The clear message from federal regulators is that we don’t have to choose between electric reliability and public health. Yesterday, the House Energy and Commerce Subcommittee on Energy and Power called on all five Federal Energy Regulatory (FERC) Commissioners to testify about the potential reliability impacts of the EPA’s proposed Cross-State Air Pollution Rule (CSAPR) and Utility Toxics rules. Subcommittee Chairman Ed Whitfield (R-KY) kicked off the proceeding with a sweeping concern that if the EPA rules get implemented, U.S. citizens will face blackouts across the country.
However, contrary to the attempts by Congressman Whitfield and other members of the Subcommittee to find acrimony, all five FERC Commissioners agreed in written or spoken testimony that the EPA’s proposed rules can be implemented without risking serious reliability problems. Despite a focus on division between FERC and EPA and among Commissioners by Politico and E&E News PM, the key takeaway is that all of the FERC Commissioners affirmed that EPA rules can be implemented in a way that adequately maintains power system reliability.
Reliability – Resource Adequacy v. Local Impacts
First, House Members suggesting that the EPA’s rules might turn out lights across the country seem to ignore the view of FERC Commissioners, transmission planners (see page iv) and most, if not all, of the private entity studies referred to at the hearing (for example, MJ Bradley, Bipartisan Policy Center). These policy makers and experts unanimously agree that implementing the EPA rules will not cause overall resource adequacy problems. As FERC Chairman Wellinghoff pointed out, the country currently has over 100 GW of excess capacity, and has previously demonstrated the ability to bring on significant amounts of new generation quickly (like in 2002, when we added 58 new GW of power generation).
In a real-life example, PJM, the regional transmission operator (RTO) responsible for transmission planning across 13 Mid-Atlantic States (including coal states like Ohio, Pennsylvania and West Virginia), recently conducted its annual forward capacity market auction for the 2014-2015 delivery year. 2014-2015 is the first year in which the CSAPR will be in effect. Despite the fact that 7,000 fewer MW of coal generation cleared the auction compared to last year (due at least in part because of expenses related to environmental compliance), the auction proved that after CSAPR goes into effect, sufficient capacity will still exists (page iv again) to meet reliability requirements (including reserve margins). The experts and market experience unanimously repudiated the House members sweeping concerns that the rules will prove catastrophic, and affirmed that resource adequacy will not be a significant concern for maintaining system reliability for the foreseeable future.
However, the Commission did acknowledge that the retirement of significant amounts of generation could cause some localized reliability issues around the country related to voltage stability concerns and the like. Fortunately, as I’ll discuss next, the Commission and states have long had a system in place to address local reliability issues that stem from generation retirements and other issues.
Who Should Plan – FERC and EPA Studies v. Regional and Local Planning
Another take-away from yesterday’s line of questioning is that, like most Americans, the members of the House Subcommittee on Energy and Power are unfamiliar with the process of transmission planning and who undertakes this important work.
Some transmission providers engage in their own system needs planning, and others that belong to RTOs leave the planning coordination to the relevant RTO. Usually on an annual basis, the utility or the RTO, in conjunction with its member utilities, engage in an involved modeling of the grid’s transmission needs going out in the short and longer-term. The regional planning authorities maintain an enormous number of data inputs, sophisticated modeling tools, volumes of proprietary information, and coordinate extensive stakeholder involvement in order to carry out their planning activities. Neither FERC nor EPA could (or should) duplicate that function. The good news is that over time FERC has put in place rules that ensure regional planning processes meet certain criteria, including, among others, coordination, openness, transparency, information exchange and comparability. These rules, along with FERC’s authority to insure reliability of the bulk power supply under Section 215 of the Federal Power Act, provide FERC with the tools to maintain a check on regional planning, but it is beyond the scope of FERC’s role to do high level resource adequacy planning. There are sufficient regional and local planning processes in place to address any local reliability impacts that the rules may have.
Commissioner Moeller and Spitzer’s view yesterday that more federal study and analysis should take place before rule implementation seems to leave out the planning already taking place within the existing planning paradigm. PJM just issued a report on the potential reliability impact of EPA rules and how they are dealing with those impacts. The Midwest Independent System Operator, or MISO (the RTO for much of the Midwest), is in the process of analyzing potential coal generator retirements as part of its annual planning process and while recognizing there will be some local reliability issues to address, does not foresee any unmanageable reliability issues.
Finally, as Dr. Sue Tierney of the Analysis Group pointed out in the second panel of yesterday’s hearing, the CEOs of major utilities have known these rules were coming for over a decade and have assured investors that they are in a position to comply with the rules reliably (see page 4 for statements from Xcel, Duke, Wisconsin Energy, Edison International, PPL and TVA). The goal of ensuring reliability may be better pursued through emphasis on the need for continuing coordination between the regions and FERC going forward, and not on the need to add an additional (and redundant) level of FERC review. Later today, my colleague Starla Yeh’s blog will cover Dr. Tierney’s excellent testimony and address some of the arguments made by State public service commission representatives during the hearing’s second panel yesterday.
The “Safety Valve” – EPA Rules v. System Reliability
The last point I’ll highlight from yesterday’s hearing is that attempts at pitting the EPA rules against system reliability do not work because the regional planning process has the protections in place to ensure that generation needed for reliability does not retire. Generators cannot simply shut down a coal plant whenever they feel like it. In RTOs, generators must give a specified amount of notice to the RTO of the intent to shut down. The RTO responds by engaging in a series of local and regional reliability analyses to determine whether there are any predicted reliability impacts from the proposed retirement. If not, the generator can retire the unit. If there are local reliability issues that require further action, the RTO will work with the involved transmission provider to develop and implement the appropriate solutions (including transmission upgrades, demand-side resources, new generation) before the unit can retire. The RTO also has the ability to engage the generator in a “reliability-must-run” or RMR agreement that requires the generator to stay online within certain parameters until the replacement solutions are enacted. Outside of the RTOs, a similar RMR agreement option is available to address local reliability impacts. DOE can also require generators to keep running.
As relates to the EPA rules, generators can find themselves in a conundrum if they want to retire a facility instead of retrofit it to comply with EPA rules but the RTO or FERC tells them they have to keep running for reliability purposes. All of the FERC Commissioners agreed during yesterday’s testimony that a limited, narrow “safety valve” concept proposed by the RTOs would work to allow a time-limited waiver of EPA rule compliance on a unit-specific basis, if it is determined that units need to stay online for reliability purposes. Although recommending an EPA safety valve calls into question the adequacy of the RTOs own retirement notice requirements (that may not currently provide adequate time for planning), conceptually the safety valve would work to alleviate the opposition of two sets of federal rules and ensure reliability is maintained throughout EPA rule implementation. It is important to note that the planning authorities recommending the safety valve approach to EPA made clear that they are “not asking for a blanket extension of the proposed rule’s compliance timeframe.”
Yesterday’s hearing involved a bit of political theater in an attempt to discredit clean air and clean water rules that are not only essential to our citizens' health, but critical to paving the way for new job creation and technology innovation. We don’t have to make a choice between electric reliability and public health – FERC Commissioners and experts agree that the rules’ reliability issues are undoubtedly manageable and should not impede moving forward with the their implementation.