AIR POLLUTION:

AEP proposal idles with no sponsors, no new industry support

When it came to light in April that American Electric Power Co. Inc. had drafted its own legislation to delay or change new EPA rules for a wide range of Clean Air Act pollutants and was shopping it to congressional offices, the proposal sparked the curiosity of a small army of journalists who take to Capitol Hill every day to cover energy and environmental policy.

But nearly two months later, the proposal has gone nowhere and its putative sponsors have still not seen it.

Sens. Joe Manchin (D-W.Va.) and Rob Portman (R-Ohio) -- who were named as potential backers of the proposal and represent states serviced by the utility giant -- say they have never committed to introducing the bill and have never even reviewed the draft, though their staffers may have.

"The press told me I had a bill before I knew I had a bill," Portman joked this week. "Honestly, the day the press asked me about it I went to Senator Manchin because I was told he and I were introducing it. He told me he had never heard of it, so I don't know."

The 56-page draft would exempt utilities from a host of air pollution rules if they agree to retire older coal-fired power plants by the end of 2020 or if they submit an alternative plan to U.S. EPA for ratcheting down sulfur dioxide, nitrogen oxides, mercury and other pollutants. The draft is the product of negotiations between AEP and the International Brotherhood of Electrical Workers. The United Mine Workers of America has also backed the proposal.

Jim Hunter, director of IBEW's utility department, said in a May interview that the plan was for AEP to drum up support from some other utilities that could be affected by new EPA rules and then find lawmakers to support the product.

"Our efforts are trying to get a Democrat and Republican sponsor, and then we're going to go out and work on some co-sponsors," he said. "Manchin is clearly someone we think would be a Democratic sponsor, so now we're relying on the company to come up with a Republican."

But no sponsors have stepped forward yet on either side of the aisle, and the bill seems to be having trouble gaining traction.

Meanwhile, though AEP has shared the draft with other utilities, it remains the only company endorsing it.

Melissa McHenry, a spokeswoman for AEP, said the company did not necessarily expect the utilities it shared the draft with to support it, or even for its proposal to become the basis of new legislation.

"Obviously, we shared the draft with a lot of people, and it got around," she said. "Our ideas are out there."

Industry efforts to prepare for rules vary

Stephanie Kirijan, a spokeswoman for Southern Co., said the utility would not comment on AEP's proposal until it was finalized. Like AEP, Southern Co. is concerned about EPA's new rules including the proposed rule for mercury and other toxics that is set to be finalized at the end of this year to take effect in late 2015.

"The requirements are stringent and the time frame for compliance is too short," Kirijan said. "It will drive up costs and potentially impact reliability, not to mention the economy."

Tom Williams, a spokesman for Duke Energy Corp., said his company was "well positioned" to comply with the EPA rules, having retrofitted 90 percent of its electrical generation with scrubbers and swapped some of its oldest, dirtiest power plants for cleaner new ones.

Williams said EPA regulations would likely prompt Duke to retire 2,400 megawatts of its capacity or convert it to natural gas from coal, and the company is still weighing options for an additional 1,300 MW.

AEP announced last week it would retire 6,000 MW of generating capacity as a result of the new rules.

Williams said Duke had been preparing to comply with EPA's regulations for a while, though he said the company still hoped EPA would offer a reasonable timeline for compliance. Still, he said Duke was not advocating anything like the AEP draft.

"AEP has their position, and we have our position, and they reflect what we've done over the last years," said Williams. "We've done a lot."

McHenry said her company had done a lot, too.

"It's not like we've sat back and not done anything," she said, noting that the utility had installed scrubbers or selective catalytic reduction, or both, on 60 percent of its coal fleet. AEP has also reduced its emissions by burning lower sulfur coals to reduce SO2 and adding low NOx burners to reduce NOx emissions, she said.

"We've invested approximately $7.3 billion since 1990 and have cut SO2 emissions by 73 percent and NOx emissions by 80 percent," McHenry said. She further noted that AEP has more coal-fired electric generation than Duke does, making emissions reduction a heftier challenge and expense for AEP.

'This deadline was coming'

McHenry said AEP's hope now is that Congress or the agency would find a way to make the regulations more flexible and the timeline more reasonable.

But John Coequyt, senior representative for climate change and energy at the Sierra Club, said AEP had been banking on several additional years beyond those normally provided to comply with Clean Air Act rules.

AEP's assumptions placed it in a particularly tight spot compared with others in the industry when EPA's proposed maximum achievable control technology rule was unveiled in March without that flexibility, he said.

"I think a lot of companies have known that this deadline was coming," he said. "A lot of utilities have had plans to deal with the MACT deadline. I think AEP is kind of an outlier."

In December 2010, AEP filed a long-term forecast report with the Public Utilities Commission of Ohio in which the utility noted that Utility MACT could take effect as soon as the end of 2015. It stated, however, that AEP had assumed for planning purposes that all of the "fully exposed" coal units in its Eastern fleet would be retired over the course of the decade, because EPA's Utility MACT rule could potentially be "extended and staggered" beyond the end of 2015.

McHenry noted that report was written before EPA's proposed Utility MACT rule came out, when AEP assumed the agency would adopt a "reasonable" timeline for its rule.

"It is clear that the proposed rule does not include a reasonable, extended compliance timeline," she said. "We will file comments on the proposed rule including our concerns about the compliance timeline."

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