Clean Power Plan Cost Still a Mystery

Dan Kormos, COO of PJM Interconnection

Mike Kormos, COO of PJM Interconnection

by James A. Bacon

More than four months since the Clean Power Plan (CPP) established final state goals for reduced carbon dioxide emissions, no one is sure what compliance will cost. Here in Virginia, guesstimates have been all over the map, with the coal lobby suggesting that rates could more than double while environmentalists claim electric bills actually could go down, assuming conservation measures reduce consumption.

There are multiple layers of uncertainty. Under the CPP, each state is required to devise its own plan to meet state targets. One question is which economic assumptions to use. As Mike Kormos, chief operating officer of PJM Interconnection, blogged last week, five or 10 years ago, no one foresaw the cost of natural gas falling below $2 per million BTUs, as it has in some parts of the country. The price of natural gas in the near- and long-term is a critical variable in appraising the relative merits of coal, gas-fired, nuclear and renewable energy sources.

A second uncertainty is how those state plans, once chosen, interact with one another in a regional market for electricity. Virginia is part of the PJM regional transmission organization, which creates mechanisms for utilities to buy and sell electricity in wholesale markets over a 13-state region. Decisions made by one state can influence the availability of power in other states.

Wrote Kormos: “The bottom line everyone wants to know is the bottom line: what will it cost to comply with CPP. ”

At this stage, it’s way too early to tell how it will all shake out. PJM, whose mission is to maintain the reliability of the regional electric grid at the lowest cost, is trying to help. At the request of state decision makers, the member-owned organization is developing dozens of scenarios based on different combinations of assumptions to inform states’ decision-making.

One of the biggest choices states face is whether to select a “mass”-based approach or a “rate”-based approach for reducing CO2 emissions. A mass-based approach sets targets based on the absolute volume of CO2 emissions by electricity producers within a state. A rate-based approach sets targets based on CO2 emissions per kilowatt hour of electricity generated. A rate-based approach might be more advantageous to certain states, but PJM officials tell me that the mass-base approach would benefit states acting collaboratively to meet their targets.

State air regulators — in Virginia, that would be the Department of Environmental Quality — must submit their state compliance plans to the Environmental Protection Agency by September 2016.  That gives them nine more months to sort through issues of extraordinary complexity.

Since August, when the CPP guidelines were issued, PJM been developing an economic model capable of analyzing the compliance pathways laid out in the CPP. Working with stakeholders over the coming months, wrote Kormos, PJM will strive to achieve a “common understanding” of the cost drivers.

“Our first concern, at the end of the day, is to make sure that the system stays reliable,” said Kormos. “Sensitivities on both compliance choices and economic variables will be performed to provide a range of potential outcomes. When we know what the individual states want to do, we will study how the state plans impact each other as part of the PJM region.”

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43 responses to “Clean Power Plan Cost Still a Mystery

  1. independent of what the CPP scenarios might be, I’d be curious to see a study that predicts how increased cost per kilowatt affect usage.

    sort of like when toll road companies run the numbers to see at what toll – traffic starts to drop off or when water/sewer folks want to figure out where to set the price threshold to maximize conservations.

    If the greenies are right – increased prices will reduced consumption, encourage adoption of more energy efficient stuff.

    what would those numbers look like for Virginia, for instance?

  2. [Your server’s been down this afternoon; glad you are back up.]

    No one should envy the task of our electric utility regulator, the VSCC, in the near term. The EPA has upset every State regulatory apple-cart with its proposed CPP (carbon emissions) limitations and deadlines, but without clear guidelines when these rules will be made certain, or even how to implement them. At the same time, the States are wrestling with a temporarily low world oil price and, for very different reasons, a temporary glut of domestic natural gas (how long will it last, and then what?). Also at the same time, there are worldwide concerns about ANY sorts of carbon emissions and competing proposals for carbon taxation and emission rights trading. There are strong economic and political pressures to build more renewable resource generation, especially solar and wind; at the same time the costs of these are changing rapidly along with new advances in battery storage technology. The advent of massive changes in the way we power transportation, by replacing gasoline with overnight electric charging, seems finally to be coming within reach. There are competing demands by consumers to implement energy-saving measures first, through better home insulation and more efficient appliances and the like, and to implement more distributed, homeowner solar generation, all at utility cost or with utility and tax subsidies, because these measures can actually lower the cost of electricity for everyone else (even despite the temporary abatement of electricity prices due to cheaper fossil fuels). There are strong competing opinions over the future of nuclear power and its life extension decisions now arising across the country. There are growing concerns about the cybersecurity of the grid and everything connected to it. And looming in the background are the constant NIMBY regulatory tensions over the siting of new energy infrastructure of any kind, anywhere, above or under ground. Uncertainties on top of uncertainties! Yet there are decisions that must be made.

    One place where it all has to come together is in “grid operations.” In the 1990s, the Federal Energy Regulatory Commission (FERC) led the revolution in electric utility regulation (de-regulation of generation and the creation of wholesale electricity markets and unbundled “retail access” and establishment of a nationwide system of “independent system operators” or ISOs) that we now take as a given. We are lucky to have one of the best-established ISOs as our own, named PJM, operating the portion of the grid which includes Dominion Virginia Power. Just about everything to do with “the grid” consists of long-lead-time infrastructure, so PJM uses a 15-20 year planning horizon. Theirs is only a best-educated-guess of how this fantastic array of variables will play out; they are not political appointees but engineers (is it any wonder that PJM’s predictions and other reports are filled with technical data and jargon?); and their choice of assumptions may prove wrong; and in any case their predictions will be argued over by FERC and the State utility commissions across their 12-state area; but it is the best look ahead for the mid-Atlantic region’s energy future we are likely to have anytime soon.

