By Kent Singer, CREA Executive Director
With the issuance of its final Clean Power Plan rules on August 3, the U.S. Environmental Protection Agency charted a fundamentally new direction for power generation in this country. The limitations on carbon dioxide emissions from the power sector that are set forth in the rules may substantially change how Colorado’s electric co-ops provide electricity to our member-owners across the state. As nonprofit, member-owned electric utilities, we are concerned that those changes may also result in increased costs for electricity.
The 1,560-page regulation establishes a framework to reduce carbon dioxide emissions from power plants nationwide 32 percent by the year 2030. This is an increase in the overall required reductions compared to what was proposed in the initial rules, and the methodology for achieving compliance with this target was also revised substantially. Whereas the initial rules established a specific emission reduction target based on variables in each state, the final Clean Power Plan sets an emission cap that is applicable to every coal-fired and natural gas-fired power plant in the country.
In the final rules, the EPA says electric utilities must reduce emissions of carbon dioxide using basically three tools: increased power plant efficiency, increased use of natural gas generation (as opposed to coal) and increased reliance on renewable energy for power production. If a utility cannot comply with the requirements of a state plan for emission reductions by these methods, it can buy emissions credits from other utilities. The Colorado goal for reduction of carbon dioxide emissions from power plants is 40 percent by the year 2030.
Colorado’s electric co-ops rely on coal-fired power plants for a substantial portion of their power supply. Whether your co-op is a member of Tri-State Generation and Transmission Association or it purchases its power requirements from Xcel Energy, coal-fired power plants are still the foundation of the Colorado electricity grid. We built many of these coal plants during the early 1980s when the federal government would not let utilities use natural gas for power generation. Many of the power plants still have many years of useful life, and they produce some of the cheapest electricity in the country. Even if the Clean Power Plan does not directly require the closure of coal-fired power plants since utilities can obtain credits, it will still increase costs for compliance that will be passed to co-op member-owners, as well as the consumers of other electric utilities.
Why do we believe there will be increased costs? It’s simple: If co-ops have to build new power plants or buy emissions credits, those are expenses that we would not otherwise incur to keep the lights on. While the EPA says that the Clean Power Plan will actually result in lower electricity prices for consumers in the long run, it acknowledges that the near term costs will increase. These changes may also result in stranded assets, that is, power plants that have significant useful life left that must be abandoned, leaving consumers still paying for power plants that are no longer in use.
There are numerous legal arguments that can be asserted as to why the Clean Power Plan is not authorized by the Clean Air Act. The one that I think is strongest is simply the fact that the Act does not give the EPA the power to dictate comprehensive energy policy as proposed in the Clean Power Plan. These arguments will be tested in the federal courts over the next several years, and the U.S. Supreme Court will likely be the final arbiter of whether the EPA overstepped its bounds. In the meantime, electric co-ops will have to decide whether to assume that the rules will eventually be struck down or if they need to take steps to move toward compliance by the dates set forth in the plan.
Colorado’s electric co-ops believe deeply in environmental stewardship, and we do our part to maintain and protect Colorado’s air, water and land. After all, many of the power plants that provide the reliable and affordable power that we all enjoy are located in electric co-op service territories. We have a huge stake in those plants being run cleanly and efficiently since they are most often sited near the homes and businesses of co-op member-owners.
We support clean air and efficient power plants, but we are concerned that the costs of the Clean Power Plan are not justified by the perceived benefits. In fact, the EPA does not even try to predict or estimate how or whether the rules will result in a reduction in global temperatures.
It’s hard to understand how regulations that will increase the cost of power in the United States make common sense given their limited impact on the global climate.