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Exelon: Industry Can Achieve EPA Carbon Reduction Goals at Low Cost Through Compliance Option that Includes Price on Carbon

Proposal would drive investment in clean energy while preserving electric system reliability


WASHINGTON (April 30, 2015) - The Environmental Protection Agency's proposal to reduce carbon emissions from existing power plants can be achieved quickly and at low cost to consumers through a voluntary compliance program that uses existing market mechanisms to prioritize the use of emissions-free energy, Exelon Executive Vice President of Governmental and Regulatory Affairs and Public Policy Joseph Dominguez told members of the United States Energy Association today.

Dominguez disagrees with critics who claim EPA's proposed carbon rule is unachievable, too costly and damaging to electric reliability and said they are on the wrong side of history. The remarks were part of a keynote address at the 2015 USEA Annual Membership Meeting & Public Policy Forum at the National Press Club.

"Americans want the power industry to pollute less. They believe progress in this area is possible, and they are right," he said. "As an industry, we have to offer ideas that focus on what we can achieve, not look for reasons why we can't. We believe there are options for reducing carbon on time without causing blackouts, soaring electricity costs or any of the other doomsday predictions."

Dominguez urged EPA to support a proposal to give states a way to comply with the Clean Power Plan, also known as Section 111(d) of the Clean Air Act, by imposing a cost on carbon emissions to make low- and no-emissions energy sources more competitive. The concept, referred to as Reliability Dispatch Safe Harbor, has broad support from industry, environmental organizations and trade groups.

"This is a rare instance where these groups agree, which is a good basis for EPA to support it," he said.

Currently, grid operators call upon power plants in order of their cost to operate. This is a time-tested mechanism for meeting demand while ensuring that consumers get the best price. However, the market doesn't currently factor in the cost of pollution on the environment and society, Dominguez said.

Under the Reliability Dispatch plan, EPA would determine a uniform, nationwide price for carbon emissions that would result in the reductions called for in the Clean Power Plan. Carbon-emitting power generators in states that opt into the plan would include the carbon price as a variable cost of operating, and the state would be deemed in compliance with EPA's interim target. The additional carbon price would reflect the true cost of operating high-emitting plants, resulting in more clean energy sources being dispatched to the grid based on their lower true cost. High-emitting plants would remain available to meet demand, ensuring that reliability is not compromised.

The revenues collected for carbon use could be returned to consumers, mitigating the costs of the program, Dominguez said. Exelon estimates that this approach would result in a one-time rate increase of 2 percent to 5 percent, which is in line with standard utility rate increases.

Reliability Dispatch would treat all zero-carbon power equally, providing an incentive to invest in new renewable energy sources, such as wind and solar, while increasing the competitiveness of existing clean sources, including nuclear and hydropower. Nuclear plants are among the most reliable sources of energy on the grid and are essential to any serious plan to reduce carbon emissions, Dominguez said. Yet some nuclear plants are at risk of shutting down due to economic factors and market rules that don't properly value the reliability and clean energy that nuclear provides.

"The ability of grid operators to rely on reliable, emissions-free nuclear plants will be increasingly important as the nation's electricity system becomes less reliant on coal and more reliant on natural gas pipelines and renewable technologies - such as wind and solar - which are weather-dependent," Dominguez said.