Clean up time

Michael T. Burr,

Editor

When the Republican House of Representatives impeached Bill Clinton, it looked like the lame-duck president`s tail feathers were fully plucked. Since then, Clinton`s agenda has been blocked at almost every turn. Even fairly routine diplomatic appointments and treaties have been stymied by the Republican-controlled congress.

Desperate to go out with a bang instead of a whimper, however, the Clinton cabinet is intensifying its regulatory efforts. For the utility industry, the practical effect of this is an Environmental Protection Agency (EPA) hell-bent on achieving its age-nda-namely, cleaning up old, dirty power plants.

Days after the EPA`s new ozone and nitrogen oxide (NOx) regulations were snuffed out by a federal appeals court, the Justice Department (on behalf of the EPA) filed suit against seven utilities (and an administrative order against the Tennessee Valley Authority) alleging Clean Air Act (CAA) violations going back to as far as 1984 (see “EPA lassos old coal plants,” page 1). The action targets 24 coal-fired power plants that were exempt from the Act`s strictest limits on pollutants like NOx and sulfur dioxide (SO2) because they were either operating or in construction before 1977.

Legislators agreed to “grandfather” these plants because, it was reasoned, retroactive regulation was unfair. Environmental activists never were happy about this, but they consoled themselves with the expectation that the plants would be retired before very long. With a 30-year life span, even the newest ones would be shut down by 2007. They, and the EPA, expected most to be retired by now.

Surprise! Many coal-fired plants need little more than routine maintenance and parts replacement to continue operating almost indefinitely. Now, fully-depreciated plants, 30-years-old or older, generate some of the cheapest electricity on the U.S. grid. In the deregulated wholesale marketplace, the oldest, dirtiest plants are among the most competitive. Part of their economic advantage comes from their exemption from the need to install costly pollution controls, especially scrubbers. The EPA lawsuits, however, threaten these plants` grandfathered status.

The EPA`s tactics-filing a lawsuit concurrently with a notice of violation-resemble a political ambush. Further, the EPA`s legal positions are questionable. If new boiler tubes or superheaters are enough to trigger new source review, a sizeable portion of the grandfathered U.S. base-load fleet could find itself under the EPA microscope.

These facts notwithstanding, the EPA has a point. Many of the industry`s aging, coal-fired plants are due for serious emission reductions. Installing modern scrubbers or cutting-edge combustion technologies would reduce these pollutants by 95 percent. Isn`t it about time these plants were retired or cleaned up?

Some of the implicated plants should have installed modern controls in the first place. They slipped through the grandfather loophole by filing permits before 1971. Maybe a few shovels full of dirt were moved around by 1977, but some of these units weren`t completed for 10 years.

Political arguments notwithstanding, we`re talking about the destruction of our home planet. Our kids have to breathe this air. Asthma and other respiratory problems are on the rise, and power plants are part of the problem.

Important questions remain over how the capital costs and revenue losses will be covered. If these plants are shut down, the capacity needs to be replaced with something. Who`s going to build it, and how will the investments be financed? Merchant plant devel- opers will be eager to fill the void, but no one can build 30,000 MW of power plants over night.

If the EPA forces utilities to comply with modern emission standards or retire older plants, then utility customers will pay more for their power. But will regulators allow utilities to recoup their costs through more transition charges? I doubt it. They`ll have to compete on their own.

The writing is on the wall. It`s clean up time for the utility industry.

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