While states ponder their role in compliance with the now-final Clean Power Plan, the ultimate action will be in the electric power sector itself. Utilities and other generators are making early moves to prepare for, if not get ahead of, EPA requirements. Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) are also starting to weigh in on solutions. For RTOs and ISOs, that means advocating for regional compliance rather than state-by-state plans. For utilities – well, it means continuing to move away from the power sources of the past and toward advanced energy.
The message from grid operators in the nation’s organized electricity markets to state officials is simple: Think outside your state borders.
“Our studies have shown that compliance on a regional basis is more effective than state-by-state,” Southern Power Pool (SPP) Vice President of Engineering Lanny Nickell explained. “If you have to do something, it’s a good way to go, and trading ready helps.” Similarly, Midcontinent Independent System Operator (MISO) Executive VP of Transmission and Technology Clair Moeller said, “It does make a difference if states go down the path [toward compliance] individually. It will erode the value of the market dramatically.” States in the PJM footprint (sub. required) have been discussing potential coordination since June. Doug Scott, VP of Strategic Initiatives at the Great Plains Institute, said that “almost all” of the 14 states in PJM are participating.
Even as states consider the merits of regional collaboration, several utilities are actively moving toward CPP compliance well before the 2022 interim period begins. For example, seven power producers were among the 74 companies signing onto the President’s American Business Act on Climate initiative, namely, Berkshire Hathaway Energy (parent company of subsidiaries including PacifiCorp, MidAmerican Energy, and NV Energy), Calpine, Iberdrola USA, AEE member company Invenergy, Pacific Gas & Electric (PG&E), Portland General Electric (PGE), and Tri Global Energy. Berkshire Hathaway pledged to retire 75% of its coal-fired capacity in Nevada by 2019, while PGE pledged to stop using coal altogether. Invenergy pledged to supply over 1 GW of new wind and solar and double its energy storage capacity by 2020.
Even in lawsuits filed against the Clean Power Plan, EPA has the support of several utilities and energy companies. In a joint motion to intervene on behalf of EPA, Calpine, Austin Energy, PG&E, Seattle City Light, and National Grid cited their collective “history of investing in clean generation and supporting the EPA’s efforts” as proof of “the achievability and reasonableness of the CPP.” NextEra Energy has also filed to intervene in support of EPA.
However, not all utilities and utility groups have followed suit — some have instead filed suits. Southern Company’s four utilities — Alabama Power Co., Georgia Power Co., Gulf Power Co. and Mississippi Power Co. — filed a petition for review of the CPP, as did the American Public Power Association and the so-called Utility Air Regulatory Group, whose members are not identified. In addition, the National Rural Electric Cooperative Association (NRECA) was joined by 37 of the nation’s 900 member cooperatives in filing for a review and a stay on the rule.
As some utilities are busily preparing their legal positions on either side, others appear content to stay on the sidelines. As the Wall Street Journal reported prior to the initial filing of lawsuits, utilities including Dominion Resources Inc. in Virginia, FirstEnergy Corp. in Ohio, and Dynergy Inc. in Houston were moving towards compliance rather than rushing to oppose the plan in court. According to Dominion Chief Executive Tom Farrell, “Everybody is moving in this direction anyway.” The Edison Electric Institute (EEI), which represents all U.S. investor-owned utilities, has also thus far stayed out of the litigation. EEI’s top lobbyist Brian Wolff explained that the group has chosen to engage with EPA rather than challenge the rule, saying, “It’s just never been our role to act as a challenging entity.”
Other utilities are moving toward advanced energy for purely economic reasons. CEO Ben Fowke of Minneapolis-based Xcel said the utility is seeing wind PPA bids at approximately $25/MWh, competitive with gas prices, which are close to historic lows. Fowke explained, “When we’re buying wind at $25, it’s a hedge against natural gas," adding, “wind is becoming pretty close to parity.” The utility plans to add 1,600 MW of wind energy over the next 15 years, exceeding state requirements in both Minnesota and Colorado.
At the same time, many utilities are retiring higher-emitting sources. By the end of 2015, Alliant, Westar, and DTE Energy will retire a combined 600 MW of coal, natural gas, and biomass capacity in Wisconsin and Kansas. Age, costly upgrades, new regulations, reduced demand, and cheap natural gas were all cited in the decisions. CPP opponents have dubbed Westar’s closing plants the first victims of the rule, even though Westar’s announcement did not mention the CPP but rather emphasized that the plants have outlived their useful life by 25% to 50%.
But if you listen to Charles Patton, President of Appalachian Power, West Virginia’s largest electric utility, the decline of coal power is inevitable, even without the CPP. “With or without the Clean Power Plan, the economics of alternatives to fossil-based fuels are making inroads in the utility plan,” Patton told energy executives at his state’s Energy Summit. “Companies are making decisions today where they are moving away from coal-fired generation.” That includes Appalachian Power, which anticipates a 26% decline in coal use by 2026, with or without the CPP.
Stay up-to-date on all policy developments with AEE's PowerSuite. Track regulation and legislation as it happens across all 50 states.