Utilities seeking financing for environmental upgrades should look to the markets for debt and equity, rather than trying to securitize those costs.
Power-Plant Cooling: How Many Fish Per kWh?
EPA flounders on the Clean Water rule, while producers tackle the real enemy—shortage.
many other reasons firmly rooted in dollars and sense.
California’s drought of 1987-1992 illustrates the severe limitations of that state’s water supply, whether for power-plant cooling or otherwise. According to the California Energy Commission, the economic, environmental, and social consequences from the drought echoed throughout the state, affecting every aspect of life—from agricultural production to recreational fishing. For example, the San Joaquin Valley experienced water shortages of 390,000 acre-feet, leaving 166,000 acres of agricultural land idle. The overall economic repercussions totaled $179 million in lost revenue.
Wildlife Protection: The Cost-Benefit Analysis
Acting under section 316(b) of the Clean Water Act, the EPA had successfully issued two rules prior to the current Phase III proposal to regulate the cooling water intake structures (CWIS) at facilities, such as power plants, that take in large quantities of water. These two rules replaced a prior regime whereby CWIS facilities would fall subject to permit regulation only by state officials, if at all, and then only on a case-by-case basis. State regulation had prevailed because the EPA’s first attempt (proposed in 1976) to regulate CWIS facilities under the Clean Water Act Sec. 316(b) had been struck down by a federal appeals court in 1977, on procedural grounds, and was not again taken up by the agency. ( See, Mercatus Center, George Mason University, “Public Interest Comment on the EPA’s Proposed Rule: Phase III Cooling Water Intake Structures,” EPA Docket OW-2004-0002-0919, filed March 24, 2005. )
In Phase I, in a final rule issued in 2003, after various iterations, the EPA issued rules governing cooling water intake structures at “new” facilities, including power plants, constructed after Jan. 17, 2002. It governed facilities with a design capability to withdraw more than 2 million gallons per day (MGD) from waters of the United States, provided they used 25 percent or more of their intake water for cooling. The EPA projected in 2001 that its Phase I rule would apply to some 120 facilities built over the next 20 years, at a compliance cost of less than $48 million per year.
In July 2004, the EPA issued new Phase II rules governing cooling water intakes at large “existing” power plants (construction begun on or before Jan. 17, 2002) with a total design intake flow of 50 MGD or more. It estimated an average annual pre-tax compliance cost of about 0.01 cents/kWh, or about one-tenth of one percent, at most, tacked on to the average consumer’s retail electric rate.
These rules covered the low-hanging fruit. Phases I and II together covered existing and future power plants using the very largest quantities of water for cooling. In each case, the agency conducted extensive studies of facilities of the type to be regulated in order to confirm that the benefits of protecting aquatic and marine life from impingement and entrainment caused by cooling intake structures would outweigh the costs of compliance.
Then came the Phase III rule, proposed in November of last year. The EPA offered three different options—three different definitions of the types of facilities that the rule would cover, depending upon the design capacity