Rural co-ops fight to survive Clean Power Plan's carbon limits

By Jonathan H Harsch

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Sept. 29, 2015 --U.S. EPA's Clean Power Plan (CPP), which for the first time would limit power plant carbon emissions, could be a death sentence for more than 100 coal power plants across the country.

But the battle to save at least some threatened plants will continue, according to the National Rural Electric Cooperative Association (NRECA), the trade association for over 900 private, not-for-profit, consumer-owned electric co-ops delivering power to 42 million people in 47 states.

Agri-Pulse interviews with NRECA and power plant co-op executives in Arizona, Indiana and Florida confirm that the nation's rural co-ops are pursuing a multi-pronged strategy of urging the Obama administration to make changes to the plan when it releases implementation details, seeking support from Congress, working with state regulators to win concessions which EPA hasn't provided, and suing to overturn the Clean Power Plan in the courts.

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Patrick Ledger, CEO of Arizona's G&T (generation and transmission) Cooperatives, (AZGT) providing electricity to over 350,000 co-op members in Arizona, California and New Mexico, acknowledges that EPA's final CPP rule, unveiled in August, provides “a better outcome than forcing us into bankruptcy, which would have been, without any doubt, the outcome under the proposed rule.” But he says AZGT still faces “significant hurdles and a lot …will depend on development of carbon markets and what the energy prices are going to look like.”

Ledger warns that the electric co-ops' future may depend on state implementation plans and how the Obama administration decides to deal with “stranded assets” - the coal plants that the CPP may force to close decades before the end of their useful lives, leaving co-op customers to pay off huge debts on plants no longer generating electricity or revenue.

Ledger hopes the administration will lower interest rates on USDA Rural Utilities Service loans to power plants or even forgive debt in extreme cases. He says action now could avoid having debt problems end up “in federal courts and bankruptcy courts where the outcome is completely unknown.”

Ledger says AZGT is working hard to survive the challenges presented by the CPP. But in the event the CPP final rule stands, Ledger says “we are going to be filing a law suit” and working with NRECA “to see this rule overturned.”

USDA Rural Utilities Service Administrator Brandon McBride tells Agri-Pulse that the implementation of the Clean Power Plan now moves to the states, which must decide whether to implement their own plan or utilize a to-be-developed federal fallback plan.

“We cannot speculate on what might happen before state plans are developed,” he said. Acknowledging that “RUS has approximately $4.5 billion invested in rural electric utility coal plants that may be affected by EPA's new rule,” he adds, “At RUS, we are carefully monitoring the implementation process, and where appropriate offering our expertise on rural service, as well as offering assistance to our borrowers.”

Donna Snyder, chief financial officer at Hoosier Energy Rural Electric Cooperative in Bloomington, Indiana, says the CPP final rule fails to account for the remaining useful life of current generating resources. “The rule “goes well beyond what we view as EPA's authority and it goes well beyond what can be done at an existing power plant to control emissions,” she told Agri-Pulse.


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Calling for “a balance of affordability, reliability and environmental stewardship,” Snyder says Hoosier Energy supports an all-of-the-above energy plan to include not only renewables and natural gas but also “the valuable coal resources that we've invested in over the years.”

Snyder explains that because EPA still hasn't released all the details on the CPP, Hoosier can't predict whether it will be allowed to continue operating its coal-fired Merom Generating Station, which is equipped with the latest sulfur dioxide-removing scrubbers and nitrogen dioxide removing selective catalytic reduction equipment. She points out that even before the new carbon limits, Hoosier invested over $568 million to install environmental controls at Merom to meet EPA's pre-CPP environmental regulations.

Snyder adds that “there is no technology that you can install on a coal plant to comply with the Clean Power Plan” - raising the possibility that Merom will join the list of expensive stranded assets.

Florida's Seminole Electric Cooperative faces the same challenge after investing $530 million in environmental upgrades for its award-winning Seminole Generating Station. Seminole's Ryan Hart sees no way for the plant to comply with the final CPP rule, potentially saddling co-op members with no income from the plant to pay its $900 million debt. That's an especially painful debt because it was the 1978 federal Fuel Use Act that pushed co-ops like Seminole to invest in coal rather than natural gas generating plants.

Kirk Johnson, NRECA senior VP for government relations, says the association will continue seeking ways to “reduce the negative impacts the rule will have on our members.” To do that, he says that once EPA publishes details of the final CPP rule in the Federal Register, NRECA will file a formal petition with the D.C. Circuit Court of Appeals “to consider whether or not the rule passes legal muster.”

Johnson says it's too soon to calculate full CPP impacts because so much depends on state implementation plans and “whether or not the state plans work together, whether there is a regional approach, whether there is some sort of trading.” He says “EPA is very much counting on the notion of emissions trading to help allow some plants to continue operating,” but that would require other plants over-complying to “allow plants that would be stranded assets with remaining debt to get the emissions allowances to continue to run.”

NRECA's basic demand from EPA, Johnson says, is that the agency provide co-op plants “the opportunity to pay back the debts that they've incurred to build or improve those plants . . . But you can't pay debts back if you can't run the facilities and sell the electricity.”

Once EPA publishes additional data and analysis of projected impacts of its final CPP rule, NRECA will provide an updated map of expected coal plant closures across the country. For now, the latest NRECA projection is for 111 plants to close complexly, an additional 70 plants to keep going with reduced capacity, with a total of almost 86,000 megawatts of lost capacity.

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