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By J. Wylie Donald
It was innocuous enough: Conference on Environmental Regulations; but the plainness of title belied what was going on at the Federal Energy Regulatory Commission at the first public forum at FERC on EPA's Clean Power Plan. It played to overflow crowds. Notwithstanding arriving an hour early, I didn't even get to see the Commission, except remotely. One of the panelists characterized the implications of the Clean Power Plan as the most significant transformation of the bulk power system ever. While some might not agree, none would disagree that EPA's involvement in the electricity grid is unprecedented. This tension was evidenced repeatedly. Reliability and affordability are paramount - where are they referenced in EPA's plan? States and FERC regulate power supply and distribution - how is EPA directing States to prefer one source over another? Citizen suits regularly seek to compel compliance with Clean Air Act requirements - who will be the target when a State plan incorporates voluntary initiatives like fluorescent light bulbs or efficiency planning?So that all have the basics: EPA issued its proposed rule last summer. Comments were due in the fall. A final rule is predicted in early summer. EPA has proposed a broad and flexible plan (EPA's terms) to allow the United States to reduce its carbon dioxide emissions 30% below its 2005 emissions. Each State has been given targets with wide flexibility on how it will get there. EPA has identified four building blocks: improvements in fossil fuel plant efficiency, expansion of renewable energy and nuclear power sources, replacement of coal plants with natural gas, and improvements in system efficiencies. State plans are required by 2016, which can be extended to 2017 and even 2018. Requirements kick in by 2020 with the plans fully implemented by 2030.
The Commission was to fora on the subject over the next 45 days. Besides the National Overview conference, upcoming regional meetings were scheduled for Denver (2/25), and are scheduled for DC (3/11) and St. Louis (3/31).
The conference opened with FERC Chairman Cheryl LaFleur explaining the Commission's goals. FERC wants to move beyond rhetoric and ideology. There will be three panels focusing on reliability (which is all we will address in this blog), infrastructure and markets. The goal is to identify concrete facts and suggestions to move things forward. The other commissioners lent their views as well. Commissioner Moeller pointed out that the role of wholesale markets has expanded over the last several decades. In so doing, the grid has provided unprecedented reliable and affordable power to consumers. The Clean Power Plan cannot upset those markets. Commissioner Clark stated that the "rubber meets the road" issue is reliability, and responsibility for that falls squarely on State regulators and FERC. There needs to be a granular and technical analysis to make this happen, which will require the permitting of a lot of infrastructure. The analysis will be two-fold: what does the reliability analysis need to look like (things like voltage support, market impact, SIP integration) and how can FERC leverage its expertise to assist EPA. Commissioner Bay echoed the concerns about challenges and FERC assistance; he also emphasized the importance of addressing infrastructure and market operation. Commissioner Honorable likewise saw the exercise as a job of constructively and thoughtfully solving the problem, and in so doing providing assistance to EPA.
Acting EPA Assistant Administrator Janet McCabe spoke for EPA. She acknowledged that reliability is absolutely critical and offered that in the last forty years of Clean Air Act activity, at no time have EPA actions affected reliability. Anticipating a topic raised by other speakers, Ms. McCabe was confident that the EPA proposal could be implemented by 2030, but she seemed to be offering flexibility on the interim deadlines; EPA is listening to the States' and industry's concerns about the short term planning horizons. Another anticipated topic was the reliability safety valve (RSV), although EPA did not call it by that name. Ms. McCabe offered that experience with the Mercury, Air Toxics Standards (MATS) demonstrated that compliance could be melded with reliability. Chairman LaFleur commented that her review of the written comments identified five different RSVs that people were considering: 1) a fixed process identified in the rule, 2) a dynamic process that can take account of changing conditions, 3) a rule that takes into consideration the mutual achievability of all state plans, 4) exceptions for particular plants, 5) exceptions for particular evolving circumstances (i.e., a hotline). There was no consensus on what should be written into the rule.
The panelists did not see it exactly like EPA did. Focusing on just these two topics (timeline and RSV) one heard the following:TIMING
States are not working on their implementation plans because the proposed rule is too uncertain (Environmental Council of the States - Alexandra Dunn, Edison Electric Institute member companies - Gerard Anderson) The timing to build plants, pipelines, and infrastructure is all five years or more - the interim deadline of 2020 is simply not achievable; a longer "glide path" to 2030 is needed (EEI) A longer timeline is necessary (American Public Power Association - Sue Kelly) The deadlines are not realistic - we are facing a short-term "cliff" (National Rural Electric Cooperative Association - Jay Morrison) There is no short-term cliff; PJM has demonstrated this (Sustainable FERC Project - John Moore)Pushing out the interim deadline and easing the "glide path" would make achieving EPA's goals a lot easier (EEI, Environmental Council of the States)
RELIABILITY SAFETY VALVE
All the contingencies cannot be seen now so there has to be an RSV "baked into the rule" (National Electricity Reliability Corporation (NERC) - Gerry Cauley)No one has defined what a reliability safety valve is so the ISO/RTO Council did and provided specifics in its written comments. Key is that the process for invoking the RSV needs to be written into the rule (Independent System Operator/Regional Transmission Organizations Council - Craig Glazer) The RSV needs to be dynamic - able to adjust based on changing resources over the 15 year implementation period and beyond (NRECA)The need for the RSV is overstated, but if it is available it needs to be tightly written (Sustainable FERC Project)The RSV needs to be available for entities that have approved operations but then find that things go awry (APPA) The EEI companies have not reached agreement on what the scope of the RSV should be (EEI).
Other topics that bear paying attention to included:
EPA involvement may interfere with the exclusive jurisdiction of the state utility commissioners (National Association of Regulatory Utility Commissioners (NARUC) - Lisa Edgar) Intermittent sources may compromise reliability (NARUC, NERC)The patchwork of state plans may not work together effectively (NERC) Need better coordination of electricity and gas sectors (APPA)EPA did not consider the value of fuel diversity (NRECA)States will be reluctant to bring their voluntary programs into a federally mandated implementation plan (Environmental Council of the States)
As can be seen, there are a lot of topics for discussion. We expect the dialog will be intense over the next several months. On one thing there was unanimity, however; all of the panelists wanted FERC to be more than a potted plant. As Sue Kelly of APPA put it, EPA has swept FERC into the maelstrom, FERC cannot be chopped liver.
J. Wylie Donald, a partner at McCarter & English, LLP, counsels and litigates for clients on insurance coverage, environmental and products liability matters. Mr. Donald co-chairs the firm's Climate Change and Renewable Energy Practice. He draws on his substantial environmental experience, his prior non-legal technical work, and his deep involvement in risk management to assist clients in understanding and controlling the coming regulatory and non-regulatory impacts of climate change. He has tried cases and argued appeals in the state courts in New Jersey and Maryland, conducted private arbitrations and mediations, and argued motions in federal courts across the nation.
Read more at Climate Lawyers Blog by McCarter & English, LLP.
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