EPA’s Clean Power Plan: A recipe for consumer confusion, cost increases, and confrontations

A taste of things to come for electricity consumers and generators

gmacOne year ago, Environmental Protection Agency (EPA) Administrator Gina McCarthy announced the controversial centerpiece of the Obama Administration’s climate change legacy: the Clean Power Plan (CPP). The rule is slated for finalization this summer. 
Unions have protested against it. The North American Electric Reliability Corporation, which is the international regulatory body devoted to ensuring outage-free electric service for Canada, the U.S., and parts of Mexico, as highlighted in a recent study, believes it risks the reliability of the grid. States, encouraged by Majority Leader Senator Mitch McConnell, are boycotting it. Yet, the EPA is pushing ahead, touting the plan’s built-in flexibility for individual states in devising a compliance plan—uniquely suited to each specific state. If states, as McConnell advocates, refuse to comply, the EPA will impose a Federal Implementation Plan (FIP).
While no one knows what the final plan will be, we can be sure that, at the very least, it aims to severely reduce coal-fueled power generation and dramatically increase the implementation of renewables such as wind and solar. Industry experts expect the CPP will possibly force the premature closure of hundreds of coal-fueled power plants—and that, alone, without factoring in the higher cost renewables, will raise costs to all consumers.
The anti-fossil-fuel movement would like us to believe we are just replacing one power source with another. The problem, however, is far bigger.
After attending a recent workshop at the Federal Energy Regulatory Commission clean_power_plan002_16x9(FERC), Phillip A. Wallach, a Fellow in Governance Studies at the Brookings Institute, wrote a report titled: The confounding complexities of the Clean Power Plan—reliability concerns aired at FERC. In it, Wallach addresses the technical problems that the CPP will have to overcome—which he calls “staggering.” He, then points out that “the interplay of federal laws set off by the CPP is enough to make one’s head spin.”
pwHe continues: “It can take a remarkable 12-14 years to site a new high-voltage transmission line. Unless federal regulators (and possibly Congress) somehow facilitate streamlined development, it is hard to see how states will be able to achieve big emissions reductions in time to meet the first compliance goals in 2020. Amidst this cacophony of legal requirements, states are not currently able to plan for compliance with any confidence.”
Wallach’s predictions about the “complex, EPA-mandated process of energy sector transformation” are hypothetical, but totally believable—especially given the real-world example of New Mexico’s ongoing experience.
In New Mexico’s Four Corners region, negotiations regarding bringing the San Juan Generating Station (SJGS) into compliance with Regional Visibility Rules under the Clean Air Act have been underway for more than a decade—with the bulk of the shenanigans taking place during the past five years. Note: the SJGS’s back and forth with the EPA, the New Mexico Environmental Department (NMED), and anti-fossil groups has been over just one small rule that would improve visibility in wilderness areas and national parks to such a small degree that it would not be detected by the human eye. One can easily imagine how this process would be exacerbated by policy so extensive that it strives to transform the entire energy sector.
You may want to just skim over the following abbreviated timeline as it will “make your head spin”—which is my goal. The reality is far more overwhelming than what I am presenting here. (Thanks to James Crawford for the use of his background research on the SJGS.)
The SJGS is a coal-fueled power plant near Farmington, NM, that produces 1,683 mega-watts (MW) of electricity through four units. The Public Service Company of New Mexico (PNM), the majority owner, takes 783 MW for New Mexico customers. The coal for SJGS comes from an adjacent coal mine operated by BHP Billiton. The current contract for coal expires in 2017.
To meet Regional Visibility Rules, the EPA requires that states develop a State Implementation Plan (SIP) that meets its approval. The NMED submitted its first SIP back in 2003. However, due to evolving regulations, it was never approved.
In 2010, the NMED submitted another, revised SIP but had to withdraw it again due to those changing regulations. Once again, in February 2011, the NMED submitted a new SIP for EPA approval—which the EPA ruled was invalid because it wasn’t approved by the required 2009 date.
The EPA further decreed that because of sue-and-settle cases brought by Wild Earth Guardians and others, it was under court order to implement a FIP by January 2011—which the EPA did finally issue in September 2011 (well after the SIP submittal that wasn’t even considered). Now, the SJGS was subject to the dictates in the FIP without any due consideration of the SIP.
The February 2011 SIP called for compliance-achieving emissions controls costing about $80 million. The FIP requires a different approach that will cost almost $1 billion—or, PNM could close down two perfectly good, reliable generating units with years of life left.
The PNM and the NMED filed suit against the EPA and, after a couple years of legal wrangling, settled on closing the two units and lesser cost equipment for the two remaining units. In September 2013, the NMED submitted a revised SIP, which reflected the agreement; the EPA approved it a year later.
