Southern: FERC needs to tell EPA to fundamentally alter the Clean Power Plan

The primary way that the Federal Energy Regulatory Commission can help in relation to EPA’s proposed Clean Power Plan would be to acknowledge, unanimously, the very real concerns created by this proposal regarding reliability of the electric system, the absence of an effective solution available to either EPA or to FERC to address the reliability concerns, and to advocate for more time to comply.

That is according to Jeff Burleson, Vice President of System Planning for Southern Co. (NYSE: SO), in March 11 testimony at a FERC technical conference on the Clean Power Plan’s potential impact on grid reliability in the eastern U.S.

Southern’s public utility subsidiaries (Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Southern Power) serve 4.4 million customers throughout a 120,000-square-mile territory in Alabama, Florida, Georgia and Mississippi. Southern Co. owns and operates a diverse generation fleet comprising approximately 45,000 MW of generating capacity, much of it fired by coal, and a robust transmission system with over 27,000 miles of transmission lines.

In Burleson’s statement, he addressed details and support regarding three key issues:

EPA’s proposed CPP compliance timelines are not achievable, thus more time is needed at every step of the process

“EPA’s own state-by-state CPP compliance analysis illustrates the un-achievability of the proposed CPP timelines. More time is needed at every step of the process but in particular more time is needed for compliance with both the final and interim CPP emission rate targets. EPA’s analysis predicts retirement of a number of coal-fired generation units by 2018 and replacement of that coal-fired generation with combined cycle natural gas generation by 2020. The proposed timelines are inadequate for development of needed infrastructure and replacement generation. The proposed timelines limit the range of feasible compliance options for both the interim and final CPP compliance targets. The proposed timeline for the interim CPP emission rate targets effectively eliminates robust consideration of regional approaches.”

EPA’s proposed CPP will jeopardize reliability of the bulk electric system

“EPA’s proposed CPP represents a major overhaul of the electric system that will potentially put serious reliability and operational pressures on the grid. This potential impact is unlike past environmental requirements where individual plants will either install environmental controls or close. Instead, the proposed CPP intends to shift regulatory and operational control over the nation’s electric system to the EPA, or to the state environmental agencies as a proxy for EPA. And it does so under the guise of ‘environmental compliance.’ There is no ‘reliability safety valve’ that can be properly designed or implemented that could remedy the myriad of possible consequences of tampering with the electricity system in this interventionist way. Moreover, The EPA CPP proposal would result in long term reliability challenges that extend well beyond the final 2030 emission rate targets. A continuing compliance obligation with the CPP would extend indefinitely beyond 2030. State or regional compliance plans will be based on a collection of separate actions that collectively attempt to achieve and then maintain compliance. However, unexpected events could dramatically alter a state or region’s ability to remain in compliance on a continual basis and force a state or region to decide whether to maintain compliance or whether to maintain reliable electric service to customers.”

EPA’s proposed CPP will increase bundled retail rates paid by customers

“EPA’s own state-by-state CPP compliance analysis predicts the premature retirement of existing coal generation that would have to be replaced by natural gas-fired combined cycle capacity. Additionally, EPA predicts substantial increases in energy efficiency and in some regions also predicts substantial increases in the penetration levels of renewables. EPA’s prediction of the premature retirement of existing coal capacity, the replacement of that capacity with combined cycle natural gas-fired capacity, the significant increases in energy efficiency, the significant increases in the penetration of renewables and the associated integration costs of those renewables will all result in significant upward pressure on the bundled retail rates paid by customers.”

EPA is assuming a lot of coal retirements in the Southern service region

Wrote Burleson: “EPA’s state-by-state CPP compliance analysis illustrates the un-achievability of the proposed CPP timelines. For the four states served by Southern Company’s public utility subsidiaries, the interim emission rate targets require roughly 75% of the overall reductions to effectively be made by 2020. In EPA’s compliance modeling of the four states served by the Southern Electric System, EPA assumed that by 2018 the Southern Electric System would retire more than 9,000 MWs of additional coal units over and above retirements already made as a result of the EPA MATS rule. These retirements would necessitate the addition of 5,400 MWs of gas combined cycle generation by 2020.

“Needless to say, these EPA compliance predictions are egregiously unrealistic since it would take: (i) three to seven years for any transmission upgrades to reliably accommodate retirements of this magnitude; (ii) more than five years for siting, permitting, state regulatory approval, engineering, procurement and construction of new combined cycle generation; and, (iii) more than three years to enable interstate natural gas pipeline expansion to supply firm fuel to the new generation. Yet, under the most optimistic timeline within EPA’s proposed CPP, individual state implementation plans would not have to be approved by EPA until the Fall of 2017, leaving woefully inadequate time for the needed state regulatory approvals, infrastructure development and generation resource changes.

“The proposed 2020 interim goal timeline is so aggressive that it would be extremely difficult to coordinate and fully implement a regional approach across multiple states. EPA’s proposed CPP allows an extension until 2018, to submit multi-state, regional implementation plans. However, EPA’s proposal does not allow any additional time for the start of interim compliance for regional implementation plans on January 1, 2020. If EPA takes a year to approve any multi-state regional plans that could be submitted as late as the middle of 2018, it would be the middle of 2019 before EPA approved those plans. EPA approval of a regional plan in the middle of 2019 would leave only about six months before the interim compliance obligations would begin on January 1, 2020. Such a short compliance timeline is clearly unworkable.”

He later added: “The sudden and unprecedentedly large amount of capacity that EPA assumes would be retired in order to comply with the CPP proposal would eliminate many of the very baseload units that have been long-needed, and will continue to be needed, to maintain voltage, inertia, spinning reserves, etc. to maintain the reliability of the nation’s bulk electric system.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.