So the Clean Power Plan Rules Are Out. What Happens Now? by Jeremy Elrod, TMEPA
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This month the Environmental Protection Agency released its final rules on its Clean Power Plan under 111(d) of the Clean Air Act. The rules regulate greenhouse gas emissions from electric generating units, whether they be new, existing, modified, or reconstructed. The rules are complicated to say the least, but the overall target of the rules is to reduce carbon dioxide output nationwide from power plants 32 percent by 2030 compared to 2005 levels. This is accomplished by the EPA giving each state a goal to meet, and then requiring each state to come up with a "state plan" to meet its goal. The rules have received much criticism from across the county, and many comments were filed challenging their legal authority critiquing different parts of them. Legal challenges are certain to come, with the likely final conclusion being the Supreme Court having the final say.
So with the rules released, what happens in Tennessee now? As we all know, the state is unique in that all electricity is generated by the federal agency TVA, so Tennessee’s plan will be tied at the hip with TVA. Under the original proposed rules, TVA’s biggest criticism was it failed to receive credit for the nuclear plants currently under construction, Watts Bar 2. Also, TVA was not given credit for emissions reductions it has been carrying out in the past decade under an existing agreement with the EPA. Tennessee and TVA were looking at the possibility, like most other states, that to comply with these new rules would require significant capital outlays to build new power plants with lower carbon dioxide emissions or modify existing power plants. Significant, unplanned capital outlays mean high rates for electric ratepayers. However, if TVA and Tennessee are given the credit for lower emissions because of Watts Bar 2 and its other emissions reductions, TVA could possibly avoid spending significant sums on new power plants.
In preparation for the final rules coming down, the 2015 session of the Tennessee General Assembly passed Public Chapter 478. This law requires TACIR, upon submission of Tennessee’s final state plan, to prepare a report that assesses the effects of the state plan. The bill requires TACIR to look at several areas, including: the state’s electric power sector; electricity consumers within this state; employment within this state, both directly and indirectly; economic development in this state; the competitive position of this state relative to neighboring states and other economic competitors; state and local governments; existing state laws; and any proposed legislation that may be necessary to implement the state plan.
The bill has a trigger that relieves TACIR from its requirement of compiling the report. If TVA’s new nuclear power is be properly counted under the Clean Power Plan rules as being part of the reduction in the state’s carbon dioxide emissions, a study isn't needed. While TVA is still examining the rules, an early verdict is that TVA is able to count Watts Bar 2 as being part of Tennessee’s reduction in carbon dioxide emissions. Therefore, it is likely a study by TACIR will not be required according to this year’s bill. Electric rates are significantly less likely to see giant increases because TVA won't have the capital outlays to meet the new rules. In at least this instance, EPA listened to reason from TVA and other groups to allow Watts Bar 2 to count as it should, as a low-emission power plant that won’t produce carbon dioxide emissions. This was a win for TVA, but more importantly it was a win for Tennessee’s electric rate payers that likely won’t see their electric bills increase because TVA had to comply with burdensome EPA regulations.
Many other states have passed legislation in response to the federal Clean Power Plan. Several passed legislation that required its state bureaucracy to submit its state plan to the legislature before it goes to the EPA, with the legislature giving its approval or disapproval. Tennessee’s legislation originally had a similar process, but TMEPA and TECA lobbied hard against including legislative approval as part of submitting Tennessee’s state plan. The legislature would be unlikely to give approval to any plan put together by TDEC that looked like Tennessee was attempting to comply with EPA regulations, and under the rules the EPA writes a federal implementation plan, or FIP for Tennessee. Any FIP from the EPA would likely be harsher than any state plan put together by TDEC, and the EPA would be unlikely to listen to TVA or groups like TMEPA as it hands down the FIP. Tennessee’s legislation was a measured response, and it doesn’t jeopardize Tennessee’s unique position in the country of possibly avoiding significant capital costs by not having to build more power generation that emits lower carbon dioxide. It is possible that TVA rates, and therefore municipal electric rates, will be lower than other states that will have to recoup their significant capital costs through higher electric rates.
