The Obama administration’s historic initiative to curb greenhouse gas pollution from existing power plants survived its first legal attack yesterday, but also got some harsh criticism from utility industry executives.
A federal court of appeals in Washington dismissed a case brought by more than a dozen of the country’s largest coal companies and coal-producing states that sought to block implementation the U.S. EPA’s Clean Power Plan (CPP). Under the proposed rule, states would have to meet different emissions targets based on their regional generation mix in order to achieve an overall 30 percent emissions cut from 2005 levels by 2030, with an average interim reduction target of 25 percent between 2020 and 2029.
Opponents say the rule would freeze demand for coal production and lead to the shuttering of hundreds of coal plants. Many detractors say it’s also an example of gross federal overreach.
Since the proposal was introduced last June, the EPA has collected millions of public comments. The environmental agency is expected to release a final rule in August.
The D.C. circuit court judges threw out the case yesterday because they found it to be premature. “We deny the petitions for review and the petition for a writ of prohibition because the complained-of agency action is not final,” Judge Brett Kavanaugh wrote in the opinion.
Murray v. EPA is unlikely to be the last case brought against the CPP. While no electric utilities have announced litigation against the plan, executives at some of the nation’s largest power companies expressed serious concerns yesterday over how the CPP would affect their industry at the Edison Electric Institute’s annual convention.
Southern Company, one of the largest generators and distributors of electric power in the U.S., has come out in strong opposition to the rule, which it says could cost $1 trillion to implement. According to CEO Tom Fanning, the emission reduction guidelines laid out in the proposal are unworkable and the EPA should withdraw the proposal.
“If you want to achieve a certain carbon reduction by a certain timeframe, I’m perfectly happy to move ahead and make that a reality,” he said at an EEI press conference. “But let the free market, let the companies that know best how to provide an optimal portfolio to serve their customers [be the ones to lead]. That’s the best way to do this.”
Southern Company has one of the most diverse mixes of generation resources in the country, including coal, natural gas, renewables and nuclear. The company is also taking steps to make its power generation cleaner with new efficiency programs, and both utility-scale and distributed solar projects.
These developments would seem to put Southern Company on the right track to meeting CPP goals. However, the utility maintains that the EPA’s targets for natural gas capacity, weak incentives for new nuclear generation, and stringent heat-rate improvement requirements make the rule infeasible.
“My challenge on [the CPP] had nothing to do with carbon, and had everything to do with federal overreach from a regulatory body on what is otherwise a state purview,” said Fanning.
Pat Vincent-Collawn, chairman, president and CEO of PNM Resources and the first woman elected to the EEI executive board, echoed Fanning’s statements.
“If you look at this industry, we have an amazing history of meeting any kind of emissions targets,” she said, referring to local air pollution and mercury regulations. “If you give us the goals, we achieve them. What we need is the flexibility to do it in the best way for our state.”
It’s no secret that the utility industry is undergoing a transformation driven by new, more affordable technologies and changing customer demands. And as part of that shift, utilities are already adopting large amounts of renewables and converting old coal facilities to efficient natural gas plants.
In this changing environment, utilities are organically progressing toward a cleaner grid, said Nicholas Atkins, CEO of American Electric Power (AEP) and the incoming chairman of EEI.
Atkins underscored that timing is one of the main issues utilities have with the rule, given the complex nature of the electricity system. The 25 percent interim emissions reduction target is so steep that they’re simply impossible for certain states to meet, he said.
Exelon Corp., the largest owner and operator of nuclear plants in the country, has taken a less adversarial position on the CPP. In comments submitted to the EPA, Exelon wrote that the EPA is within its legal bounds to pursue the CPP, and that “doomsday predictions are simply not correct.”
This stance sets Exelon in contrast to its fellow utilities, particularly Souther Company and AEP, which have much higher levels of coal generation. But according to Exelon CEO Christopher Crane, all EEI members agree that the rule needs to do much more to address system reliability.
“I think what feels like it’s resonating with [the EPA] is a safety valve -- some way of maintaining reliability while the implementation of the plan is done,” he said.
But rather than work toward a compromise, Atkins said it would be a more effective and less litigious to throw out the EPA rule entirely, and come up with another plan that allows utilities and states to control their emissions reductions.
“If I was talking to the president today, [I’d say] his legacy is already there,” said Atkins. “The world is starting to recognize the issue [of climate change], and just the fact of the Clean Power Plan being presented has started to bring together a lot of issues that weren’t brought together before.”
“So to me, I think you would call it a day and say, ‘Let’s talk to people about making this thing rational,’” he added. “Because if it is, you can avoid all of the litigation, all of the discourse, all the issues involved that will slow the process down.”