However, the antis were not happy with this agreement for replacing the lost electricity which, for the PNM, would be met by assuming a greater share of the electricity from the two remaining units (remember: the PNM didn’t use all that was generated; there are other owners, some of which plan to leave), constructing a new natural gas peaking plant, bringing in nuclear power from Arizona, and adding 40 MW of solar. They wanted the deficit made up strictly with renewables. (In fact, the antis want all four units closed—this, after the PNM already spent $320 million in 2009 on extensive emissions remodeling.) 
Just before the October 2014 Public Regulatory Commission’s (PRC) meeting to approve the SIP, environmental groups filed a series of legal blockades that ultimately changed the agreed upon plan.
Finally, in January 2015, the PRC held hearings on the plan almost everyone agreed ongessing—environmentalists protested outside the hearing and demanded the closure of all four units. Addressing their views, Paul Gessing, President of New Mexico’s free-market think tank, the Rio Grande Foundation, said: “The radical anti-modern-society types were out in force … While the PNM plan is not perfect, the radical anti-energy crowd would love nothing more than to completely kill New Mexico’s economy.” 
In April, a hearing examiner advised the PRC to reject the plan unless changes were made. His concerns, according to the Associated Press report, were in part because the PNM didn’t have a “contract to provide coal for the plant beyond 2017.” The adjacent coal mine is the subject of negotiations between current owner BHP Billiton and several proposed new owners. 
On May 5, a deal was struck. Westmoreland Coal Company would purchase the mine and take over operations—resulting in a $300 million savings over the next 6 years for PNM and its customers. However, the PRC must approve this deal before the sale goes through.
Business leaders, coal miners, power plant workers, and elected officials from the Four Corners area have united in support of the plan that would allow the SJGS to continue operating. At a recent Albuquerque City Council meeting, Ray Hagerman, Four Corners Economic Development CEO, “emphasized that 740 jobs—400 coal miners and 340 power plant workers—would be jeopardized if the plan is not approved.” According to the Farmington Daily Times, Hagerman said: “The generating station and the coal mine that feeds it also represent around 2,400 indirect jobs.” Unemployment in the region would double.
Because getting all parties on board — including minor-percentage owners in the SJGS such as the City of Anaheim and the Utah Associated Municipal Power Systems — is essential to approval of the deal, the PRC voted, on May 27, to give the PNM more time to finalize an ownership restructuring agreement. Sources tell me that many of these co-owners don’t meet regularly, and the new July 1 deadline has the potential to scuttle the entire decade-plus procedure. 
Hagerman believes: “If the utility supplies regulators with the documentation they need, then approval of the plan is likely.” 
PNM spokesman Pahl Shipley, according to the Farmington Daily Times: “reiterated that the revised plan, with new tentative agreements in place, represents ‘the most cost-effective path forward, balancing reliability, affordability and environmental responsibility. The ownership restructuring and coal supply agreements would further increase the cost benefit to customers.’”
While there will be a “cost benefit to customers,” rates will still increase. The PRC hearing officer “warned that the changes spurred by the partial closure of San Juan would result in substantial rate increase for customers over the next 20 years.” 
In a recent op-ed in the Albuquerque Journal, Carla Sontag, executive director of the New Mexico Utility Shareholders Alliance, addressed the cost factors: “It is estimated that the shutdown will cost about $5.25 a month for the average residential customer. PNM plans to replace lost power generation with cleaner energy sources and significantly less coal. Those costs will be filed with the PRC later, and that increase would take effect in 2018.…  The PNM recently filed its first rate increase in almost five years. Beyond the need to maintain system integrity, the biggest driving force behind the increases is environmental initiatives.” Environmental groups acknowledge a 7% increase to monthly bills.
So, now we wait. 
Will the PRC approve the plan? Will good-paying jobs be saved? Will cost increases be minimized? Will the anti-fossil fuel groups sue? Will New Mexico have enough power for the future?
This is a New Mexico story. It is about just one power plant in a sparsely populated state. It is the story of that power plant, in that state, trying to meet just one EPA regulation dealing with regional visibility—even though improvements will not be detectible to the human eye. (The American Lung Association’s 2015 State of the Air report just ranked Farmington number 1 for cleanest metropolitan areas in the country for 24-hour particle pollution and number 2 for cleanest metropolitan areas in the country for annual particle pollution.)
Under the CPP, similar scenarios will have to take place in every state, over every coal-fueled power plant—not with just one regulation, but with a massive plan designed to transform the entire energy sector. The CPP, which is not yet final, is supposed to be implemented in less than five years. This New Mexico story is a taste of what is to come: years of legal wrangling, cost increases for consumers, loss of good-paying jobs—for reductions in CO2emissions that will make no temperature difference on a global scale.
It makes my head spin.

