For more information contact: Jesse Borjon, (785) 271-3269
October 29, 2014
Commission urges Environmental Protection Agency to Withdraw its Clean Power Plan Regulatory Scheme
Topeka, KS - Today, the Commissioners of the Kansas Corporation Commission (KCC) authorized their staff to file technical comments to the Environmental Protection Agency (EPA) calling on the agency to withdraw its proposed Clean Power Plan (also known as Rule 111(d)) regulatory scheme and return to the proven and historical regulatory framework of regulating air pollutants.
"The direct impact of the EPA's Clean Power Plan will be a complete transformation of Kansas' electrical utility industry resulting in a substantial increase in rates and a negative economic impact to the Kansas economy," said Chair Shari Feist Albrecht. "The EPA's attempt to make such monumental changes in a few short years is unrealistic."
Section 111 of the Clean Air Act establishes a mechanism for controlling air pollution from stationary sources. The Clean Power Plan is a federally mandated program that requires states to reduce carbon output from existing coal plants and develop a plan that meets a state-wide carbon reduction goal set by the EPA. The Plan is currently scheduled to become final by June of 2015.
In Kansas, the KCC is the state agency tasked with ensuring Kansas ratepayers are provided sufficient and efficient electric service at just and reasonable rates. The EPA has historically worked with the Kansas Department of Health and Environment (KDHE) to enforce the Clean Air Act. This has been accomplished by regulating stationary sources of air pollution through generation unit specific permits and the use of proven technologies that reduce pollution. The Clean Power Plan proposes a new regulatory scheme that sets a state-wide carbon emission limit and seeks to change the generation mix in Kansas to place more emphasis on natural gas combined cycle generation (NGCC), renewable resources, and energy efficiency. This new scheme creates jurisdictional issues, as well as concerns with reliability, affordability, and other issues.
The KCC's comments focus on key issues including, EPA's Legal Authority, Reliability, Affordability, Regulatory Obstacles, Stranded Costs, Over Reliance on Natural Gas, and Cap and Trade.
Legal Authority - The Clean Power Plan is an attempt by the EPA to regulate each state's mix of generation resources. The EPA's plan explicitly requires coal-fired generation to be used significantly less or completely shut down, while shifting generation to NGCC, renewable resources, and energy efficiency. The Commission questions whether EPA's has the authority to regulate generation mix, an area now clearly under state control.
Reliability - In Kansas, the Southwest Power Pool (SPP) is responsible for dispatching generation and the reliability of the grid. SPP has conducted a Reliability Impact Study, which demonstrates that the Clean Power Plan, as proposed, will result in significant reliability issues, including black out conditions in the SPP region. The reliability issues identified by SPP's study are primarily due to the Clean Power Plan requiring a significant reduction in the use of coal plants, while shifting generation to NGCC (Kansas currently has no NGCC plants), renewable energy and energy efficiency in such a short time period (15 years).
Affordability - Ratepayers have seen dramatic increases in their electric rates over the past eight years. To meet the new Clean Power Plan standards, Kansas must make significant investments in replacement base load generation (NGCC), renewable energy, transmission, and energy efficiency, all contributing to substantially increasing electric rates even further. Commission staff estimates a cost to Kansas of $5 to $15 billion.
Regulatory - The process of regulating carbon emissions on a statewide basis is very problematic. First, the KCC does not regulate all electric utilities in the state of Kansas. Also, Kansas utility companies have invested in environmental upgrades when required by EPA, while other states have been much slower to comply. Because the Clean Power Plan is a state-wide emission standard and not specific to affected generation units, if protective measures are not taken, the result most likely will be some utilities ratepayers paying for costs that actually lower another utilities ratepayers cost. It is also possible that Kansas' ratepayers could pay costs that lower other states' ratepayers' costs.
Stranded Costs - Kansas has invested billions of dollars recently for environmental upgrades to electric generating units in Kansas that burn coal. The Clean Power Plan will mandate that these coal units generate significantly less or that they are shut down before the end of their useful life. Despite the fact that the coal units will no longer be fully utilized or not utilized at all, ratepayers will still be legally required to pay for the coal units through the end of their projected useful life.
Over Reliance on Natural Gas - With an abundance of natural gas in the U.S., there will be a need to replace a large portion of coal generation with natural gas generation. Coal has the ability to be stored on site while natural gas must be delivered at the time of use through transmission pipelines. A study should be commissioned to understand the dynamics of substantial increase in natural gas usage for electrical generation and the effects on our current pipeline systems and what will be required for new infrastructure to meet the demand.
Cap and Trade - In its Clean Power Plan, the EPA encourages the use of a market based approach such as a Cap and Trade program. Cap and Trade programs interject too much uncertainty and risk into the utility planning process for new generation and related transmission projects that will be required under the Clean Power Plan. In addition to creating higher costs, a Cap and Trade program could lead to future stranded costs.
Kansas has achieved a 19.1% reduction in CO2 emissions from 2005 to 2012. This reduction was realized while Kansas's retail sales of electricity increased by 3.15%.
The KCC regulates public utilities including telecommunications, natural gas, electric and water companies, and oil and gas producers. The Commission's regulatory oversight of public utilities primarily pertains to rates and terms of service. In order to ensure that customers of regulated utilities are provided sufficient and efficient service at just and reasonable rates - jurisdictional utilities may not change rates without Commission approval.
Staff's comments can be found here.