"The EPA is currently conducting a campaign against coal fired power plants... (with new rules) that mandate utilities to install 'maximum achievable control technology.' By the EPA's lowball estimates, it is the most expensive rule in the agency's history."

I saw this article in the Wright Hennepin Electric Newsletter, I thought it was pretty good.
By Marc Vogt, Wright Hennepin President and CEO
Trouble is likely on the horizon for electric consumers due to the current state of U.S. energy policy - more accurately, the lack of a well-researched, balanced and congressionally approved energy policy. This became vividly apparent in June. The pages of electric industry publications - and even the commercial media - signaled that something big is afoot. I thought I'd try to thread together this emerging story for you, using words that were reported by the press in June to explain what is presently underway.
Sweeping new interpretations of existing laws by the Environmental Protection Agency (EPA) are causing significant ramifications for the electric industry and its consumers. In a bluntly-worded lead editorial at midmonth titled "The EPA's War on Jobs," The Wall Street Journal framed the issue this way:

"The EPA is currently conducting a campaign against coal fired power plants... (with new rules) that mandate utilities to install 'maximum achievable control technology.' By the EPA's lowball estimates, it is the most expensive rule in the agency's history."

Coal-fired power plants produce most of the energy consumed in Minnesota.
The June Minnesota Rural Electric Association member newsletter gave dimension to this new interpretation of law, reporting what is happening just next door in North Dakota:

"Have you ever been to North Dakota? It's nothing but blue skies, except in the opinion of the EPA. Last month, EPA's Denver office announced it was taking enforcement for clear skies away from the state in violation of the (1977 Clean Air Act, which assigns authority to the states for such matters). For the first time ever, the EPA told North Dakota they (the EPA)...would impose (haze reduction) technology on Minkota Power Cooperative (MPC)."

MPC, a generation and transmission cooperative with power plants in North Dakota, produces power for electric cooperative members in northern Minnesota.

"EPA wants MPC to install a technology called "Selective Catalytic Reduction" or SCR to reduce nitrous oxide, which is said to create haze. However, a pilot project using SCR to remove nitrous oxide from lignite coal doesn't work. No matter, EPA is insistent that MPC drop a minimum of $500 million to install (this speculative technology)... (Not only does the technology not work), according to North Dakota (officials), if every electric generator in (the state) was shut down, it would only decrease haze production by five percent."

The EPA has recently informed both of WH's power suppliers of a similar order. One of those suppliers suggested an alternative solution to meet the EPA's new standards, while using more proven technology. The price tag for this alternative solution would be approximately one-seventh of the cost. So far though, the EPA has rejected that alternative. WH's members will undoubtedly pay the cost of these new interpretations of law through higher electric rates.
The Bismarck Tribune was livid about the EPA inserting itself into NorthDakota's business. It's editorial page said:

"The EPA (is holding) lignite-fired power plants hostage to stringent "haze" requirements. The EPA has done this despite legitimate disagreements over the environmental and economic consequences of its actions. It does this without there being a national energy policy in place to guide the agency's decisions. People who call the EPA arrogant and out of control are not far off the mark."

Early ramifications of what these new EPA interpretations will mean for electric consumers were reported last month in The Chicago Tribune:

"Consumers could see their electricity bills jump an estimated 40 to 60 percent in the next few years. The reason: Pending environmental regulations will make coalfired generating plants, which produce about half the nation's electricity, more expensive to operate. Many are expected to be shuttered. The increases are expected to begin to appear in 2014, and... those costs will be passed through to consumers."

The shuttering of perfectly operating power plants has already been set in motion. A newsletter from one of the electric industry's leading lenders reported this:

"Complying with proposed EPA regulations would cost American Electric Power (AEP) up to $8 billion, according to the Columbus, Ohio-based investor owned utility. ...AEP estimates it would need to retire 6 GW (gigawatts) of coal fired generation, upgrade 10.1 GW, refuel 1.1 GW of coal capacity and almost 1 GW of natural gas capacity, and build an additional 1.2 GW of natural gas-fired generation."

