FERC commissioner says EPA carbon rule may usurp state powers

By Emily Holden | 06/02/2015 08:54 AM EDT

PHOENIX — States complying with U.S. EPA’s Clean Power Plan run the risk of ceding jurisdiction over energy policy decisions to the federal government, according to Federal Energy Regulatory Commission member Tony Clark.

Clark, a Republican and former North Dakota electric regulator, told state regulators at a meeting of the Western Conference of Public Service Commissioners yesterday that EPA’s draft regulation to cut power-sector carbon emissions could "fundamentally change everything about how utilities are regulated."

"What EPA is asking states to do, depending on how states choose to write their [state implementation plans], is to give EPA authority over things that it on its own in the Clean Air Act does not have authority to claim jurisdiction over," Clark said.

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The Clean Power Plan set individual state reduction goals based on what EPA thought states could achieve through direct changes to coal-fired power plant operations and with systemwide efforts to cut emissions by using more natural gas, building up renewable energy and cutting back on power demand.

But Clark said states that seek credit for renewable portfolio standards and energy efficiency efforts would be giving EPA authority to regulate those programs.

"To the degree that you put that in a plan and it gets a seal of approval from the EPA, that then becomes a federally enforceable plan. So what happens then is the administrator of EPA is really in charge of state energy policy," Clark said. "It simply gives Washington so much authority over the decisions that have traditionally been made by state public utility commissions, legislators and governors."

Clark said he believes states’ responses will fall into three categories as they try to avoid giving EPA that power.

First, California and states in the Northeast will likely rely on cap-and-trade programs to set limits on emissions. Clark said he hasn’t traditionally been a fan of cap and trade, but from a mechanical standpoint, it might be "the least burdensome way for states to comply," as long as EPA is only enforcing the cap itself.

However, cap and trade is "a political dead leg in a large chunk of the country," Clark said.

Clark thinks a second group of states will submit plans based only on changes that can be made directly at power plants — which EPA has uncontested authority to regulate. But many states argue they cannot reach their targets with those changes alone, especially without jeopardizing electric reliability or significantly raising costs to consumers.

Last, Clark said a number of states will refuse to send EPA plans and "just say no" until the last lawsuits have been settled in front of the Supreme Court years from now.

Because those states will not be preparing proposals at all, regional carbon-cutting solutions that could be beneficial and keep costs down will be difficult to get off the ground, he noted.

‘Rubber-stamping costs’?

Even in states that are hostile to the rule, Clark says it’s critical for electric regulators to be talking closely with state energy offices, legislators, governors and environmental regulators responsible for writing plans.

"They absolutely have to be talking with those folks, because if they don’t, they could end up in a very, very bad spot where you could have the state environmental regulator committing to certain things that are within the jurisdiction of the [public utility commission] and all of a sudden, the state environmental regulator’s writing checks they can’t cash," Clark said. "At that point, you’re just rubber-stamping costs. … You don’t want to be in that position as a utility commissioner; you want to be in a position of actually helping to shape the energy policy of those states."

In states that have already announced they won’t comply, though, regulators are in a "holding pattern," he said.

Clark also offered further insight into FERC’s recent advice to EPA on how to avoid risking power outages under the Clean Power Plan (Greenwire, May 18).

"The Clean Power Plan puts FERC in a very interesting and unique position in that it’s not our rule; it’s EPA’s rule … and yet … almost all of the potential negative outcomes that could come out of a poorly structured Clean Power Plan are all squarely within our wheelhouse, both at the FERC level and at the local level at public utility commissions," Clark said. "Whether we want to be involved in that fight or not, the fight is coming to us and we need to be engaged."

Clark said that in regional technical conferences on the rule, FERC identified three concerns: that the rule didn’t allow enough time for power-sector changes to begin, that someone would need to review proposals to make sure they mesh together, and that there should be a reliability "safety valve" to provide real-time relief from state plans in emergency situations.

FERC’s letter did not explicitly call for a review of individual plans, what many have come to call a "reliability assurance mechanism."

But Clark said FERC and the North American Electric Reliability Corp. would want to conduct modeling to see how state plans fit together to affect reliability without making a "qualitative judgment."

"We’re not going to be going into the middle of individual state implementation plans and saying, ‘Oh, your energy efficiency product that you’ve worked out with your utility is garbage; you need to change it,’" he said. "Where we have a potential to be helpful is in modeling the reliability of the wider power system."

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