UTILITIES

Unadvertised visit from EPA's McCarthy encourages CEOs

LAS VEGAS -- What may have been the most important event at the Edison Electric Institute's annual meeting occurred with no fanfare and out of sight of the more than 1,000 attendees early Monday morning, hours before the scheduled program.

And it could prove to be a pivotal event as the electric utility industry opens what amounts to a multiyear negotiation with U.S. EPA over how to control greenhouse gas emissions from power plants.

It was when EPA Administrator Gina McCarthy met for more than hour with the executive committee of the trade association representing investor-owned utilities behind closed doors to do what industry leaders credit her for doing best: listening.

"I think it was positive she came out to face a group of CEO executives so soon after the proposed rule was released," said Nick Akins, chairman, president and CEO of American Electric Power Company Inc., whose power plant fleet is among the nation's chief emitters of greenhouse gases.

"We've had on ongoing relationship with the EPA," Akins said in an interview. He pointed to previous interactions that resulted in improvements from initially proposed rules, such as when EPA "made adjustments to the mercury rule based upon some input we had given."

He also cited the flexibility offered in the recently unveiled final clean water rule, also known as 316(b). "We're very happy with how that came out and certainly want to congratulate the EPA for working with the industry and listening to the concerns that we had," Akins said.

But this proposed rule is unlike any other before, as it is "more complicated," he said.

"When they deferred to the states in many respects -- here's your emission rate limits, and you go figure it out -- it drives a process that I don't know that we've ever had before, because it touches so many things," Akins, who was in the meeting, said.

For example, Akins cited the proposed rule allowing state compliance schemes to "go outside the fence line" through the use of energy efficiency, renewables, retirements of generation and the addition of natural gas.

"If they use 2012 as a base, there's concern that they've absorbed all the benefits and said, in effect, do more. So everybody's trying to figure out how does each state do more; they can only work with what they have. So we have to figure out from the perspective of each state we do business in what the opportunities may be," he said.

Akins said that, as in the past, "we've been very serious and very collaborative in our efforts working with the EPA and other stakeholders to come up with a solution that really makes sense."

Entergy Corp. Chairman and CEO Leo Denault was in the meeting and had a similar reaction to McCarthy's visit.

"I think what you're hearing from us is a recognition that, to date, Administrator McCarthy and the EPA under her leadership has been willing to have that dialogue," Denault said in an interview.

Speaking about the proposed rule's complex state-by-state goals for interim and final emissions reductions, Denault said, "We would hope that if they assumed one thing, and they were trying to accomplish one thing, and the math doesn't work that way -- that if we show them the math, they'll say, 'Oh, we pushed too hard here; we need to readjust.' That's what we're hopeful will happen," he said.

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'We want to be thoughtful'

At a news conference, Ted Craver, chairman, president and CEO of Edison International, said it was the first opportunity for EEI leaders "to talk about the rule, ask questions and exchange ideas" with McCarthy.

"The part I feel pretty good about is the industry once again has demonstrated its ability to work in a collaborative way, a constructive way with EPA," said Craver, the incoming chairman of EEI.

"We want to be thoughtful," said Craver when asked how his and other executives' posture about EPA jibes with early and loud condemnation of the proposed rule by an array of Washington, D.C.-based business lobbies that purport to speak for the utility sector.

"To start by throwing bombs as opposed to sitting down and really understanding what's in the 645 pages of the proposed rule" is the wrong approach, Craver said.

Akins noted that "various states will have various views of what this means. But we want to be consistent and mindful about what we say about this proposed rule. There's a whole lot of work that we have to before we can start taking positions."

Southern Co. CEO Tom Fanning also decried "the notion of playing politics" with the rule.

"At the end of the day, we all want the same thing: clean, safe reliable and affordable energy," Fanning said. "It's going to take some time. We want to have a very thoughtful response on this."

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