CUB Applauds EPA’s Clean Power Plan

This week, the EPA released its final version of the Clean Power Plan, the EPA rule which will regulate carbon emission from power plants. While we are still in the process of digesting this rule, which is more than 1000 pages long, we have several observations we would like to share:

1. This is timely and necessary. Utility power plants have useful lives that last decades: 30, 40, or even 50 years. Climate change is real and carbon will be regulated. But we have been taking a significant risk as utilities have spent billions of dollars on retrofits to coal plants and new investments in natural gas plants without knowing what the rules on carbon regulation will be during the life of those investments. Providing emissions limits for these plants will allow utilities to avoid pouring hundreds of millions of dollars into facilities that are later closed due to carbon regulation. Knowing the carbon rules before we make investments could save customers millions of dollars.

2. There is a difference between the impact these rules have on the State and the impact they may have on Oregon’s customers. Much of the reaction in Oregon has been to point to the fact that Oregon’s requirements under the final rule are less than Oregon’s requirements under the draft rule. While that is true, customers face the cost of implementing this law throughout the West as the generating assets that serve Oregon are mostly located in other states. For example, states such as Wyoming, where much of Oregon’s coal power comes from, have seen their requirements go up under the final rule. So while the compliance obligation of the state of Oregon may have gone down, the compliance obligation of Oregon’s utility customers has probably gone up.

Part of the reason Oregon’s obligation may not be difficult is that we already dealt with Boardman, the coal plant in Oregon that is scheduled to close before the Clean Power Plan rules take effect. And we saved customers money by closing Boardman. Pacific Power, which owns many of those Wyoming coal plants, will have a more difficult time complying than PGE, because while PGE was making the decision to close Boardman, Pacific Power was pouring billions of dollars into a series of retrofits of their coal fleet. When the retrofitted plants are abandoned due to carbon regulation, Pacific Power will likely argue that it should still recover from customers the cost of its coal retrofits. CUB will likely argue that customers should not pay for the bad investment of the utility.

3. The final rule is on firmer legal grounds than was the draft rule. The coal industry, along with some utilities and some states, has been preparing to challenge the rule. That will now be more difficult. The final rule takes a much more traditional approach to reducing carbon emissions. It starts with the specific plants that contribute to carbon pollution and requires significant pollution reductions at those plants. States can meet the requirements of the rule by reducing emissions from the specific sources that are producing the pollution. The rule allows for alternative compliance using a system of reductions, including investing in energy efficiency and renewables, but makes clear that the rule is grounded in pollution reduction requirement of specific generating plants. In addition, by giving states more time to develop plans and more time to implement them, the final rule reduces the likelihood that an injunction could stop the rule before it gets started. Showing immediate harm is more difficult for a rule that is implemented on a slower time table.

4. The final rule makes state cooperation easier than the draft rule did. Under the final rule, the emissions reductions are tied to specific plants. The plant can reduce its emissions or it can buy/trade emission allowances from another entity. In the draft rules, this required an interstate agreement. But in the final rules, the EPA establishes standards and each generating unit has a great deal of flexibility within that standard. This should reduce the cost of compliance and offers a good deal of flexibility to ensure that carbon is being reduced significantly, but at the least cost.

In conclusion, it needs to be stated emphatically that these rules are critical. Yet, as important as they are, they are not a substitute for comprehensive climate policy. They are, however, a significant first step and given the current political dynamics, the administration should be congratulated for taking that step. In addition to mitigating climate change, planning for the future also protects ratepayers from costly, unwise investment by utilities going forward.

But the truth is, we should be under no illusion that this rule is enough to curb climate change. Congress and state legislatures still need to act. Failing either of those, voters themselves need to communicate at the ballot box how important it is to create comprehensive climate policy. Until then, CUB will be working with decision makers to ensure that the Clean Power Plan works, and works well.

To keep up with CUB, like us on Facebook and follow us on Twitter!

• Share this post on Facebook.
• Share this post on LinkedIn.
• Share this post with email.

« Back