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EPA Rule - Clean Power Plan

 

“The Greater Reading region is proud of the significant progress we have made to ensure our community has clean air and we are in compliance with EPA’s 2008 ozone standards. Now the EPA is changing the rules to require even stricter standards than that are not likely achievable. Our regional economy is driven by the manufacturing sector that is still recovering from the recession and will be further hindered by the increased uncertainty and expense that the new regulations bring.. This rule will also have negative impacts on our economy by increasing the price of electricity, one of the major operating cost for all businesses.  Operational investments will be diverted to increased electricity and regulatory compliance costs.  Regulators must work closely with the regulated community to devise a sensible solution that poses the least burden on industry and job creators. EPA needs to give regulatory stability and keep the standards at current (high) levels so small businesses can invest in hiring more workers, not complying with more red tape.

– Ellen Horan, President & CEO of the Greater Reading Chamber of Commerce

On July 29, 2015 President Obama received a letter co-signed by 260 national, state and local trade associations and chambers of commerce including the Greater Reading Chamber of Commerec & Industry regarding the U.S. Environmental Protection Agency’s final ozone regulations. 

On Aug. 3, 2015 President Obama unveiled the final version of his Clean Power Plan 

The Plan includes three major components:

•  Regulations governing newly constructed natural gas and coal-fired power plants;
•  Regulations governing existing power plants, with compliance measures that include increasing  efficiency of coal plants and increase use of natural gas, nuclear and renewables; and
•  A model federal rule for states who fail to submit an acceptable state implementation plan.

The rule will have negative impacts on our economy. Key takeaways from this rule include:

1. The price of electricity will rise as a result of these regulations. An economic analysis by NERA Consulting expects electricity costs to climb by 14% or more, with increases felt the most by low income and fixed income populations, as well as small businesses. EPA itself expects the price of electricity to increase in the grid that Pennsylvania gets its electricity from by 6%, even while noting that “costs may be understated.”

2. Increased deployment of renewable energy remains expensive, and its output unreliable. Even though EPA’s own Clean Power Plan documents note that increasing renewable energy is the most expensive way to reduce emissions, EPA has increased its expectations for states to increase renewables even further. Pennsylvania, for example, already has one of the most expensive alternative energy requirements in the nation, with consumers already having paid hundreds of millions of dollars for AEPS mandates.

Despite these subsidies, alternative energy has yet to be able to compete on its own in the marketplace, where all other electricity generators compete based on price. Ironically, these costly mandates have also jeopardized the future of some zero-carbon nuclear units. Energy output from renewables is also variable, meaning production is unreliable dependent on weather conditions. Voters should hardly be expected to pay for renewables twice – once through taxpayer subsidies, and again through energy portfolio mandates. Finally, despite some claims that “clean energy jobs” outnumber mining jobs – remember that renewables still only represent a fraction of the output to the great, further attesting to the inefficiency of the resource.

3. Pennsylvania has been given more time to meet a slightly less stringent goal – but compliance with the rules will still require a wholesale change to state energy policy. While states will have to file an initial plan by September 2016, final plans are not due until 2018. Further, Pennsylvania’s original emissions goal is less burdensome, but only by a fraction. Compliance with the plan will still cost our economy billions of dollars, with job loss felt the hardest in regions of the state where mining and power generation takes place. Nearly all of the reductions will have to happen between 2018 and 2022. As such, it is vital that the General Assembly ensure DEP follows the requirements of Act 175 of 2014, which obligates DEP to prioritize least-cost compliance options and to submit its plan for approval by the General Assembly prior to going to EPA.

4. This is a federal energy policy disguised as environmental regulation. The final rule differs significantly from the proposed version issued last summer. Notably, the Obama administration removed one of the rule’s four “building blocks” relating to decreasing consumer demand, as the measure was, by EPA’s own admission, legally unsound. The Obama administration has also changed its expectations on how much share of electricity will come from natural gas. Before, EPA expected natural gas to increase its share of the market; now, EPA expects its share to remain constant – even as many new natural gas plants are proposed in Pennsylvania, and some coal plants look to switch to gas. In place of energy efficiency and increased natural gas usage, the Obama administration expects states to increase their use of renewable energy. The federal rules ignore clear market signals regarding which fuels are the most economic, and do not give full credit to the value of low or zero carbon power generation like nuclear and natural gas.

Further, the federal backstop plan for states that do not file a plan (or for states whose plans EPA finds unacceptable) is for power plants to be forced by EPA into a national cap-and-trade scheme. Federal legislation to enact cap-and-trade failed in Congress in 2009, and nearby states that participate in the Regional Greenhouse Gas Initiative trading market have among the highest energy prices in the nation. EPA also opens the door for states to impose a carbon tax.

5. Litigation is certain, but an outcome by the Supreme Court is years away. Various states, companies and trade groups will challenge the rules in court, but a final decision by the Supreme Court will be years away. In the meantime, the state must evaluate its best course forward, which may include not filing a plan at all. The General Assembly’s continued and close attention to this matter is vital.

6. Finally, these rules will impose great cost and job loss for an arguably insignificant reduction in global greenhouse gas emissions. Development abroad continues to outpace that of the United States, with countries like China and India rapidly building new coal-fired generation to power their growing economies. Such generation lacks the emissions controls and regulations of American power producers. Yet all told, despite tens of billions of costs nationwide, global greenhouse gasses will only fall by a few percentage points.

State regulators must work closely with the regulated community to devise a sensible solution that poses the least burden on industry and job creators. This includes taking advantage of every ounce of discretion afforded by the EPA, proceeding deliberately throughout the process of developing a state plan, and faithfully executing the requirements of Act 175 of 2014.

The Chamber will continue to advocate for affordable, reliable energy production, which is a requirement of a strong economy.