Industry Responds to DOE Electric Reliability Report and EPA Power Sector Rules
On December 1, the Department of Energy (DOE) and the US Environmental Protection Agency (EPA) had a teleconference to discuss reliability of the electric grid in the context of pending EPA regulations. DOE’s new review limited itself only to resource adequacy, which DOE admits is just one component of reliability assessment. Indeed, Commissioner Phil Moeller of the FERC identified some 22 areas of inquiry necessary to assess reliability, most of which the DOE does not address.
On the same day, Scott Segal, director of the Electric Reliability Coordinating Council (ERCC), issued a white paper about the DOE report. Segal outlined some additional points to consider in the wake of the release:
- Traditionally, the DOE has made it very clear in substantial reports that the utility sector will face significant challenges to electric reliability over the next 15 years and that the cumulative effect of EPA regulations will make it hard to maintain reliability.
- It was recommended that DOE engage all stakeholders in an open and robust process to determine the effects of EPA rules on reliability. They have not met the recommendations of their own Electricity Advisory Committee in carefully evaluating reliability impacts.
- DOE admits that grid operators, states and power providers hold the best information on reliability from a comprehensive viewpoint. The North American Electric Reliability Corporation’s (NERC) recent report cautions the EPA to consider the “time and scope of regulation” and to take into account effects “on bulk power system reliability.” Concern with reliability also is widely shared by some 27 states as reflected in briefs filed in the deadline case regarding Utility MACT, letters from governors, and rulemaking comments filed by public service commissioners and other state officials.
- Of particular interest are the views of state public utility commissions – the frontline for reliability concerns – around the nation. The Pennsylvania Public Utility Commission found that the rule “could lead to expensive upgrades at greater cost to ratepayers or premature retirement of fossil units which could compromise system reliability.” The Public Utilities Commission of Ohio wrote to EPA that, “The current and foreseeable economic environment indicates that Ohio’s ratepayers will be hard-pressed to absorb rate-shock due to the implementation schedule advanced in the proposed rule.” The Public Utility Commission of Texas found that if the rule had been in effect, “Texans would have experienced rolling outages and the risk of massive load curtailment” during the warm summer months. The Alabama Public Service Commission found that “compliance obligations and timeline associated with the proposed rule will threaten the reliability of the electric supply in Alabama with similar consequences resulting at the national level as well.”
- Last, we are concerned with the frequent reference to use of emergency authorities to address potential reliability concerns. Reliance on emergency authorities fails to take into account the continued disagreements between EPA and the U.S. Department of Energy regarding whether or not emergency orders actually forestall Agency enforcement actions. The experience of GenOn in this situation was also presented in testimony to FERC on December 1. In any event, it is far better to address reliability concerns by ensuring proper timing and scope at the outset, rather than waiting for problems to materialize and hoping that emergency authorities will be sufficient.