To put this in perspective, the huge generating complex in Becker produces about two gigawatts of power. So in addition to the cost spikes that are anticipated with the EPA's new interpretation of existing laws, the premature closure of plants could also cause serious reliability issues. The North American Electric Reliability Council (NERC) just reported that the U.S. will need to build 135 gigawatts of new generation in the next five years to meet demand. But only 77 gigawatts is on the drawing board, leaving a big gap. Moreover, power producers and lenders are reluctant to start new projects with the reinterpretation of existing laws making things so uncertain. AEP alone estimates that the new interpretation of rules will immediately affect about 25 percent of its existing generation fleet.

"The sudden increase in electricity rates and impacts on state economies (from closing these plants sadly) will be significant at a time when people and states are still struggling," Michael Morris, AEP Chairman and CEO said in announcing the plan."

Bloomberg News quoted West Virginia's governor when it was reported his state would be one of the first to be affected by AEP's early closing of power plants:

"EPA's inflexible approach that is driving our nation's energy policy is wrong, and it will permanently damage industries, businesses, and cause significant negative impacts on consumers and workers."

The Wall Street Journal quantified the issue:

"The International Brotherhood of Electrical Workers...says the rule (changes) will destroy 50,000 jobs and another 200,000 down the supply chain. That's more jobs lost than if Boeing went bust."

Sen. Barbara Boxer, Senate Environment and Public Works Committee chairwoman last month took issue with all of this. The publication The Hill quoted her:

"Anyone who says that environmental laws hurt jobs doesn't know that since we have passed them, we have had the best economic growth we have ever had."

EPA Administrator Lisa Jackson also disagreed, saying the anticipated results of these new interpretations far outweigh the costs. According to The Hill, Jackson said:

"The new standards for power plant emissions will prevent an estimated 17,000 premature deaths, 120,000 cases of childhood asthma and 850,000 days of missed work due to illness."

So that's where we are at right now. As a result of these new interpretations, both of WH's power suppliers will have to consider the early retirement of some lignitefired power plants currently serving you. The real possibility of a premature retirement of an existing power plant will undoubtably increase the price of power sold to
WH. That's because there will be a four-way collision of accelerated depreciation on the existing units, replacement capital costs for the new units, higher operating costs of the new generation and building new transmission lines to serve the new generating facilities.
There are other troubling aspects about the more aggressive interpretation of existing EPA regulations (along with a whole host of new rules on the horizon). One is the hurried and abrupt way these rules and regulations are being implemented. The Wall Street Journal put it this way referring to one of the rule changes:

"The EPA issued the utility rule in March, with only 60 days of public comment. Basic administrative practice usually affords between 120 and 180 days, especially for complex or costly regulations of this scale. The proposal was obviously rushed (and filled) with numerous errors. The word in Washington is that the openly politicized process unsettled even the EPA's career staff."

The New York Times reported this in June:

"The (EPA)...has literally overloaded itself with rule makings... They need to take more time."

Reuters added:

"The EPA has taken on its heaviest load in years."

The danger with this kind of fast and forced implementation is that unintended consequences almost always occur and hit energy consumers in the pocketbook. A good, local example of rushing to implementation of energy policy is what occurred with CenterPoint Energy customers in Minnesota just last month. The Star Tribune reported:

"CenterPoint Energy is under fire from the Minnesota attorney general for an experimental pricing system that is supposed to encourage conservation by charging residential customers a higher rate as they use more natural gas. Attorney General Lori Swanson said the program was launched last July with good intentions but has ended up 'picking winners and losers... for reasons that are unfair.' ...The company has indicated that as many as 140,000 households may expect higher bills because of the pricing program."

When consumers complained of sticker shock, the state ordered CenterPoint Energy's experimental pricing system to end. The result of this well-meaning, but in reality negative, energy initiative is miniscule compared to what I believe the ramifications will be of the new EPA interpretation of existing laws.
This is a mess! Our appointed and elected leaders could take a lesson from your board of directors whose carefully considered policy on this subject reads as follows:

"WH shall promote energy conservation methods and renewable energy sources that are reliable, technically feasible and cost effective for our member-owners...WH shall continue its long-standing environmental leadership (by) balancing our desire for more efficient methods of energy production and delivery with an obligation to safeguard the economy, affordable electric rates and high service reliability."

The balance called for in WH's policy is clearly not part of the EPA's rule making right now. As this will be a pocketbook issue for you, I wanted you to be aware of it. This is no longer a question of if this might happen. It is happening right now. Know that we will continue to give voice to your desire for energy policy that balances both environmental protection and economic affordability.

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