POLITICS

GAO: EPA rules to cause energy price increases in Midwest, ‘compromise’ electric grid

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Politics,Beltway Confidential,Joel Gehrke

Four coal industry regulations from the Environmental Protection Agency (EPA) will likely cause electricity prices to rise and may “compromise” electric grid reliability — especially in the Midwest and South — according to the Government Accountability Office.

“Several representatives from power companies and officials from federal and state regulatory agencies have expressed concerns that as companies incur additional costs in responding to these additional regulations, and as the electricity supply is affected by generating unit requirements, electricity prices could increase and reliability — the ability to meet consumers’ electricity demands — could be compromised,” the GAO reported to Sen. Jay Rockefeller, D-W.V., yesterday.

Two of the regulations (the Cross-State Air Pollution Rule and the Mercury and Air Toxics Standards) have already been finalized, while two others (the Cooling Water Intake Structures regulation and the Disposal of Coal Combustion residuals) are still under consideration. The EPA has pushed these rules in order to mitigate health risks that may arise from exposure to coal emissions. Taken as a whole, the rules require coal-fueled power plants to upgrade their technology in order to meet new standards.

The studies the GAO surveyed predicted that between two and 12 percent of American coal-fueled power plant to close “in response to the four regulations rather than installing controls,” the GAO said. “Two of the studies we reviewed reported national estimates of the total costs of actions power companies may take in response to the four key EPA regulations, projecting from $16 billion to $21 billion in additional annual costs.”

Those coal plant losses will concentrate in certain regions of the country, though. “For example, a study by the Midwest Independent Transmission System Operator (MISO) . . . projected that 18 percent of the coal-fueled capacity in the U.S. portion of it’s region could retire,” the GAO observed. The effort to maintain electric grid reliability could cost between $2 billion and $10 billion “after potential unit requirements,” according to the same study.

In Ohio, Kentucky, Indiana, and West Virginia, coal-fueled plants generate over 70 percent of the state’s electricity, according to the GAO. The state of Ohio has the greatest concentration of the largest coal-fueled plants that are likely to close as a result of the rules, a GAO map indicated.

The EPA’s timeline for complying with the new rules could cause some plants to close that could have been retro-fitted had the owners had more time to do so.

“Available information suggests the actions the power companies take in response to the four key regulations will have costs, and some may be challenging to complete by the the regulations’ compliance deadlines,” GAO found.

EPA believes that “a moderately-paced” effort to retrofit the coal plants will suffice, but coal industry representatives say it “might be challenging to complete retrofits or retirements by the compliance deadline for MATS,  in some cases.” The main difficulty, they warned, would be the regulatory approvals that must be received in order to carry out the retrofits.

“In addition, these actions may have varied implications across the country — increasing electricity prices in some regions and contributing to some potential reliability challenges,” GAO said. Kentuckians, for instance, may find that the rules “increase residential electricity bills by 18 percent for one company and 10 percent for another — about $16 and $7 per month for an average customer, respectively, by 2016.”

 

 

 

 

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