Special CUB Conference Preview: 111(d)‘s New Regulatory Reality

As October 23 inches ever closer and registration numbers for Utility 2025: Building the Northwest’s Energy Future climb higher, we continue our special CUB Policy Conference preview series with a look at the topic of our first morning breakout panel, ”They’re Hee-re…111(d)‘s New Regulatory Reality”. The Clean Power Plan, also known as 111(d), is a broad effort by EPA to address the major contributors to climate change, and get states to reduce electric carbon emissions 32 percent from 2005 levels by 2030. Each state is tasked with specific target reductions, but under the approval of the EPA the states are allowed to collaborate to achieve these reductions.

Last year, the EPA released a draft rule for the Clean Power Plan which raised some red flags from states, utilities, advocates, and other interested parties. For example, the Northwestern States were concerned with how hydro was treated. It is clear that the EPA was listening to their concerns. The final clean power plan has now been released, and some major changes were made, formalizing the feedback that the EPA had internalized during the comment period after the proposed rule was released.

For one, the draft rule set first implementation dates at 2020, giving states less than five years to initiate compliance. With this very short timeline some believed that, on a legal basis, 111(d) would be challenged, and not be robust, because it did not allow ample time to plan or prepare. To address this issue the EPA moved the first compliance date back to 2022 and in doing this, made it less likely that states or utilities could persuasively argue that they were harmed by lack of time for planning.

The EPA also clarified and simplified the responsible parties. The states are tasked with developing an implementation plan. In Oregon, that means that the Department of Environmental Quality will develop a State Implementation Plan (SIP) which lays out in detail how it plans to comply. In the final rule, Energy Generating Units are responsible for their emissions (and so carbon emissions are counted at the source), and so DEQ will decide whether they will hold the energy producers to a mass-based target or a rate-based target. 

The EPA calculated benchmark carbon emission levels and hence calculated the required reduction. This is a mass, or a particular carbon tonnage. However, as long as the state/DEQ arrives with the same final carbon tonnage reduction in their SIP, the EPA is allowing the states to place a rate (of carbon tons/mWh produced) on each of the generating units (or plants).

Most of the focus is, of course, on coal burning plants. They are by far the largest carbon emitters. However, the EPA is also concerned about states and utilities ramping down their energy production with existing coal plants, and not investing in cost-effective energy efficiency or carbon retrofits. This could happen if a utility, for instance, let their plant sit idle and meanwhile built a natural gas burning plant to produce the load instead. The EPA calls this leakage and correspondingly creates two sets of emissions targets that the state must satisfy, one for natural gas combined cycle (NGCC) and one for Fossil Steam (FS) (mostly coal plants).

Another change from the proposed rule reared its head close to Oregon’s heart: in the world of energy efficiency (EE). With the Energy Trust of Oregon, Oregon has led the nation in innovative energy efficiency, conservation, and renewables programs. The proposed rule did not give credit for ‘early action’; in fact, if your state had already achieved much of its carbon reduction by the time the rule was in place, you might struggle to find affordable ways of achieving additional reductions. Because of this, existing and forecasted energy efficiency programs were a concern. The final rule removed EE from the emissions reductions calculations. However, it allowed EE to be utilized in earning Energy Reduction Credits (ERCs). ERCs can be produced by renewables, energy efficiency, new nuclear units, or capacity uprates at nuclear, hydro, or NGCC plants. The ERCs can be traded between EGUs in any states that use the same rate-based compliance approach. The ERC’s are not the same as RECs (renewable energy credits), but are similar and can be banked indefinitely for later compliance application.

Finally, the EPA recognized that all power plants are not created equal. It gave different targets to different states, based on their generating fleets, recognizing that some coal plants were already more environmentally sound than others. It also recognized that some states experienced significant anomalies in the benchmark year, and allowed some states to use an average of carbon emissions and energy generated over several years. Consider, for instance, if the only coal plant in the state was shut down for unexpected maintenance for six months in the benchmark year, setting an arbitrarily low level of carbon emissions for that year. A 32 percent reduction from that level would be great, in theory, but possibly unattainable in reality.

The EPA clean power plan is slightly different from the proposed rule, and is seemingly more robustly protected from legal challenges, and user error. It lays out specific methods and calculations for each state, and the electric generating plants within the states, to achieve the required emissions reductions. Compared to the proposed rule, some states seem to fare better. Oregon, for instance, has been recognized for its impending closure of Boardman and will not be punished for existing energy efficiency programs. However, in the sense that the individual states and regulatory bodies have the latitude and discretion to interpret and implement the rule, how individual customers fare has yet to be seen.

I am looking forward to discussing this rule and its various implications with a panel of experts from the utility and regulatory sectors as well as advocacy and economic analysis. Joining me will be Cameron Yourkowski, Senior Policy Manager at Renewable Northwest; Colin McConnaha, Senior Climate Policy Analyst at Oregon DEQ; Ruchi Sadhir, Senior Policy Advisor at the Oregon PUC; Mary Wiencke, Director of Environmental Strategy and Policy at PacifiCorp; and Rachel Wilson, Senior Associate at Synapse Energy Economics Inc. I am anticipating a stimulating and detailed discussion, and hope you will join me along with a wide variety of industry professionals and stakeholders, on October 23 at the Downtown Portland Hilton. Early bird registration is available until Friday, October 2, so get your ticket today, and we’ll see you there!

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