EPSA worries about impact of state CO2 plans on interstate markets

As a representative for competitive generators, Electric Power Supply Association (EPSA) President and CEO John Shelk likes to say that his organization is “fuel neutral,” meaning that it does not play favorites among fuel sources for electric power.

“We did not comment on all the soup-to-nuts issues,” connected with the Clean Power Plan proposed by the Environmental Protection Agency (EPA), Shelk said Dec. 8 during the PennWell GenForum conference in Orlando, Fla.

Nevertheless, EPSA does have some concerns with the EPA plan, Shelk told the gathering organized by GenerationHub.

EPSA members are deeply engaged in interstate power markets. As a result, the group is worried about the structure of the EPA proposal that instructs states to draft plans to cut CO2 emissions 30% by 2030.

“How does the EPA plan continue to allow wholesale markets to continue to market, or not,” Shelk said. “There are interstate markets,” he said.

“You really have to work with FERC and the states.” You cannot dispatch the grid “state by state,” Shelk said.

The EPSA official said that the EPA CO2 proposal is different from prior pollutant rules that sometimes involved state implementation. “We are not putting a gizmo or a gadget on a plant” to control CO2, Shelk said. The EPA rule is addressing things like energy efficiency and dispatch rates for certain types of plants, Shelk said.

At the same time, Shelk stressed that his members, which include the likes of Calpine (NYSE:CPN), Exelon (NYSE:EXC) and NRG Energy (NYSE:NRG) don’t necessarily oppose a federal carbon regime.

“A lot of our members like the EPA plan,” Shelk said. “We are not in the climate denier camp,” he added.

Competitive suppliers are different from regulated utilities in that they don’t have a rate base to cushion the impact of increased expenses. “You feel the bumps in the road quicker and with more force,” in competitive power, Shelk said. For example, the cheap natural gas prices were felt first and most by competitive suppliers.

The EPSA website currently lists 15 members. Shelk said that while his organization has fewer members than it did a few years back it controls more generation capacity, thanks to industry consolidation.

EPSA looking at FERC, legal, regulatory issues

During the past year, courts have often been deciding where the lines are drawn between federal and state jurisdiction of energy markets, Shelk said.

The New Jersey and Maryland state generation subsidy programs were shot down by federal appeals courts. Maryland has asked for U.S. Supreme Court review. Shelk, an attorney, doubts the high court will hear the case given that there was no split among federal circuits.

The Maryland and New Jersey cases are examples where “everybody wanted the bright new shiny plant,” and the jobs that come with them, Shelk said. “Today’s new plant is tomorrow’s old plant,” Shelk said. It was an attempt “to force feed the system” although there were already ample supplies of power, he added.

There seem to be constant efforts at the state level to second-guess competition, Shelk said.

Nationally, there will be a “change in the gavel” at the Federal Energy Regulatory Commission (FERC) in 2015, Shelk noted. In April Norman Bay will succeed Cheryl LaFleur as chairman of FERC. Bay was confirmed to FERC by the Senate last summer. Under a deal worked out by lawmakers, he will succeed LaFleur as chair in 2015. LaFleur has been leading FERC since she was named acting chairman in November 2013.

Shelk also said he was happy to see the Senate Energy and Natural Resources Committee approve Colette D. Honorable of the Arkansas Public Service Commission to fill the final FERC vacancy.

Shelk also noted that EPSA is monitoring the so-called “fuel assurance” rule at FERC. Regional Transmission Organizations (RTOs) have until mid-February to submit reports on what they are doing to blunt the impact of a future polar vortex, he noted.

Meanwhile, EPSA continues to be engaged in legal follow-up to a demand response ruling by the U.S. Court of Appeals for the District of Columbia Circuit.  In May by a three-judge panel for the D.C. Circuit ruled two-to-one that a FERC rule concerning demand side management should be vacated “in its entirety.”

FERC will be allowed to go ahead and seek Supreme Court review, Shelk said.

A “sleeper case” is D.C. Circuit case concerns EPA exempting demand response units from certain EPA rules, Shelk said. The case involves application of some EPA standards to so-called “behind-the-meter” generation.

Shelk says companies keep backup generators for many reasons. EPSA argued this setup was being abused by some to get around tough EPA standards. “You are just shifting your demand to these diesel generators,” Shelk said.

This is not fair to conventional power plants that are fully regulated by EPA, EPSA has argued.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.