The rules will become official in the next couple of months, and the stage is now set for Tennessee, through its Department of Environment and Conservation (TDEC), to put together its state plan. By September 2016 each state must either submit its final state plan, or it can file an initial submittal along with an extension request. If Tennessee receives an extension, it must file its final state plan by September 2018. TDEC will likely be in discussions with TVA as it puts together its state plan. TMEPA will also be meeting with TDEC to stress that Tennessee’s state plan do everything it can to keep electric rates down and while not reducing grid reliability. Legal challenges will likely throw a wrench into the process, with a Supreme Court ruling likely years away that could possibly throw all the rules out. So while the final rules have been released, in Tennessee and in the court system the process will continue to play out. We’ll keep you updated.
So with the rules released, what happens in Tennessee now? As we all know, the state is unique in that all electricity is generated by the federal agency TVA, so Tennessee’s plan will be tied at the hip with TVA. Under the original proposed rules, TVA’s biggest criticism was it failed to receive credit for the nuclear plants currently under construction, Watts Bar 2. Also, TVA was not given credit for emissions reductions it has been carrying out in the past decade under an existing agreement with the EPA. Tennessee and TVA were looking at the possibility, like most other states, that to comply with these new rules would require significant capital outlays to build new power plants with lower carbon dioxide emissions or modify existing power plants. Significant, unplanned capital outlays mean high rates for electric ratepayers. However, if TVA and Tennessee are given the credit for lower emissions because of Watts Bar 2 and its other emissions reductions, TVA could possibly avoid spending significant sums on new power plants.
In preparation for the final rules coming down, the 2015 session of the Tennessee General Assembly passed Public Chapter 478. This law requires TACIR, upon submission of Tennessee’s final state plan, to prepare a report that assesses the effects of the state plan. The bill requires TACIR to look at several areas, including: the state’s electric power sector; electricity consumers within this state; employment within this state, both directly and indirectly; economic development in this state; the competitive position of this state relative to neighboring states and other economic competitors; state and local governments; existing state laws; and any proposed legislation that may be necessary to implement the state plan.
The bill has a trigger that relieves TACIR from its requirement of compiling the report. If TVA’s new nuclear power is be properly counted under the Clean Power Plan rules as being part of the reduction in the state’s carbon dioxide emissions, a study isn't needed. While TVA is still examining the rules, an early verdict is that TVA is able to count Watts Bar 2 as being part of Tennessee’s reduction in carbon dioxide emissions. Therefore, it is likely a study by TACIR will not be required according to this year’s bill. Electric rates are significantly less likely to see giant increases because TVA won't have the capital outlays to meet the new rules. In at least this instance, EPA listened to reason from TVA and other groups to allow Watts Bar 2 to count as it should, as a low-emission power plant that won’t produce carbon dioxide emissions. This was a win for TVA, but more importantly it was a win for Tennessee’s electric rate payers that likely won’t see their electric bills increase because TVA had to comply with burdensome EPA regulations.
Many other states have passed legislation in response to the federal Clean Power Plan. Several passed legislation that required its state bureaucracy to submit its state plan to the legislature before it goes to the EPA, with the legislature giving its approval or disapproval. Tennessee’s legislation originally had a similar process, but TMEPA and TECA lobbied hard against including legislative approval as part of submitting Tennessee’s state plan. The legislature would be unlikely to give approval to any plan put together by TDEC that looked like Tennessee was attempting to comply with EPA regulations, and under the rules the EPA writes a federal implementation plan, or FIP for Tennessee. Any FIP from the EPA would likely be harsher than any state plan put together by TDEC, and the EPA would be unlikely to listen to TVA or groups like TMEPA as it hands down the FIP. Tennessee’s legislation was a measured response, and it doesn’t jeopardize Tennessee’s unique position in the country of possibly avoiding significant capital costs by not having to build more power generation that emits lower carbon dioxide. It is possible that TVA rates, and therefore municipal electric rates, will be lower than other states that will have to recoup their significant capital costs through higher electric rates.
The rules will become official in the next couple of months, and the stage is now set for Tennessee, through its Department of Environment and Conservation (TDEC), to put together its state plan. By September 2016 each state must either submit its final state plan, or it can file an initial submittal along with an extension request. If Tennessee receives an extension, it must file its final state plan by September 2018. TDEC will likely be in discussions with TVA as it puts together its state plan. TMEPA will also be meeting with TDEC to stress that Tennessee’s state plan do everything it can to keep electric rates down and while not reducing grid reliability. Legal challenges will likely throw a wrench into the process, with a Supreme Court ruling likely years away that could possibly throw all the rules out. So while the final rules have been released, in Tennessee and in the court system the process will continue to play out. We’ll keep you updated.
