Rural utilities are cautiously optimistic about the changes made to the final version of the Obama administration’s Clean Power Plan, but they don’t know if it will be a win or lose for them.
The rural cooperatives make up the large swath of the nation’s electric system that lies in between the densely populated areas of the nation. They are consumer-owned and serve some of the poorest areas in America, and therefore are the most sensitive to policies such as the power plan, which is expected to drive up costs and require new investments to comply.
The Environmental Protection Agency plan places states on the hook to reduce emissions from power plants beginning in 2022, with the goal of a 32 percent emission reduction by 2030. Many rural utilities use coal-fired generation, which the EPA plan would seek to limit.
Speaking on a conference call Monday, Duane Highley, the CEO of Arkansas Electric Cooperatives, said the EPA has reduced the stringency of its original emission reduction goal for his state, but the timing, or “glide path,” for getting there appears more like a “crash landing.”
Highley noted that the EPA gave states a two-year extension of the target to begin complying, from 2020 to 2022, but it still may not be enough time to invest in the infrastructure needed to shift from the co-op’s coal-heavy power base to something cleaner, such as wind or solar.
There is “not enough time to develop [the] infrastructure needed to replace the coal that is lost,” Highley said on the call, hosted by the National Rural Electric Cooperative Association. He added that it will take new transmission lines to make up for the losses, by connecting to far-off wind farms and other resources. Highley estimates that planning and siting new transmission “will take at least 10 years,” which places his co-ops well beyond the EPA’s interim compliance period.
Despite the challenges, he was pleased to see EPA included a “reliability safety valve” in the final rule. The safety valve would prevent a generator — most likely a coal plant — from being closed to comply with the rules if the plant is deemed necessary to prevent blackouts.
Highley said that even with the changes, Arkansas is the poorest state in the country, and “we are bearing” more than other states under EPA’s rules.
Patrick Ledger, CEO of Arizona Electric Power Cooperative, said his state is breathing a sigh of relief in taking a preliminary read of the rule. Yet, he is also being cautious. There “does seem to be some positive signs, … [and we] do appreciate the additional two years,” he said. The state emission goal is less stringent than the draft rule, he added. “[We are] optimistic this is the flexibility we were looking for and asking for,” Ledger said.
Without flexibility, Ledger said his company was “faced [with] an epic situation” of rapidly scuttling much of its coal plants in a very short period. He said “the proposed rule would have been cataclysmic …, [as] we were looking at shutting down all of our coal plants.”
Like Highley, Ledger says closing the number of coal plants would have been “problematic because we serve … ratepayer[s] … [who are] at or below the poverty rate.” Switching to other resources would cost too much, forcing the utility to shutter much of its operations, he said.
Ledger said a situation that gets little play in deliberations over the Clean Power Plan is that energy policies from the 1970s forced many co-ops to go “all in on coal,” which is now turning out to be a liability. The Fuel Use Act, passed by Congress in response to the Middle East oil embargo as a way of conserving petroleum, mandated that power plants phase out their use of petroleum-based fuels, which were used more in power plants back then. The law forced the country away from oil and toward using huge amounts of coal for electricity production.
Many in the utility industry who went through the changes say increased coal use was Washington’s plan. That makes some uneasy when considering that Washington keeps changing its mind about what is acceptable for producing electricity.
Lisa Johnson, CEO of Florida-based Seminole Electric Cooperative, said some of her company’s largest coal plants are in jeopardy under the rule. Johnson says Seminole appreciates the added two years to the interim targets, but she is unsure “if that will be enough time.”
She said the state’s target has been lowered under the final rule, but greater analysis of what that actually means for her coal fleet requires more study.