    So, thank you, Jim, for taking the time to contact PJM and bring us this interview with Mike Kormos. He, and his boss, Andy Ott, have been an untapped resource for too long, and I commend your tapping their knowledge (and bringing their questions) to BR.

    • I wonder if this ambiguous, opaque, and indecipherable language was intentionally built into the CPP by the EPA regulators so as game the process in a way that leverages their power to do most anything they want, however illegal, and defend it?

    • Good summary of the complexities and uncertainties involved in the decision making. I would add one more layer of complexity that I didn’t mention in the post: Not only does the DEQ have to decide whether to adopt the “mass” based approach or “rate” based approach, and which fuel mix to adopt, it has to divvy up the pain between Dominion, Apco, ODEC and a number of bit players.

      It won’t be easy. I expect there will be some heavy-duty lobbying behind the scenes.

    • Acbar’s summary puts much into perspective.

      For example, the EPA’s Clean Power Plan, when considered on a simplistic basis (without full regard to Acrbar’s comments), is plainly illegal unless it is carefully crafted to be “ambiguous, opaque, and indecipherable.” For if its intentions and its methods were plainly stated for all of us to understand and to fairly execute and comply with (this being the historic gold standard of good and fair and constitutional laws), well then, is such a case, the Supreme Court would most likely strike down the Clean Power Plan when it is heard next year by the Court.

      In addition, and as a collateral matter, Jim Bacon’s article that points out the inability of anyone to determine the cost of “enforcing” EPA’s Clean Power Plan would also seem to doom that Plan to rejection by the Supreme Court under the recently established rationale that sent EPA’s Mercury regulations back to the lower court, given EPA’s failure there to base its rule on a cost benefit analysis as required by law.

      Hence, what we find here is that the Clean Power Plan is not by any definition a good law or a constitutional law. Instead it is a carefully devised and highly potent political maneuver disguised as an EPA regulation. One that will, in practical effect, deliver unto this nation the full impact of an historic game changing legislation that was passed by both houses of Congress and signed into law by the President of the United States. For it will impact the energy infrastructure of this nation in ways as profound as Roe v. Wade impacted reproductive rights in this nation or Brown v. Board of education impacted America’s system of education.

      Hence, once studied and fully understood within the context of Jim Bacon’s Article as elaborated on by Acbar’s comment, we begin to better understand how today a community organizer president and his allies now transform the working of America’s Federal government, how they can outflank both the US court system and the US Congress. Hence we can better gain insight into the profound, fascinating, and frightening (for some) change that is going on today in how America today is “Ruled” without regard to the norms envisioned the founders of this nation as enshrined by Constitution and intervening customs and laws that regulated and deployed that earlier system of governance.

      Modern technologies drives much of this ever faster acceleration of history. Evolution is giving way now to revolution.

      Other examples now abound. Take, for another example, the ongoing effort of the current administration to take control of colleges and universities, and in so doing to circumvent and reinvent how we define and make, and investigate and enforce, this nation’s criminal laws. This amounts a circumvention of our entire state and Federal court systems, and proposes radical changes in the adjudication of law in this country, all of it done in the name of the Title X legislation to assure women’s participation is sports at school. Thus some of our leaders now endeavor to place our system of higher education in this country under the thumb of the Executive Branch of our Federal Government. And, in so doing, these leaders run the risk of turning our institutions of higher learning into tools of a police state.

      • It will be interesting to see how the U.S. Supreme Court rules on the legal challenges to the Clean Power Plan. Given its recent history, I expect it will uphold the plan, in effect giving carte blanche to rule by executive decree.

        There are many policy arguments for and against the plan — TomH is particularly persuasive on the merits of moving toward a low-carbon energy grid — and people can have reasonable debates over the issue. What shocks and dismays me is the way in which the law has been imposed by executive decree. Barack Obama has laid the groundwork for Caesarism in this country. Liberals hail his actions, but they should spend five minutes imagining how a President Donald Trump might use Obama’s tactics to arbitrarily re-write the immigration laws or national security laws of the country.

        • I totally agree with you, Jim.

          One article in the Washington Post (a 2011 article recently brought to my attention by Acbar) changed my opinion on coal after refusing the arguments of others that I considered little more than demagoguery.

          Why can we not discuss these matters the old fashioned way? Like that single Washington Post article did, and the act on such intelligent and informed information in a legal way, why cannot we do that?

          I also agree with you regarding the Supreme Court. Unfortunately, the court today is severely compromised by ideology.

          • Reed Fawell 3rd

            “Barack Obama has laid the groundwork for Caesarism in this country. Liberals hail his actions, but they should spend five minutes imagining how a President Donald Trump might use Obama’s tactics to arbitrarily re-write the immigration laws or national security laws of the country.”

            Jim Bacon makes an exceedingly important point. Fear of growing “Caesarism in this country” is a very real and fully justified fear.

            Edward Gibbon proves this point in his masterful and timeless work – The Rise and Fall of the Roman Empire.”

            Therein Gibbon explains the long term drift of the successful Roman Republic into a police state. How it began after “the confusion” that followed in the wake of the assassination of Julius Caesar when the enlightened Augustus Caesar began to rule by executive decree cleverly disguised as law giving under the old Republic. And how under his successors this morphed into terror and tyranny of the worst sort.

  3. The deadline for the first draft of the plan can be extended for a year, although final implementation cannot be delayed. But Virginia has more than nine months if it wants to take the time, and I hope it does. The EPA gave the states far more flexibility in the final rule, as many of us expected.

    It is also far from decided that it will be DEQ making any final decisions. Expect lots of legislative discussion of proposals that the General Assembly sign off on the plan.

    There was a very telling moment in a recent legislative discussion of all this, where a legislator made a flat statement at the CPP would require that all coal plants close and the DEQ director indicated maybe not. Many, many moving parts. Stay tuned.

