Clean Power Plan a “Hot Topic” at Regulatory Conference

The Clean Power Plan (CPP) and its many implications sparked a lot of great dialogue at the Center for Public Utilities’ “Current Issues 2015” regulatory conference held last week in Santa Fe, N.M. Among the audience of state public utility commissioners and utility executives in charge of regulatory strategy, the proposed CPP and anticipation of the final rulemaking this summer was a recurring focus over the two-day event, with panel discussions devoted to discussions on CPP compliance, multi-state vs. individual-state participation, and impacts that the final ruling may have on reliability.

The events two keynote speakers—Senator Jeff Bingaman, Former Chairman, Energy & Natural Resources Committee, U.S. Senate and The Honorable Collette Honorable, Commissioner at FERC – set the tone with their opening comments and references to the CPP. Senator Bingaman noted the challenges from courts, Congress and states that are likely to continue to face the CPP and suggested that it’s “premature to address the impacts of the plan without a final version before us.” Nevertheless, one of the key issues that needs to be addressed, as Bingaman duly noted, is the concern raised by a number of states regarding the credit they may or may not receive for steps already taken to reduce carbon emissions and the extent to which those steps had been considered in the proposed state targets included in the draft CPP. Put another way, some impacted entities are very concerned that there is an inherent lack of symmetry between goal computation at the state level and compliance demonstration that is recognized by the EPA. The other concern, which has formed the basis for some of the litigation in opposition to the plan, is how quickly heavily coal-dependent states can transition out of that dependence and whether the interim targets associated with 2020 are attainable. Both issues are items that will need to be addressed in the final rule, observed Bingaman.

Commissioner Honorable’s keynote focused on the work that has been done in the Technical Conferences held over the last year to discuss the CPP’s impact. While the Commissioner made it clear that the CPP is “EPA’s rule, not FERC’s” she and her fellow commissioners are waiting patiently for the final rule and will continue to consider the CPP within the context of FERC’s role to ensure reliability and protect customers. Further, it will be FERC’s role to provide counsel but not to challenge the CPP, the commissioner said. She also pointed to several issues that have come out of the Technical Conferences. First, if regional collaboration is to be pursued, the RGGI model in the Northeast does appear to offer a good template, along with work that is being done in WECC and at the Midwest ISO. Second, the draft CPP may not go far enough to address reliability and safety implications that result from CPP compliance and that is something that will need to be addressed by the final rule. Unforeseen events could compromise reliability across the country, and along with the individual state targets for reducing emissions, the Commissioner offered that the final CPP will also need to consider how to protect the nation’s grid.

Subsequent panel discussions at the event delved deeper into the discussion around multi-state versus individual-state CPP compliance strategies. One point that stood out was a reference to the fact that “one ton of carbon reduction in one area does not equal one ton of carbon reduction in another area,” and consequently those promoting a multi-state/regional approach will need to address multi-state reciprocity arrangement to align incentives across states and to avoid wealth transfers. Much time was also spent on the fact that reference to a “multi-state approach” often overlooks the fact that generation sales and transmission lines do not fall neatly into state borders and thus a regional approach that is aligned with RTO territories rather than state borders might be a more effective approach.

All in all, it was very interesting to be in a group of commissioners and policy-minded utility representatives as implications of the CPP continue to be vetted.

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