SJGS.)
The SJGS is a coal-fueled power plant near Farmington, NM, that
produces 1,683 mega-watts (MW) of electricity through four units. The
Public Service Company of New Mexico (PNM), the majority owner, takes
783 MW for New Mexico customers. The coal for SJGS comes from an
adjacent coal mine operated by BHP Billiton. The current contract for
coal expires in 2017.
To meet Regional Visibility Rules, the EPA requires that states
develop a State Implementation Plan (SIP) that meets its approval. The
NMED submitted its first SIP back in 2003. However, due to evolving
regulations, it was never approved.
In 2010, the NMED submitted another, revised SIP but had to
withdraw it again due to those changing regulations. Once again, in
February 2011, the NMED submitted a new SIP for EPA approval—which the
EPA ruled was invalid because it wasn’t approved by the required 2009
date.
The EPA further decreed that because of sue-and-settle cases
brought by Wild Earth Guardians and others, it was under court order to
implement a FIP by January 2011—which the EPA did finally issue in
September 2011 (well after the SIP submittal that wasn’t even
considered). Now, the SJGS was subject to the dictates in the FIP
without any due consideration of the SIP.
The February 2011 SIP called for compliance-achieving emissions
controls costing about $80 million. The FIP requires a different
approach that will cost almost $1 billion—or, PNM could close down two
perfectly good, reliable generating units with years of life left.
The PNM and the NMED filed suit against the EPA and, after a couple
years of legal wrangling, settled on closing the two units and lesser
cost equipment for the two remaining units. In September 2013, the NMED
submitted a revised SIP, which reflected the agreement; the EPA approved
it a year later.
However, the antis were not happy with this agreement for replacing
the lost electricity which, for the PNM, would be met by assuming a
greater share of the electricity from the two remaining units (remember:
the PNM didn’t use all that was generated; there are other owners, some
of which plan to leave), constructing a new natural gas peaking plant,
bringing in nuclear power from Arizona, and adding 40 MW of solar. They
wanted the deficit made up strictly with renewables. (In fact, the antis
want all four units closed—this, after the PNM already spent $320
million in 2009 on extensive emissions remodeling.)
Just before the October 2014 Public Regulatory Commission’s (PRC)
meeting to approve the SIP, environmental groups filed a series of legal
blockades that ultimately changed the agreed upon plan.
Finally, in January 2015, the PRC held hearings on the plan almost everyone agreed on—environmentalists protested
—environmentalists protested
In April, a hearing examiner advised the PRC to reject the plan unless changes were made. His concerns, according to the Associated Press report,
were in part because the PNM didn’t have a “contract to provide coal
for the plant beyond 2017.” The adjacent coal mine is the subject of
negotiations between current owner BHP Billiton and several proposed new
owners.
On May 5, a deal was struck. Westmoreland Coal Company would purchase the
mine and take over operations—resulting in a $300 million savings over
the next 6 years for PNM and its customers. However, the PRC must
approve this deal before the sale goes through.
Business leaders, coal miners, power plant workers, and elected
officials from the Four Corners area have united in support of the plan
that would allow the SJGS to continue operating. At a recent Albuquerque
City Council meeting, Ray Hagerman, Four Corners
Economic Development CEO, “emphasized that 740 jobs—400 coal miners and
340 power plant workers—would be jeopardized if the plan is not
approved.” According to the Farmington Daily Times, Hagerman said:
“The generating station and the coal mine that feeds it also represent
around 2,400 indirect jobs.” Unemployment in the region would double.
Because getting all parties on board — including minor-percentage
owners in the SJGS such as the City of Anaheim and the Utah Associated
Municipal Power Systems — is essential to approval of the deal, the PRC voted,
on May 27, to give the PNM more time to finalize an ownership
restructuring agreement. Sources tell me that many of these co-owners
don’t meet regularly, and the new July 1 deadline has the potential to
scuttle the entire decade-plus procedure.
Hagerman believes: “If the utility supplies regulators with the documentation they need, then approval of the plan is likely.”
PNM spokesman Pahl Shipley, according to the Farmington Daily Times:
“reiterated that the revised plan, with new tentative agreements in
place, represents ‘the most cost-effective path forward, balancing
reliability, affordability and environmental responsibility. The
ownership restructuring and coal supply agreements would further
increase the cost benefit to customers.’”
While there will be a “cost benefit to customers,” rates will still
increase. The PRC hearing officer “warned that the changes spurred by
the partial closure of San Juan would result in substantial rate
increase for customers over the next 20 years.”
In a recent op-ed in the Albuquerque Journal, Carla Sontag, executive director of the New Mexico Utility Shareholders Alliance, addressed the
cost factors: “It is estimated that the shutdown will cost about $5.25 a
month for the average residential customer. PNM plans to replace lost
power generation with cleaner energy sources and significantly less
coal. Those costs will be filed with the PRC later, and that increase
would take effect in 2018.… The PNM recently filed its first rate
increase in almost five years. Beyond the need to maintain system
integrity, the biggest driving force behind the increases is
environmental initiatives.” Environmental groups acknowledge a 7%
increase to monthly bills.
So, now we wait.
Will the PRC approve the plan? Will good-paying jobs be saved? Will
cost increases be minimized? Will the anti-fossil fuel groups sue? Will
New Mexico have enough power for the future?
*****
This is a New Mexico story. It is about just one power plant in a
sparsely populated state. It is the story of that power plant, in that
state, trying to meet just one EPA regulation dealing with regional
visibility—even though improvements will not be detectible to the human
eye. (The American Lung Association’s 2015 State of the Air report just
ranked Farmington number 1 for cleanest metropolitan areas in the
country for 24-hour particle pollution and number 2 for cleanest
metropolitan areas in the country for annual particle pollution.)
Under the CPP, similar scenarios will have to take place in every
state, over every coal-fueled power plant—not with just one regulation,
but with a massive plan designed to transform the entire energy sector.
The CPP, which is not yet final, is supposed to be implemented in less
than five years. This New Mexico story is a taste of what is to come:
years of legal wrangling, cost increases for consumers, loss of
good-paying jobs—for reductions in CO2emissions that will make no temperature difference on a global scale.
It makes my head spin.
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