  4. I think massive disruption was already underway BEFORE CPP and what CPP is doing is requiring utilities to make commitments in strategy when they’d prefer to wait or go slower.

    It’s not like CPP is directing only one solution. In fact, it’s got so much flexibility built into it that the many varied choices themselves are intimidating..

    demand is not going up …. listen to these folks:

    “While U.S. demand for electricity has risen in all but four years since 1949, the rate of increase has been steadily going down. The Energy Information Administration predicts an annual growth rate around +1% to 2030 (which RMI extrapolates to 2050).

    Rocky Mountain Institute’s four scenarios for the future U.S. electricity system ( detailed here ) all deliver the same energy services but with varied end-use efficiencies. In the fourth scenario (Transform), projected efficiency gains cut nationwide demand by 1% each year, even with the added demand from 150 million electric vehicles.”

    http://www.rmi.org/RFGraph-US_electricity_demand

    I don’t think DVP is worried about how they will supply power as much as they are worried about how much others in PJM will generate and sell at such competitive rates they undercut DVP own generating costs.

    Now if DVP could get permission to build a Nuke and let Va ratepayers pay for it -they could then sell power to others in PJM.

    I’d say the real impact of CPP is that it limits DVP ability to sell cheap coal-generated electricity from already-paid-for plants that do pollute. …as opposed to not having enough power to serve Va demand even if they had to buy it from PJM.

    and PJM is pretty much making it known – they’re a player in CPP.

  5. Reflecting on Kormos’ comments, for CPP he suggests Va. may want to accept a strict CO2 mass target and then join a PJM/collaboration with other states.

    In contrast, I personally feel Virginia should probably pick the Rate Based CO2 EPA target. This gives us freedom…put’s us in charge of our own destiny. I do not see how Virginia benefits from a collaborative-with-other-states pact based on accepting the low mass CO2 target we have been assigned.

    I definitely see a need for regional coordination. But I am not willing to sacrifice the Rate Based CO2 target to join a pact of some kind, I don’t think.

    • if some states collaborate under PJM and some do not – does that change the way that PJM works with those that go it alone versus those that are grouped together?

      • LarryG, The PJM states have their own parallel organization, named (surprise!) OPSI, the “Organization of PJM States, Inc.” which does research and employs consultants and lobbies at PJM and at FERC on behalf of all of the State utility regulators in the region. While this does not mean the State regulators agree on policy, it does tend to get them arguing over PJM policy based on the same set of facts.

        This works because the common goal is an efficient, low cost, reliable wholesale electricity marketplace, and improvements are weighed by both OPSI and by PJM in terms of efficiency and cost and reliability, not in terms of philosophical bias towards one kind of market participant or another. So, what if the Pennsylvania PUC wants more solar generation? PJM’s job is not to favor or discourage solar power, but simply to forecast how much there will be in, say, 10 years; if Pennsylvania’s subsidies for solar are expected to influence the development of solar power there, PJM (and the other states) will take that into account in its forecast.

  6. The $2 natural gas is a short term anomaly that will be changing soon. It was due to two factors: 1) overproduction in the Marcellus and 2) the shortage of takeaway pipelines to get the Marcellus production into the existing gas transmission system. Drillers in the Marcellus were overproducing because they needed to keep drilling to make their loan payments even if they were drilling at a loss (similar to what is happening with the shale oil developers). Rig counts are now declining. Chesapeake Energy one of the major and early shale gas pioneers is about to take major write-downs of its assets as required by the SEC. Last year gas production increased by 5.1 Bcf/d while demand went up only 0.9 Bcf/d. This caused prices to fall nationwide, but even to lower levels in the Marcellus. Currently, there are not enough takeaway pipelines to get the full Marcellus production into the gas transmission system. This stranded gas can only find a market when priced below the national price. Thus, the low prices we see today. By 2017 enough new takeaway pipelines will exist to connect to the existing transmission system and equalize prices.

    Independent studies still expect affordable gas ($4 mcf) to decline by 2018-2020, unless an economic decline lessens demand.

    Energy efficiency is still clearly the best way to deal with the CPP. It has no carbon emissions and good projects have a Levelized Cost of Energy of $0.02-0.03 /kWh. Solar currently has a LCOE of $0.05-.075 /kWh which is cost competitive with gas combined cycle plants with solar prices continuing to fall. Massachusetts has a plan to have energy efficiency provide 30% of the state’s energy requirements by 2020. In Virginia we use twice the amount of energy to create a unit of GDP (or GSP) as California so we have plenty of room for improvement.

    A great complicating factor, especially for PJM and other ISO’s is that FERC is being sued regarding its authority to regulate demand response markets. Litigants claim that DR is a retail issue not a wholesale one. If the Supreme Court rules against FERC it would remove a major tool from the ISO’s and could cause more high-cost, high-carbon generators to be put on line. And cost ratepayers an extra $9 billion nationwide.

    An AEE Institute study shows that reversal of existing pipelines would provide sufficient gas to the Southeast to meet demand caused by the CPP without requiring new pipelines to be built.

    The CPP is at least causing greater awareness of these issues. Given so much uncertainty, we should be looking for options that provide as much flexibility as possible, with the least investment until we gain a clearer picture of how all of this will fit together.

    RMI has been working on this a long time and has an intriguing perspective on how we could support by 2050 a 158% larger economy, using the same amount of energy we use today, but with no coal or oil, without the need for subsidies or new laws or even new technologies – just a shift in perspective and priorities.

    Much of the movement in the next few years will be by large companies installing solar and improving energy efficiency independent of the utility channel. So regulators and utilities might have difficulty managing the process.

    PJM is a good source of even handed analysis. It will depend on the assumptions they use and whose agenda they will be asked to serve.

