CUB Endorses EPA’s Proposed New Emissions Rules

Yesterday morning (June 2nd, 2014) in Washington DC, as a primary component of President Obama’s Climate Action Plan, the Environmental Protection Agency released new draft rules for regulating greenhouse gas emissions at existing power plants in the United States. Widely discussed and anticipated since the President announced his directive to the EPA one year ago, the 645-page proposal is already stirring up plenty of controversy and political dispute. But what are these new rules all about, and what do they mean for Oregon consumers?

The rules are intended to reduce greenhouse gas emissions from the power sector across the country by 30% by the year 2030, using 2005 emissions levels as a starting point. The power sector generates a third of emissions produced in the United States, so the new EPA rules will have a substantial impact in lowering our national carbon footprint, helping to mitigate the effects of climate change, and ensuring protection for customers against the financial risks inherent in unsustainable investment in fossil fuels.

CUB applauds the EPA for drafting rules that are stringent, but flexible enough to be achievable. The rules acknowledge that states vary widely in the quantity of greenhouse gases they produce each year, and each state will have to make adjustments proportionate with its emissions levels. This may present a challenge for some states that rely heavily on coal for their energy needs, but the EPA is also allowing each state to take whichever implementation approach is the most cost-effective. This puts the responsibility for innovation on the utilities, state regulatory bodies, and advocates and experts like CUB.

Oregon is in a strong position to meet our reduction standards by 2030. Under the EPA draft rules, Oregon will have to reduce its carbon emissions covered by this rule by 48%. The Boardman coal plant, which is scheduled to shut down by the year 2020, accounts for 57% of the emissions currently covered by the rule. In addition, Oregon has set a strong precedent for implementation of energy efficiency and renewable resource investments over the next decade, and the EPA rules allow the state credit for the carbon reductions that come from these investments.

While 48% seems like a big number compared to other states or the overall reduction mandate of 30%, the use of percentages is misleading. The EPA allows energy efficiency investments to off-set emissions, which changes the equation. States like Wyoming, with smaller populations and lots of coal plants, have little opportunity to off-set their emissions, while Oregon, which has a large population and only one coal plant, has much greater opportunity. So, Oregon has to reduce emissions by 48%, and Wyoming only has to reduce emissions by 19%. But Oregon starts with only 7 million metric tons of carbon emissions covered by the rule, whereas Wyoming starts with 45 million. This means that Oregon must reduce our carbon emissions by 3 million metric tons (48%), while Wyoming has to reduce its carbon emissions by 9 million metric tons (19%).

The question of how the new regulations will affect Oregonians’ utility rates is not so easily answered. While Oregon is not a large producer of greenhouse gas emissions, three of our largest investor-owned utilities – PacifiCorp, Idaho Power, and PGE – operate coal plants in six other western states that feed power to Oregon customers. Those states are Wyoming, Montana, Nevada, Colorado, Utah, and Arizona. This means that while Oregon can meet its emissions standards without too much disruption to energy industry, Oregon’s customers of these three utilities may need to wait to find out how their rates will be affected until regulators in those six other states work out their emissions reduction strategies.

But at the same time, Oregon ratepayers are already seeing utility bills grow as our utilities are investing billions of dollars into coal plant retrofits that are designed to make these coal plants run indefinitely. CUB supports national carbon rules because we need to know what rules coal plants will be subject to before we invest billions into them. Otherwise, we risk spending huge amounts of customer dollars on coal plants that will shut down long before those investments have been fully paid. The best way to maintain affordable bills is to make good investments, and this is much easier to do when utilities know how their carbon emissions will be regulated.

Analysts are already predicting the new rules to come under close scrutiny and legal challenge, both inside and outside of the courts. Whatever the outcome of these debates, CUB is prepared and looking forward to working closely with Oregon’s utilities and the Public Utility Commission to work out a strategy for implementing the EPA regulations in our state, and making them work for Oregon’s utility customers. We are also committed to keeping you informed about how regulatory changes in other western states may affect you.

Anticipating the release of these rules and their implementation was one of CUB’s primary reasons for structuring our 4th Annual Policy Conference around the theme of adapting to new climate change mitigating regulations. In fact, in our opening panel, A Climate of Change: Opportunities for Utility Leadership, I will be exploring this topic along with three of Oregon’s top utility executives: PGE CEO Jim Piro, NW Natural President and CEO Gregg Kantor, and PacifiCorp President and CEO Pat Reiten. NW Energy Coalition Executive Director Sara Patton will moderate our conversation. We will also be holding an afternoon breakout panel specifically to discuss the EPA’s proposed rules under section 111(d). Stay tuned to our conference site for more information on this event in the coming months!

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