September 14, 2011
Exelon: EPA’s Clean Air Rules Can Be Implemented on Time Without Threatening Reliability
Existing tools for case-by-case extensions mean no need for blanket delay
Chicago – The electric utility industry can comply with the U.S. Environmental Protection Agency’s clean air rules – the proposed Mercury and Air Toxics Rule and the final Cross-State Air Pollution Rule – while maintaining the reliability of the nation’s electricity grid, Exelon said today.
“The rules have been in the works for about a decade, and the electric utility industry is well-positioned to respond, with more than 60% of coal-fired power plants already equipped with pollution controls,” said Joseph Dominguez, senior vice president of federal regulatory affairs, public policy and communications for Exelon. “Those companies that have done little or nothing to improve or update antiquated, inefficient plants should start planning for compliance now, instead of lobbying for categorical extensions or legislative delays.”
Those utilities claiming a large volume of coal plant retirements due to the rules are citing retirement estimates made before the details of the rules were released, so those estimates overstate the impact. But the more recent Bipartisan Policy Center report, Environmental Regulation and Electric System Reliability, projects 15-18 gigawatts of incremental coal plant retirements by 2015, which is less than 6% of total coal-fired capacity, and less than 2 percent of total generating capacity.
In addition, an August 2011 report from the Congressional Research Service highlights the nation’s substantial amount of excess generation capacity and the industry’s proven track record of building capacity in far greater quantities and more quickly than may be needed under the rules.
If there are isolated cases where power plant owners need more time to install pollution controls, existing regulatory and market mechanisms can provide extensions on a case-by-case basis. For example, the Clean Air Act provides the opportunity for extensions to install pollution controls. In addition, the U.S. Secretary of Energy has authority under the Federal Power Act to order units to operate on a limited basis in emergency situations.
Furthermore, the Cross-State Air Pollution Rule’s 2012 requirements were designed to be met by operating existing pollution control equipment and limited fuel switching.
In their joint comments to the EPA on the Toxics Rule, five grid operators responsible for ensuring the reliable flow of electric power to over 146 million Americans also proposed a limited, targeted “reliability safeguard” that could be used to address any localized reliability issues. It should be noted, however, that the grid operators also emphasized that they expected the safeguard “would not be invoked often, if at all.”
Exelon supports the grid operators’ approach. In fact, Exelon has experience working with the nation’s largest grid operator, PJM, when Exelon sought to retire four of its Pennsylvania fossil-fired units. PJM notified Exelon that two of the units needed to stay in operation to meet local reliability needs for several additional months until transmission upgrades could be constructed. All of the necessary upgrades will be completed within 29 months of Exelon’s announcement of its plans to retire the units. By operating these fossil plants for reliability purposes only, Exelon has been able to maintain electric reliability while minimizing harm to the environment and human health.
“Exelon’s experience demonstrates that there are existing mechanisms that would allow the health and economic benefits of the rules to take effect as quickly as possible, as opposed to a blanket compliance extension that would unnecessarily prolong the public’s exposure to dangerous pollution,” said Dominguez. “Implementation of the rule also provides the regulatory certainty utilities need to make substantial capital investments in modernizing the nation’s electric system, which will create jobs.”
Exelon Corporation is one of the nation’s largest electric utilities with more than $18 billion in annual revenues. The company has one of the industry’s largest portfolios of electricity generation capacity, with a nationwide reach and strong positions in the Midwest and Mid-Atlantic. Exelon distributes electricity to approximately 5.4 million customers in northern Illinois and southeastern Pennsylvania and natural gas to approximately 490,000 customers in the Philadelphia area. Exelon is headquartered in Chicago and trades on the NYSE under the ticker EXC.