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Electric Supplies at Risk Under EPA Rules, FERC Member Says

Sept. 14 (Bloomberg) -- Environmental Protection Agency rules might constrain U.S. electricity supplies, especially when customer demands are highest in summer and winter, a member of the Federal Energy Regulatory Commission said.

Electric utilities may be unable to build new transmission lines to cope with the anticipated closing of coal-fired plants if the proposed EPA rules to cut pollution take effect, Commissioner Philip Moeller told the Republican-led House Energy and Commerce Committee at a hearing today.

“I remain concerned that the timeline for electric utility planning and implementation is not compatible with the EPA timelines for its new regulations,” Moeller said today in Washington. “I see a need for FERC to become further involved in the reliability implications of EPA actions.”

Moeller was named by President George W. Bush in 2006 and re-nominated by President Barack Obama this year. He is a former congressional aide and was director of the Washington office of Alliant Energy Corp., the owner of electric utilities in the Midwest.

His testimony was seized on by Republican lawmakers as a warning that the EPA isn’t only harming the American economy; it also may undercut the reliability of the electric grid.

“The Obama EPA’s unprecedented regulatory agenda brings with it a number of unprecedented problems,” Representative Ed Whitfield, a Kentucky Republican and chairman of the energy and power subcommittee of the Committee on Energy and Commerce, said today at the hearing.

State Regulators

State regulators from Georgia, Utah and West Virginia offered similar warnings, according to their prepared testimony posted yesterday on the committee’s website.

In “15 years of regulating the electric utility industry, I have never seen the number, the breadth, or the potential impact that this whole group of regulations will have on the industry and on my constituents,” Stan Wise, chairman of the Georgia Public Service Commission, said in his testimony.

The EPA is considering or has already approved measures to curb sulfur dioxide or nitrogen oxide in the eastern U.S. and Texas, limit mercury emissions and regulate coal ash and cooling water.

Comments by Moeller and Wise on implications of the EPA’s proposals to limit pollutants from power plants contrast with the assessment of FERC Chairman Jon Wellinghoff, who said the industry can add capacity to compensate for closed plants.

Industry Capability

Replacing old, coal-powered plants “is not something that’s unprecedented and it’s something that can be taken care of with proper planning,” he said.

Independent analysts also have found that electric utilities can cope with the rules, including in Texas where Energy Future Holdings Corp. units filed a lawsuit Sept. 12 against the EPA’s Cross-State Air Pollution Rule and said it would cost it $1.5 billion through 2020 to comply.

“Texas reliability is not threatened by CSAPR as we do not believe material capacity will be retired,” UBS AG analyst Julien Dumoulin-Smith said today in a report.

The Congressional Research Service in a report on Aug. 8 reached a similar conclusion for plants nationwide.

“The primary impacts of many of the rules will largely be on coal-fired plants more than 40 years old that have not, until now, installed state-of-the-art pollution controls,” the non-partisan congressional research unit said in its report. “Many of these plants are inefficient and are being replaced by more efficient combined-cycle natural gas plants,” which will continue “almost regardless of EPA rules.”

Older Plants

Democrats said today that the EPA rules would only force the closure of older power plants that haven’t installed modern pollution-control equipment. Representative Bobby Rush, an Illinois Democrat, said Republicans are on a “jihad” against new environmental protections, which would harm health.

“Regardless of the EPA’s rules, these old plants are being replaced by modern gas plants,” Representative Henry Waxman, a California Democrat, said at the hearing. “Reliability of the electric grid is an important topic and it should not be used as an excuse to block important public health protections.”

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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