    • I think the one thing everyone probably agrees with is that we do not want to damage or endanger the reliability of the grid.

      most everyone has experienced electrical outages and knows how crippled homes and business become without electricity and a few have lived through regional brownouts and blackouts.

      And Dominion spares no effort in reminding people of this when they speak of the risk of “rolling blackouts” and the like for Hampton.

      and truth be known – if DMV had a choice between how to build and maintain a load-balanced grid of diverse and varying inputs … and just running cheap baseload even if it not turning turbines – just idling, at times, the later is certainly less complicated and less problematic – from a utility perspective, I would think.

      If you look at the issue through that lens – the importance of natural gas is – different. It becomes a “nice to have” but not critical concept.

      whereas for those who want to see renewables incorporated – how does that really work if natural gas is scarce, and spotty in supply – and expensive?

      I don’t see how renewables work without abundant supplies of cheap natural gas and I’m a skeptic that near-term storage technology will change this… I think there is more hope for the technology than real prospects of near term availability but I will admit that if there is a breakthrough that it will be a game-changer….

      so much of a game-changer that one might ask – if we could easily store and retrieve energy right now – would the CPP be an issue at all and massive disruption would be radically transforming the whole industry of electricity generation.

      so – the utilities including DVP are looking at a world where if people can generate and store their own electricity – their preferred reliance on base-load and not renewables – will be moot and what people will really expect from them is power on-demand, when it is needed and not needed at other times.

      entire regions could see huge drops in demand on sunny or windy days then suddenly – they all need grid power and lots of it – right away.

      How many utilities work this way right now? How many are strategically pointed in that direction?

      Could PJM end up with much higher expectations than it could meet if a sunny Mid Atlantic region suddenly gets cloudy and ALL members are looking to buy supplemental power until the baseload can be spun up or will some – perhaps DVP operating “hot” standby units – running 24/7 and not supply power – until needed – but then when it is – the price will be for the cost of 24/7 availability – not just the fuel cost of the demand period?

      So – given all of this non-CPP stuff going on – what exactly is CPP doing ? It’s NOT dictating a one-size fits all path to a specific target … it’s actually only saying – you can’t do it with dirty coal … but all the other stuff going on – really does not have that much to do with CPP.

      I would assert that CPP is the least of the problems that DMV faces … it’s just a complicating factor. If storage technology matures – CPP will be but one of many moving parts.

      • The variability of solar is an issue. But PJM is accustomed to dealing with that. They have reserve requirements for all of the PJM members. Each member must have ready reserves greater than the size of their largest generating unit that is on line. For example, if one of the 900 MW North Anna units scrams and goes immediately offline, Dominion must have a way of compensating for that. This is far more difficult than dealing with clouds that are covering a 50 MW solar facility. So this issue is not new to solar. (Acbar could probably address this more correctly).

        Highly refined weather forecasting tools are being developed to aid in the anticipation of lowered output from solar to give power control facilities a heads up. I am more concerned with 4-5 days of prolonged overcast skies when solar has a much higher market penetration. Perhaps by that time, storage and demand response measures will be a larger part of the picture too.

        We would probably need to use more intermediate and peak load units to fill the gap on those occasions. It would be more expensive and more polluting, but probably would be made up by all the time that the lower cost, zero emission solar operated the rest of the year.

    • The thing is – EPA’s CPP assumptions and models are based on the assumption of cheap natural gas (which is probably a good assumption). We cannot eliminate coal by saying nat gas is cheaper, and then say we do not believe that. Cheap natural gas is what empowers EPA to say that the Clean Power Plan is not an economic burden to America. For example, EPA is predicting Virginia will be at 959 lbs CO2/MWhr by 2020…believe this is the result of EPA model closing down coal plants (on paper) on the basis of cheap natural gas.

      • It’s probably time for Congress to examine the judicial Chevron doctrine that gives federal agencies great deference in interpreting federal statutes. I do think agencies need some flexibility to address new problems or situations without necessarily going to Congress for a statutory amendment. But there is too much of a radical change in the direction and extent of regulation. Agencies must be held to the requirement that they cannot change policy without first addressing in great detail what facts have changed that have caused the agency to move in another direction. Similarly, agencies must not be permitted to adopt rules that are clearly out of scope of what it proposed in the notice of proposed rulemaking.

        This is not a political dig. Both parties go too far when they control the White House.

        • Congress currently DOES – Always has – the ability to NOT delegate to regulation – things they do not want delegated but I would assert that Congress itself is not only incompetent to do that – but even if they could – they’d not agree.

          So if you really wanted to re-do the CPP regulations – at the Congressional level -what would happen?

          I would assert the same thing would happen as has happened with other tough issues like health care and immigration… i.e. not even the opponents can agree among themselves on alternatives so they agree to disagree – sit on the status quo and gridlock.

          so no… I do not think Congress would be willing nor able to take over regulation… they’d corrupt the entire process… no question.

          • Larry, my point is not results driven. It’s a matter of fundamental liberty and due process. Government needs to operate within the constitutional and legal framework or we all are at risk. As RF-III notes, what Obama can do unilaterally, a future president with dissimilar policy goals can undo or go even further in another direction.

            One of the fundamental premises upon which this Nation exists is the difficulty of adopting laws that radically change rights and duties. The President can refuse to sign a bill into law. Congress can refuse to pass the President’s agenda and can override vetoes.

            And the power of government agencies, under either a Democratic or a Republican president, must be limited to their powers under the Constitution, enabling legislation, specific laws administered by the agency, the Administrative Procedure Act and judicial decisions. IMO, there is too much judicial deference to agency rulemaking and adjudication. Agencies have too much freedom to interpret statutes in inconsistent or broadly expansive ways. Similarly, too often agencies are permitted to take short cuts in the rulemaking process.

