Electric Competition Moves On
The recent months have brought a flurry of activity in a number of states:
ARIZONA: The Arizona Corporation Commission approved rules opening...
on the NO x SIP Call refute NERC's reliability claims, highlighting the fight between industry and environmentalists.
"The EPA NO x SIP Call process has been politicized," says one source, brushing off the differing reliability conclusions.
But an environmental policy expert at the Department of Energy sees potential problems if proper steps are not taken. Says the source, "There are a number of actions that can be taken by the industry to mitigate the potential impacts of the SIP Call, such as the coordination of planned outages. However, [this is] at a time when the reliability of the industry is already being called into question."
Utility executives say they already have gone to great lengths to comply with environmental objectives.
"Since 1970, the amount of coal used for electricity has nearly tripled, yet total emissions have been cut by about a third. Electric utilities meet or exceed numerous clean air requirements," says CMS chief McCormick.
Furthermore, he adds that the equipment required to meet new EPA rules is too expensive, and will force his company to increase prices. As an example, American Electric Power in its annual report estimated that it would have to allocate $1.6 billion to comply with the new standards.
But while CMS Energy may be able to pass increased costs through to distribution customers through its regulated cost of service, merchant generators that buy and sell at market-based rates in deregulated markets say they expect that they will have to be content with less profit.
SIP Call in a Nutshell
As it was first issued three years ago , the EPA rule required 22 states and the District of Columbia to reduce emissions of nitrogen oxides, which react with other chemicals in the atmosphere to form ozone (smog). In addition, the EPA set up a NO x budget, establishing the maximum amount of NO x allowed to be emitted in each state affected by the NO x SIP Call, based on a new eight-hour standard to measure ozone attainment, which replaced the one-hour standard set in 1979. The process of setting a NO x emissions budget for each state drew distinctions among certain categories of boilers, engines, and electric generating plants, including some and excluding others from tabulations of NO x emissions and calculations of required tonnage reductions. However, in the final SIP, each state remains free to decide how it will achieve the actual emissions reductions required by the EPA.
Jenny Noonan, policy analyst in the Office of Air Quality Planning and Standards at EPA, says states will have to submit a state implementation plan by late October, now that the federal appeals court has lifted the stay. When asked, she said she still expected the agency to stick with its planned deadline of May 2003 for full compliance with NO x reductions.
"The court made a couple of small adjustments," added Noonan. "It remanded [the case] back to EPA [regarding] Georgia, Missouri and Wisconsin." The court took Wisconsin out of the SIP Call, finding no proof that emissions floating out over Lake Michigan affected downwind states.