About the Author: Marita Noon

Marita Noon

CFACT policy analyst Marita Noon is the author of Energy Freedom.,

  1. Brin Jenkins

    Here in the UK we have serious load supply balancing problems, with 20% generation from renewable sources this will lead to power blackouts as load must be shed when the wind drops.

    We have an excellent web site that monitors industry data presenting this in graphic style with links and explanations:- http://www.gridwatch.templar.co.uk/. France is also covered on a sister site, it helps us to understand the problems, and the pitiful wind contribution can be gauged in real time. I recommend this site for its informative contribution to our understanding.

    • Brin Jenkins

      “May”, is a poor comfort when power fails. The distribution grid is unable to store energy for non daylight hours. In the UK we lose 28% in transmission of electrical energy due to ohms law, this non recoverable loss is radiated as heat into the atmosphere. Here in the UK it’s around 12 Gw, it will be more in the USA with greater loads and distances.

      Efficiency we all like to see, with reduced loads and losses that’s development, but just closing down generators in favour of renewables is plain stupid until we are sure of a reliable alternative supply.

      In the UK we need to factor in an 800% increase of capacity to allow for the dropping to just 12% efficiency of panels in Dec Jan Feb. Wind has similar limitations, when the wind speed halves the generated output falls off dramatically. That all of this is being brought about on a warming consensus whim is self destruction.

  2. The game is to make energy more expensive. The rules and regulations will never be met as long as these tyrannical bureaucracies continue to be fed. For instance, whatever happened to the highly-touted clean coal power plants? This past February, Obama pulled the plug on the only carbon capture and storage (CCS) prototype under construction in Illinois–the Future Gen Project. After deploying 1.1 billion dollars in stimulus dollars, it was determined that CCS was just too expensive and lacking in private investor backing.

    Well, golly gee. Just as Ms. Noon cites above, what investor would think of funding a project that’s under a never-ending barrage of regulations and re-evaluations on their permits?
    This is a game rigged in favor of big gov and big environmental NGO’s. And we, the citizens, always pay.

  3. beachmike

    Marxist Monstrosity Barry Soetoro aka Barack Hussein 0bama said before he was elected in 2008: “under my cap-and-trade vision, electricity rates will necessarily skyrocket.” This is what happens when an ineligible Marxist Muslim FRAUD occupies the Oval Office.

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