Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

EPA's Emissions Rule: Reliability at Stake?

SIP Call in a Nutshell
Fortnightly Magazine - August 2000

inventory to come up with the budget."

Furthermore, she notes that utilities would have preferred a remedy on a cost-per-ton basis, instead of just a uniform number that every state had to meet.

For example, says Scavo, "If a certain state contributed x amount of parts per billion [PPB] of ozone, we should have applied a cost per PPB instead of saying, 'we think you should mitigate transport by applying highly cost-effective measures.' They don't agree with the way we developed our control strategy, and we did use cost for that and the court upheld that."

Moreover, she says that if EPA had used the utilities' preferred remedy, a state with less emissions leaving the state than its counterparts might have had a less-stringent NO x budget applied to its utilities.

In fact, in its March 3 opinion affirming the EPA's SIP Call, the court of appeals addressed this issue head-on and ruled for the government. As the court noted, the statute itself (the 1990 amendments to the Clean Air Act) barred emissions that "contribute significantly to nonattainment." In the court's view, that language implied at least some consideration of cost factors:

"The term 'significant' does not in itself convey a thought that significance should be measured in only one dimension--here, in the [opponents'] view, health alone. Indeed, 'significant' is a very odd choice. ... In some contexts, 'significant' begs a consideration of cost."

What it Means for Merchant Generators

Merchant generators like Dynegy will be affected by EPA's NO x SIP Call rule, although the amount of emissions reduction needed for new plants to comply is uncertain, says Lisa Krueger, vice president of environmental health and safety for Dynegy.

"With the merger of Illinova, Dynegy has roughly 3,800 megawatts of generation in the state of Illinois. Of that, roughly 3,100 is coal-fired generation. Those are existing units that will require a significant reduction in NO x emissions to meet the NO x SIP Call," she says.

Krueger adds that the reductions on gas-fired generation within Illinois and in other states affected by the NO x SIP Call will depend in part on the NO x budget for the state and how it is allocated in the state.

"States may be taking different approaches. Some states will be allocating to new sources. There will be a cost impact on new plants because not only will they have to meet NO x limits imposed by other environmental provisions, but they have to deal with the possibility that they will not be allocated enough NO x credits."

Furthermore, Krueger says programs for trading emissions typically achieve emissions reductions, but because of the low levels sought in the NO x SIP Call, the benefits of trading will be less dramatic.

The ruling fundamentally will change the NO x emissions markets, says Eric Thode, director of public relations at Enron North America.

"Because the plants have to put equipment on to reduce NO x emission, they are going to reduce the need for NO x credits. The market for 2003 will be a completely different market.