Sponsored and written by Chair Doug Scott – Illinois Commerce Commission
The United States Environmental Protection Agency (EPA) is planning to announce in early June their proposed greenhouse gas (GHG) regulations for existing power generators. These regulations will be issued under the authority of Section 111(d) of the Clean Air Act and will require states to develop individual plans to comply. This will necessitate state environmental and public utility regulators to work together to satisfy the requirements in a way that will also protect reliability and keep costs as low as possible.
The issue is not a new one. Just a few years ago, the United States Congress debated the Waxman-Markey bill, which would have provided for a national, market-based program to reduce GHG emissions. It only passed one chamber and has not been resurrected; however, a number of states have taken action on their own. The Regional Greenhouse Gas Initiative (RGGI) is a group of nine east coast states which have been auctioning GHG allowances for several years, seeking to reduce emissions, and in large part, returning auction proceeds to energy efficiency and other clean energy programs. California has also implemented its own GHG reduction program, though the program is still nascent.
Other states have not developed GHG reduction programs but have been actively exploring ways to address what may be needed to comply with the new regulations. For example, a group of fifteen states, with the assistance of the Georgetown Climate Center, sent principles to EPA that they hope to see in the proposed rule. In addition, other groups including the regulated community, environmental groups, a number of individual states, and the grid operators have also weighed in. In the Midwest, a collaborative made up of representatives of the stakeholder groups in a number of states that has been meeting for over two years, has also submitted principles to EPA. And recently, representatives of state environmental and utility regulators convened to explore the potential for a multi-state approach to meeting the anticipated requirements of 111(d).
In all of these gatherings, there are some common themes, both with respect to issues raised by the prospective regulations and also with respect to potential pathways for compliance by the states. The first of which is the importance of the timing of the regulations and compliance pathways.
Assuming that EPA issues the draft rule on or about June 1, that will trigger a comment period, after which the EPA will work on a final rule, which would be issued one year after the draft rule. States then would have thirteen months from the date of the final rule to submit their compliance plans to EPA for their review.
Both the time to file a state implementation plan and the time to comply with the requirements of the rule have been issues that states and others have flagged as very important and in some cases as problematic. The amount of time required for states to adopt legislative or regulatory changes that may be necessary for compliance could, in some cases, take them beyond the allotted time to submit a plan to EPA. Not all state legislatures meet every year and the rulemaking procedures in many states can take as long as two years. So, if there is the need to put legislation or state regulations in place, compliance with the timelines may be a significant challenge.
111(d) is different than other rules, such as the recently promulgated Mercury and Air Toxics (MATS) rule, where there are strict timelines for the required reductions to take place. That could be good for states, in that they will have the ability to propose plans that take into account the useful life of their power plants and other factors, but it will require flexibility in the compliance options that are approved by EPA.
This issue of flexibility is a second theme that has been common throughout the comments to EPA. Many stakeholders make the case that EPA should allow the states to use programs such as energy efficiency and renewable energy portfolios to count toward compliance with reduction targets. Also, states have requested the ability to count measures that have already been taken, such as plant shutdowns, conversion to gas or co-generation, and other actions, which have reduced GHG emissions in their states.
A third theme can be seen in entities that have asked EPA to allow for regional plans to be submitted as a compliance option. The RGGI states obviously want their plan to comply, but they certainly aren’t the only states exploring this option. New plans do not have to look like RGGI, but may involve averaging of emissions, and some sort of trading mechanism between states. There are many ways to set up a multi-state program, and the topic will be a priority in discussions going forward.
State utility regulators are charged with making sure that power is safe, reliable and affordable. Their counterparts in state environmental agencies are charged with protecting our health and safety. In responding to regulations such as the proposed 111(d) rule, both sets of agencies will need to work together to ensure that the plans submitted accomplish both sets of goals, and provide for enhanced job opportunities through the energy choices we make. That is a very difficult task, but one that state regulators and many others are working very hard to accomplish.