            The Constitution intends that, in many situations, nothing will get done. If Congress and the President cannot agree on taxes, spending, health care, immigration, etc., we get gridlock or compromise. It strikes me that neither Obama nor the GOP-controlled Congress have moved much. But we voted for split government. Perhaps, we are getting the exact results the American people want.

          • There’s an entire area of legal study called “administrative law” which wrestles with how and how much and with what strings attached to delegate the power of the legislature. I think it’s a bit like Churchill’s comment about democracy: it’s terribly messy and inefficient but compare it to the alternatives.

            There’s no way we could survive if Congress itself, or the GA in Va, had to do everything. The British have a way of delegating where an entire subject area is turned over to a minister who runs things like a dictator within the constraints — few or many — dictated by laws and the old boys network within the Party in power. You don’t hear much about court review; over there you simply pull strings or get rid of the Party in power. In contrast, we have this well-developed concept of enabling legislation and due process and judicial review in this country. I think it’s a pretty good system but so much happens out of the limelight that it invites special interest lobbying. The EPA, for example, pushes the limits of everything good about the APA (the federal Admin Procedure Act). It seems, when the subject matter is deeply controversial both Congress and the State legislature tend to pass the buck by delegating with conflicting instructions or irreconcilable goals that cannot be resolved except by the courts; in addition we’ve perfected to a fine art Congress’ delegation of power to the States with federal strings and bureaucracy attached but inadequate federal funds. Again, the EPA, for example, accomplishes most of its regulation through the States; meaning, at the least, the legal process to determine exactly what national policy is must go through multiple layers and years of challenges to come to a head; meanwhile the lobbyists get their way by controlling who gets appointed to write and implement the rules while those administrative and legal reviews grind on.

            Should we overrule the Chevron case and re-write the way the courts deal with deference to administrative discretion? I have never talked to a judge that wants to go there.

          • Reed Fawell 3rd

            Is there a fine book on the history and intent of Administrative Law? If there is, I suspect that book is in need of reissue, revision and amendment. And that so too is the federal case law in need to revision and amendment, bringing for example the Chevron holding into the modern reality of the 21st century.

            As best I know, the driving purpose of Administrative Law is to help the Executive Branch best implement and enforce the laws duly passed by the Legislative branch.

            Thus the inherent nature of this Administrative function requires that the administrator act to conserve the laws original intent, not expand it to promote the interests, desires, whims or predilections of the Administrators. And/or the political agendas of their superiors within the Administrative branch, starting with President and working on down through his or her political appointees.

            Obviously, this process is ripe for corruption. That’s in the nature of the beast.

            And this natural tendency of corruption is accelerated when it is handed down from the top – hence for example the president’s nearly 8 year pretension that the Keystone XL Pipeline decision was undergoing fair and impartial administrative review. Such corruption from the top of the Executive Branch quickly and deeply infects the entire body politic. To the detriment of the entire nation.

      • is it really the assumption? reading through the fact sheet:

        FACT SHEET: Clean Power Plan Flexibility
        FLEXIBLE APPROACH TO CUTTING CARBON POLLUTION

        http://www.epa.gov/cleanpowerplan/fact-sheet-clean-power-plan-flexibility

        it seems to be fairly comprehensive and flexible about how to go about trimming emissions… I don’t think natural gas is even mentioned…


        Existing programs also recognize the interconnected nature of the power sector – looking from “plant to plug” to find cost-effective and proven solutions. For example, 47 states have utilities that run demand-side energy efficiency programs, 38 states have renewable portfolio standards or goals, and 10 states have market-based greenhouse gas emissions reduction programs.
        The Clean Air Act provides the tools to build on these state actions in ways that will achieve meaningful reductions and recognizes that the way we generate power in this country is diverse, complex and interconnected.
        The Clean Power Plan has two main parts: state-specific goals to lower carbon pollution from power plants and guidelines to help the states develop their plans for meeting the goals.
        The goal is a target states have to meet by 2030, while starting to make meaningful progress toward reductions by 2020.
        States develop plans to meet their goals, but EPA is not prescribing a specific set of measures for states to put in their plans.
        This gives states flexibility. States will choose what goes into their plans, which will lay out how they will achieve the needed reductions.
        Each state’s goal is a rate – a single number for the future carbon intensity of that state. Each state’s goal reflects the fact that CO2 emissions from fossil fuel-fired power plants are determined both by how efficiently they operate and by how much they operate.

        The state goals also recognize the tremendous opportunity for reductions through energy efficiency improvements – one of the key strategies states and utilities have used to reduce carbon pollution.

        States will choose how to meet the goal through whatever measures reflect their particular circumstances and policy objectives. They can:

        Look broadly across the power sector for strategies that get reductions

        Invest in existing energy efficiency programs – or create new ones

        Consider market trends toward improved energy efficiency and a greater reliance on lower-emitting power sources

        Expand renewable energy generation capacity

        Tap into investments already being made to upgrade aging infrastructure

        I think CPP actually encourages emission reductions and suggests flexible approaches to include installing more wind/solar and using gas – not primarily as baseload but as peaker backup to renewables.

        using gas as baseload and/or exporting it would be squandering it, if it is finite and limited.. it would seem…

        • Yes. The CPP helps encourage the transition in the next five years away from inefficient, highly polluting (mercury and carbon) coal plants. Solutions in 2020-2030 will depend on economics and load growth.

          If we deal with this appropriately, and the regulators and utilities make room for significant contributions from third parties in energy efficiency, and distributed generation with renewables, the market can find the best solutions. Many of the new technologies are falling rapidly in price, if utilities can still make a reasonable return by incorporating them and allowing their customers to do the same, we could have an exciting period of innovation and economic growth.

          If fear takes hold and markets are constrained or dictates come from on high – we could have a different outcome.

