How should states be preparing for U.S. EPA's final Clean Power Plan rule? During today's OnPoint, Ken Colburn, a senior associate at the Regulatory Assistance Project and the former director of the Air Resources Division of the New Hampshire Department of Environmental Services, explains why he believes a nontraditional approach to compliance is needed and talks about the steps state regulators and public utility commissioners should be taking to prepare for potential reliability challenges resulting from the rule.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Ken Colburn, a senior associate at the Regulatory Assistance Project and the former director of the Air Resources Division of the New Hampshire Department of Environmental Services. Ken, nice to have you here.
Kenneth Colburn: Thank you for having me, Monica.
Monica Trauzzi: Ken, you recently co-authored a policy brief that lays the groundwork for state regulators over the next six months or so as we await a final rule from EPA on existing source emissions. Your goal is to prepare states for success, but with all the public comments pointing to potential economic issues, reliability concerns, why do you think that success is possible for all states?
Kenneth Colburn: Well, Monica, the basic reason for that is because most -- all the states have done something, one thing or another, but none of them has done everything, and there is an untapped reservoir of energy efficiency to be done even in states that've done a lot already. They may have done a lot of compact fluorescent light bulbs, for example, but there's now LEDs to work on, and no state has done a really good job with water heater, which is actually our best and most immediate form of energy storage to simply use water heaters during off-peak periods. Then the water's hot. The energy doesn't need to be generated during peak periods. So there're just a whole lot of options that states have, and happily, EPA appears intent on opening the door to states being able to use those options.
Monica Trauzzi: So, you say that states have too many compliance options, inadequate economic models, too little time and too few resources to take a traditional approach to compliance with the proposed rule. So, to me, too many compliance options sort of stands out, because the agency says that it's really intending to allow maximum flexibility. So what do you mean by that?
Kenneth Colburn: Well, I guess the best way to explain it is I think this will be complex but in a reasonably positive way allowing states to choose the best paths that they have, that they want to take. It will be complex in that it's a different animal. I've taken to calling it the first waffle. It's not a SIP, a state implementation plan, in the traditional sense, which air directors are quite familiar with doing, and they have the tools for that. And it's not on the toxic side, which air directors are also familiar with. They're not familiar, generally, with dealing with 111(d), which is not a SIP. Well, what is not a SIP? What's that mean? That's uncharted territory for EPA as well as the state. So, having an array of playing pieces without being entirely sure what the game board looks like will be complex, but as we do with waffles, we'll get through that first one, and the second and third will be much better.
Monica Trauzzi: How should state regulators be preparing for the potential reliability challenges that could result?
Kenneth Colburn: This is a really good question and one that, I'm delighted to say, they're doing really well on. It's not just air regulators, of course. It's the public utility regulators as well, and what I'm most happy about is that although those two have been pretty stovepiped in their past approaches to life, if 111(d) -- if the Clean Power Plan has done nothing else, it has caused them to engage with each other, be talking with each other, be understanding each other's problems and issues, and I think over the last six months that has gone extremely well. It would've been rare almost. Maybe 10 states would have had a situation where the air director knew the public utility commission. Now I think they all do.
Monica Trauzzi: But PUC regulators, many of them are the ones who are very concerned about this reliability question. Do you think that those concerns are warranted?
Kenneth Colburn: I think they need to have attention paid, certainly, because no one wants or needs the lights to go out, and, indeed, the administrator has said that's a key priority of hers as well. I think that reliability concerns should be seriously taken into account as the options, as those multiple playing pieces are considered. And many of them, of course, can assist in reliability. Efficiency's a notable example of that. Any megawatt-hour, kilowatt-hour that isn't used will be -- take a load off any reliability issues and at the same time save money, reduce other pollutants. We have those coming up soon -- and provide other nonenergy benefits. So, efficiency's a good way to help with reliability, lots of other planning endeavors as well.
Monica Trauzzi: Efficiency's not going to solve it all, though.
Kenneth Colburn: No, exactly, and a further example -- I mentioned the PUC commissioners and air directors talking to each other. Air directors need to also be reaching out to their independent system operators or original transmission operators or whoever manages their grid if they're not an RTO state. So, don't stop at just the public utility commissions, either.
Monica Trauzzi: So, for those states that're interested in a regional trading program, what has to be happening right now? What should they be teeing up?
Kenneth Colburn: Well, this is also a good question. For the most part, I think trading will require some kind of infrastructure. You have to know what it is that you're trading. What's the commodity? How's it verified? How're you sure you're getting a good one? And so, that infrastructure is probably the most important thing. There're a couple other key components. Should it be rate versus mass, the EPA's original question, one of the big ones? Generally that's far easier with mass. That was the approach undertaken by RGGI and generally by California, but it could be done as a rate-based program, just a little trick here. There's a good proposal in the Southwest by Western Resource Advocates on a rate-based approach that involves trading, for example -- but those two pieces, infrastructure and what's the commodity, and the third bit would be any trading system.
The broader the region is, both geographic and in terms of sources, where can I seek reductions, the better, the lower cost it will be. So, states contemplating trading systems, trading approaches would be wise to be talking to their neighbors or to other states, even if they're not contiguous.
Monica Trauzzi: Which states do you identify as being least prepared or potentially requiring the most amount of front-end work?
Kenneth Colburn: This is a good question, and I'm not sure that I can pinpoint specific states. States that have generally, I think, done the least of the things we've already talked about so far are newest in talking to the air directors, to the PUCs, states that have done the least energy efficiency to date, states that don't have RPSs, renewal portfolio standards, states that may not have played in the sulfur -- in the acid rain trading program or in RGGI. Probably there're very few states that haven't done any of those things, but those that have done fewest of them would be least familiar with the concepts and flexibility that EPA appears to be allowing.
Monica Trauzzi: All right, very interesting. We'll end it there. Thank you for coming on the show.
Kenneth Colburn: My pleasure. Thank you for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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