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News Digest

Fortnightly Magazine - June 15 1998

habitats. Project WINGS is administered by Two Rivers Resource Conservation and Development Council Inc.

Enron Corp. on April 30 abandoned sales of electricity to the California residential market, finding it unprofitable to pursue residential customers in a deregulated environment. The withdrawal of Enron marks the loss of the only major out-of-state player in that market.

News Digest is compiled by Lori A. Burkhart and Phillip S. Cross, contributing legal editors, by Elizabeth Striano, managing editor and by Beth Lewis, editorial assistant.

EPA Expands NOx Plan: Introduces Cap-and-Trade Program

IN A MOVE met with little surprise, the Environmental Protection Agency proposed a market-based, cap-and-trade program as part of its plan to control nitrogen-oxide emissions from power plants and other sources. The EPA waited until given the go-ahead from the Clinton Administration in the electric restructuring proposal released in late March.

The EPA's new proposal, a 550-plus-page supplement released April 28, further expands on its 1997 proposal to require 22 states, primarily in the South and Midwest plus the District of Columbia, to cut NOx emissions by 35 percent (See, 63 Fed.Reg. 25,902, May 11, 1998; 62 Fed.Reg. 60,317, Nov. 7, 1997).

If passed, the proposal would allow states to voluntarily participate in the cap-and-trade program to meet NOx emissions limits. It would also allow states to sell credits derived from over-compliance. Yet while the trading program could make it easier to comply, not everyone is happy.

"There were some things in the proposal that were good; some things that aren't," said David Flannery, legal counsel for the Midwest Ozone Group. "While on paper the trading program looks good, in reality it doesn't look like it's going to save anything¼ We will continue to urge a more flexible approach.

"It predominantly regulates sources in clean-air areas and really doesn't place an emphasis on sources that are in the dirty areas," he added. "They're regulating the wrong sources."

The supplement also suggested an alternative approach for calculating each state's NOx budget. EPA was interested in getting feedback on this suggestion. "We put that in there to get people's reactions," said Kimberly Scavo of EPA's Office of Air Quality Planning and Standards.

Under the new proposal, budgets would be calculated based on total electricity generation, not just fossil-fuel generation, as proposed in the original draft rule.

"We're very happy with the structure for rate limits for utilities," said Bruce Craig, director of utility regulation and environmental affairs for the Natural Gas Supply Association. This alternative approach sets up a fuel-neutral standard, he said. "So regardless of the fuel or technology, you have to meet this particular standard, which levels the playing field for everybody."

Finally, EPA included some changes in reporting requirements and laid out guidelines to assure compliance and to approve state programs to achieve set goals.

The agency said it intends to "finalize" its proposal within "the September 1998 time frame." It has set up a 45-day comment period, ending June 25, and was to hold its first public hearing on May 29.

Once a rule is approved, utilities would have one year to