          • TomH on your comments below about NC approach and Duke protecting its interests, can you elaborate what you are saying about NC strategy?

            I am seeing that NC seems to be rejecting CPP hoping EPA has no legal basis and can only ask for minor improvements in coal plant efficiency.

          • TBill,

            Regarding NC, I was thinking more about their much greater adoption of solar compared to Virginia. They are one of the top five states in the US for solar capacity I believe. Much of that was due to the state incentive on top of the federal ITC that made it very cost competitive. I don’t know if the state credit will be renewed now that the federal subsidy has been extended.

            My comment about Duke had to do with their aggressive move towards solar while they were simultaneously trying to edge third party providers out of the decentralized generation market. I don’t know if that had to do with CPP issues or just trying to protect their market share.

            Many utilities see third party solar and energy efficiency installations as a threat to their revenues. So they are working with regulators to limit the access to market, adjust net metering provisions, etc. This allows utilities to do more but slows down the overall market penetration of these developments that can be used as CPP credits.

        • There does seem to be some lack of logic in the CPP rationale. Because of environmentalist comments received on the draft, EPA downplayed natural gas as substitute for coal. Yet I believe that cheap natural gas factors strongly into EPA’s utility model. To some extent EPA is saying, cheap natural gas allows the country to move away from coal at little or no cost to society. At the same, EPA recommends against using too much natural gas. In other words, EPA’s cost assumptions may be optimistic. It will be interesting to see how CPP holds up in the on-going legal challenge.

          • Cost of natural gas is definitely an issue. Fuel costs are included in the Levelized Cost of Energy for various types of generation. I suspect a fairly inexpensive gas price is assumed in the LCOE’s for gas plants. The more expensive natural gas becomes the fewer hours per day gas plants might be used if less expensive options such as solar are available.

            Gas combined cycle plants also present a long term conundrum. Although they emit about 50% of the CO2 of an equivalent coal plant, they still release about 1000 tons /MWh. New plants are not covered by the current CPP. But they would still be expected to operate long after 2030. There might come a time when they would have to pay a penalty for this amount of CO2 (or a carbon tax) which would degrade the economic payback of the unit.

            It’s not an easy time to be a utility planner. Especially when your inclination is to stick with the tried and true (big central station plants). And moving towards solar is less predictable and not dispatchable. And you are concerned about third party participation eroding your revenue stream.

            The recent Paris accord may give more weight to maintaining some sort of policy towards carbon reduction. In Virginia we must engage in a more far reaching in-depth discussion of our energy future (it is also our economic future). Many residents of the Commonwealth don’t understand the issues or aren’t willing to engage in the discussion but the decisions made will affect their lives for years to come. I am concerned that the debate might center on short-term political and market share issues rather than a long-term assessment of what is best for all of the parties.

            New York and several other states are engaged in this, we could be in Virginia as well. North Carolina is well ahead of us, although much of this is prompted by Duke Energy protecting their interests.

    • Thanks for this input, TomH. You mention the jurisdictional dispute currently pending before the US Supreme Court, over FERC Order 745 and the future of demand response programs within PJM (and elsewhere). Conceptually, this comes down to whether a retail customer’s “demand response” is “negative retail load” which should be regulated by the States, or the economic equivalent of generation sold in wholesale markets, which should be regulated by the FERC. As a matter of economics, it comes down to whether the demand response customer is “double compensated” by receiving the full wholesale market price for the reduction PLUS the full retail savings to the customer from the reduction in retail purchases. Sure, overcompensation will attract more demand-response customers, but it will also attract gaming of the system; however it will not attract middle-men who currently seek out retail customers to sign them up for such programs and pay them some (but not all) of what they receive from the likes of PJM. This is an example of how very complicated these things can become and how difficult it is to achieve economic efficiency in the electricity business. My hope, BTW, is that if the Court decides to affirm the States’ argument for jurisdiction, they will nevertheless collaborate (through OPSI) on a joint solution for PJM demand response, at least, and preserve some of that $9 billion in savings you mention.

  7. I guess the impression I get is that we could retire the coal plants if we simply adopted demand management and current available conservation technology and we have until 2020 to start it.

    If utilities installed smart meters than worked similar to HOT lanes – and people had in-house monitors that told them the price at any given time – would quickly adopt available technology to knock down the cost – and in turn the need for generation such as coal.

    I’m NOT in favor of making changes that introduce instability in reliability and availability – and so I’d especially like to see “options” presented so that Va citizens and ratepayers could better understand and truly participate…

    I’m totally in favor – once citizens are actually informed enough to make intelligent judgements rather than be mislead with propaganda/disinformation/misinformation – that the majority rules and we abide by it…

    • The greatest energy savings is in commercial, government and industrial buildings, but the residential arena is making headway.

      Nest (Google) and others are making smart thermostats that can also be part of an overall home energy network. These are just coming to market, mostly for early adopters. But the kinks will be ironed out. Some will be installed by utilities, some self-installed and others by third parties. Should be interesting to see how this will develop in the next few years. Efficiency qualifies as CPP credit. Not sure how they will track the non-utility contributions.

  8. Acbar, IMO, Chevron needs to be changed. Agencies are given too much deference to change positions or extend regulation to places it has not existed. Courts demand too little from agencies that reverse their prior positions. Similarly, an agency that has traditionally regulated through rulemaking should not be permitted to change “policy and rules” through adjudication. An agency that proposes rules and then changes its views based on comments or other information should be required to re-state its proposal and seek further public comments.

    I don’t believe agencies should step in where the President and/or Congress does not wish to go. If our elected officials lack the stomach to address an issue, unelected agencies should not step in. That is not consistent with our system of checks and balances.

    There still is an important role for agencies to play, be they cabinet agencies or independent agencies. But they must remain subservient to the Constitution, elected officials, applicable laws and court cases. Congress should amend the APA and cut back on Chevron deference.

