Bankruptcy may not be better for ratepayers.
The Brink of Ruin?
Utilities face huge costs of complying with new EPA standards.
How far will utilities be expected to go in complying with new proposed EPA standards , now before Congress, that seek greater reduction targets for emissions of sulfur dioxide (SO 2), nitrogen oxide (NO x), mercury (Hg), and carbon dioxide (CO 2), in what is to be an unprecedented multi-pollutant reduction bill?
According to a July Supreme Court ruling affirming the EPA's authority in the Clean Air Act, Justice Breyer interpreted that the EPA has the discretion of stopping short of "hurtling" industry over the "the brink of ruin" or even "deindustrialization" when considering economic costs of environmental compliance. I'm sure that's reassuring to those utility executives reading. The EPA can pursue almost any perceived health risk, at any cost, just short of bankrupting the industry.
Moreover, the Justice said the act was expressly designed to force regulated sources to develop pollution control devices that might at the time appear to be economically or technologically infeasible. In the EPA's decision to begin controlling mercury, for example, the agency has in effect put the industry just in that position. Not only have utilities taken issue with the science that links utility mercury emission with health, but they also say the technology has not been made to work properly. Power plants tested with such technology showed mercury removal rates that varied unpredictably from 0 percent to over 90 percent, according to the Electric Power Research Institute. "Due to remaining uncertainties on control technology performance and its potential impacts on power plant operation ... best current estimates are $1 billion to $3 billion annually above the cost of other emissions controls," read a recent EPRI report.
Notwithstanding, it should be mentioned that many previous emission technology controls were thought unattainable and too expensive by utilities, and were later developed and made cost-effective, as the Clean Air Act envisioned.
But now that we know that the EPA won't excuse lack of compliance on the grounds of technology, some of you will be surprised to know that science will not always be the deciding factor.
In an early September interview with EPA Administrator Christine Todd Whitman, TV Host John McLaughlin of the McLaughlin Group, explored the raging debate on whether the EPA should base its environmental policy decisions on objective scientific standards or whether so-called "values" should supercede science.
She affirmed on the show that the stakeholder process, much like the one going on now over the multi-pollutant bill, which brings environmentalists, businessmen and academics together, is not based in science, but is an effort to equalize the interests of those involved. The equalizing of interests over science has led the Sciences Advisory Board (SAS) to warn of the many problems that exist with the stakeholder process which make it inappropriate.
The biggest concern, according to McLaughlin, paraphrasing the SAS view, is that if you give up science in the direction of the stakeholder process or a precautionary emphasis, you're opening up policymaking to all manner of