    • A good example comes from the new international “accord” on Climate Change. The Obama administration specifically persuaded other conference participants to make many targets voluntary to avoid having the accord constitute a treaty under the U.S. Constitution. Needless to say, Obama did not want to present a treaty to the Senate, where it would likely be rejected. A non-binding agreement, on the other hand, does not need Senate confirmation. But the accord, signed by Obama, could be rejected or changed by the next president. It’s not a treaty. It’s not binding on the United States.

      Under these circumstances, our courts should reject any attempt by the EPA or other agency to adopt rules that have the effect of making voluntary targets into legal and binding rules. If an agency can turn non-binding targets into law, we all need to take up arms. The Constitution has become worthless.

      Our system of government was designed to end in stalemate when the president and congress do not agree on certain subjects. If an agency can alter that result, we might as well live under Stalin.

      • @TMT – this is just more partisan stuff in my view.

        The very same Congress will not also not vote to authorize the POTUS to conduct war against ISIS – at the same time they hammer him for not doing “enough”.

        You’ve got a bunch climate deniers in Congress so what is a principled POTUS supposed to do?

        Over 200 countries have agreed to start the process – that’s almost unanimous around the world – except for the GOP….

        should the POTUS allow the GOP to set the agenda?

        Nope..

        • It’s not partisan. It’s almost 40 years of practicing law. Obama is not stupid. He knows fully well that he cannot get a Climate Change Treaty ratified (which constitutionally requires 2/3 vote in the Senate). See http://technocracy.news/index.php/2015/12/14/john-kerry-paris-agreement-tailored-to-avoid-congress/

          A ratified treaty operates as law. So if we don’t have any treaty or law that requires CO2 emissions enforcement, do you think an agency can adopt enforcement rules? If this were the case, President Wilson would not have needed to travel the country to push for ratification of the Treaty of Versailles. He could have simply directed the U.S. to join the League of Nations. Let’s assume for the moment that Wilson would have done this. Could members of Congress sued the President to stop the United States from being a member of the League of Nations? Or do we just write the advise and consent clause out of the Constitution? The Constitution often requires agreement of both the Congress and the President or things are not done. There is nothing in the Constitution that gives one branch or the other the power to act if the other branch will not. Do you really want to consider a President Trump with the authority to go around Congress? How about a President Sanders?

          The exact same legal analysis applies to the recent Climate Non-Agreement. It does not provide for any mandatory enforcement, which clearly means no U.S. agency has any legal authority to make the international deal enforceable in the United States.

          Federal agencies receive too much deference from the courts when they interpret statutes in new ways, reverse existing policies or enforce rules in a new way. Congress should restrict the application of the second prong of Chevron. A president that wants to go in a different direction, be she/he a Republican or a Democrat, must be forced to get legislation passed by Congress.

          And I agree fully that Congress needs to stop with these half-assed military powers resolutions and authorizations. Anything long-term must be authorized by the President asking for, and the Congress passing, a declaration of war. No one has done this right since FDR on 12-8-1941.

        • TMT – I appreciate your persistence in arguing your point of view in this matter. It is timely. It could not be on more important an issue.

          I am aware that numerous agencies and sub-agencies within our government continue to do fine and essential work in administering our laws. And that they are doing work that few others are equipped, situated and constituted to properly perform. This includes many agencies that regulate of the nation’s energy industry.

          The growing problems lie not with them but with the corruption growing at the top of their food chain and how such corruption works their way down the system, short circuiting our government’s checks and balances, and impartial administration of our laws, as it goes.

          This threatens growing cancer not only impairs the competence of our government, it threatens the very structure and legitimacy of our government.

          • As I’ve noted, this is not a partisan issue. The National Association of Broadcasters, the National Association of Telecommunications Officers and Advisors, and the Northern Dakota County Cable Communications Commission, a local franchising authority in Minnesota just filed a brief with the D.C. Circuit Court of Appeals where they are challenging the FCC’s recent decision to presume all local markets are competitive and, thereby, revoke authority of local franchise authorities (cities and counties usually) to regulate rates for basic cable service.

            Previously, the cable companies had to prove there was actual competition from another video services provider. The FCC’s order under challenge put the burden of proof on the LFA to demonstrate there is no effective competition. The challengers argued the FCC improperly dispensed with fact finding and went beyond a recent statute’s dictates that directed the FCC to streamline regulation for small cable TV operator to overturn the regulatory scheme for all cable TV providers.

            Whether one likes local regulation of basic cable or not, it is simply wrong for an agency to go beyond the language of a limited statute to achieve a “desirable” policy goal. And it make no sense to assume the agency can do what it wants to do, absent Congress passing a new statute stripping the agency of authority. Chevron deference needs to be cut back.

    • Indirectly you make an interesting point about Virginia — one of whose oldest agencies, the SCC, has adopted a “voluntary rule” for electric utilities’ purchases of renewable power in coming years. Most states have adopted mandatory quotas after lengthy rulemaking proceedings, but not Virginia. Were Virginia’s goals made “voluntary” to avoid judicial review, or to deflect political sensitivity to the renewables idea itself, or for some other reason? And as a matter of administrative law, what the heck is a “voluntary” rule anyway? Now I’ll grant you, this “voluntary” policy has been adopted by the agency that also regulates the utility’s income, its services, its finances, its construction of facilities and its long range planning; how much choice does the utility have to disagree?

      Now, you also say, “If our elected officials lack the stomach to address an issue, unelected agencies should not step in.” No disagreement from me, in theory! But what if the GA wants to satisfy several constituencies simultaneously by kicking an issue downstairs to its agency to craft a solution that satisfies the most influential lobbyists and otherwise ‘makes it disappear’? I think the SCC’s dance with the GA and DVP and so many other business players illustrates how that works as a practical matter.

      So, OK, you are talking about Congress and the APA and federal agencies here, but are they any different?

      • Congress (and the Va GA) have the legislative power to put as much command and control restrictions as they want and are able to agree to.

        When they cannot agree – they essentially give the administration a lot of latitude and this is not unique to this POTUS at all.

        it’s what happens when the legislative body cannot lead in performing it’s role.

        they not only don”t want this administrations version of health care or immigration – or EPA – they cannot even agree among their own GOP party to actually put forth alternative legislation – much less try to find bipartisan agreement.

        all this stuff about regulation has been, for decades, how the minority and industry works in opposition to what they disagree with.

        that’s fine – between legislative and legal opposition – it is their rigt – but all this whining about the POTUS and EPA “exceeding” their power is just that – whining.

        If Congress does not like or want the CPP – they have the authority to pull it back. The fact is – they do not agree and the minority – has no way to stop it so they cry about “exceeding” authority.

        as I said – this is the same group that hammers the POTUS over the “war on terrorism” but won’t give him the authority to conduct that war.

        The GOP has zero credibility on these issues…and they’d change their tune on it overnight if there was a GOP POTUS… you can bet on it.

  9. re: ” If our elected officials lack the stomach to address an issue, unelected agencies should not step in. That is not consistent with our system of checks and balances.”

    Congress has the power to fully restrict regulation, to put limits on it, etc… so don’t blame the agencies for Congress lack of due diligence.

    Second – the areas of regulation that Congress does not agree on – does, in fact, leave it to the agency to interpret.

    what I get out of this is that people who oppose the legislation itself will also, naturally, oppose the following regulation but the regulation is not really the issue – it is made into one by the opponents of the original legislation.

    In other words – people who fundamentally oppose the premise of the Clean Air Act – will then make regulations under it – also a point of opposition.

    we DO HAVE a good system of checks and balances. Regulations ARE challenged in the SCOTUS and the SCOTUS does determine if the regulations meet the stipulation of the regulations.

    In this particular case – what exactly is being done that is considered outside the legal scope of the EPA and Clean Air Act?

    isn’t that – essentially a partisan argument these days?

  10. Unfortunately, the lack of checks and balances in a substantial part of the problem. One that arises due to growing dysfunction of our entire federal system, one morphing into something far different from what we even realize.

  11. The “regulatory” arguments against CPP remind me of the many times in the past when industry allied with Conservatives attacked the efforts to remove lead from paint and gasoline or ban DDT or regulate cigarettes or fuel efficiency standards on autos, dioxin, pcbs, mercury, kepone, etc… a long, long list and each item on the list – was vigorously opposed to be regulated -using the same reasons over and over – that regulations kill jobs and harm the economy.

    Note – of ALL the regulations that were opposed -how many were subsequently repealed because they turned out to be as bad as claimed?

    Another difference today is that the argument has expanded beyond claims about specific regulation to the idea that any/all regulation is bad – ipso facto – it’s an article of faith that is presumed – no matter what regulation actually is – no specifics need to be provided – nope – it’s bad.

    There is no generalized regulation model that opponents use to evaluate a proposed regulation and advocate changes to it – to make it better and reduce impacts they actually show those impacts and the monetary and economic dimensions of them.

    instead, the opposition is generalized and primarily based on a philosophical concept that regulation is harmful.. without every really articulating the specifics.

    Again – since the time the FDA was created with the 1906 Pure Food and Drugs Act to regulate – provide a list of regulations created and subsequently repealed because they proved to be actually too costly and harmful.

    Provide a list right now of specific regulations – and their costs – that we’d repeal … where is that list?

    so that’s what you basically have with CPP.

    there is no real legitimate analysis of CPP that actually delves into specifics – and in turn the supposed damage they would do to the economy and what specific changes would reduce those impacts.

    Remember – the EPA HAS ASKED for responses… to their proposal.

    There is no alternative proposal for CPP other than to kill the whole thing outright and the EPA along with it for some.

    as I said in the beginning, CPP is not the first proposed regulation that has been attacked in the same way.. since 1906, it’s pretty much been pro-forma for as long as the EPA itself was created and has proposed and implemented regulation with the Clean Air and Clean Water Acts.

    Even today -other groups like the Farm Bureau are attacking the legitimacy of the EPA to regulate nitrogen and phosphorous and sediment in the Chesapeake Bay. It’s the same groups of folks who have always believed that regulation of air and water by the govt is wrong.

    so when the statement is made: ” Clean Power Plan Cost Still a Mystery” – it’s not that such costs could not be actually detailed in a real way… they could be – but then that would allow the EPA to also analyze and respond to those comments and so we never really get legitimate detailed responses – we get, instead, generic “we don’t know but we’re pretty sure it’s bad” type statements from those opposed.

    Give the EPA credit – it’s taken years to go from proposed to implementation – and we’re still talking about a decade from now to implement.

    compare that to the way that States like Va and the localities make changes to regulations… you get what? one or two hearings then BAM!

    😉

  12. Here is a two-part article summarizing how CO2 emissions can be traded under the Clean Power Plan:

    Part-1 Trading under Rate Based CO2 Target
    Part-2 Trading under Mass Based CO2 Target

    http://www.synapse-energy.com/about-us/blog/tricks-trade-who-can-sell-emissions-credits-whom-clean-power-plan-part-1-2

    I have not had a chance to review in detail, but Jim’s review touched on this idea. Gov McAuliffe has not disclosed details of his CPP proposal for Virginia, but I believe he has suggested Virginia could take an aggressive approach to build out clean energy and then sell the credits under the plan. I also believe buying credits is part of EPA approach (for those states who refuse to develop a plan, EPA will mandate a CO2-credit purchase plan for them).

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