Current Utility News
Current News

AIC Briefs

AIC Supports APS Net Metering Cost Shift Solution
Friday, 05 June 2015

AIC Supports TEP Net Metering Tariff
Monday, 1 June 2015

Letter of Opposition to AG-1 Extension
Monday, 8 December 2014

AIC Comments on 111(d)
Tuesday, 2 December 2014

AIC Four Corners Surrebuttal
Monday, 21 July 2014

AIC Testimony on Four Corners
Friday, 20 June 2014

AIC Testimony on UNS/Fortis Settlement
Monday, 2 June 2014

AIC Letter on Net Metering
Monday, 4 November 2013

Deregulation Responsive Comments
Thursday, 17 October 2013

Deregulation Comments
Wednesday, 9 October 2013


Conferences

Click the links below to watch the upcoming debate or watch the archived debated.

 

Reports and Newsletters

Connect - March 11, 2015

Connect - December 23, 2014

Connect - November 7, 2014

2014 Annual Report

Study of Studies: Economic Impacts
of GHG Regulation

Carbon Controls Fact Sheet

Economic Impact of Carbon Controls
in Arizona (full report)

Infrastructure Needs and Funding
Alternatives  For Arizona: 2008-2032
(Full Report)

Infrastructure Needs and Funding
Alternatives For Arizona: 2008-2032
(Executive Summary)

Streamlining Administrative &
Ratemaking Processes of the ACC

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Arizona Energy Regulators Cheer Ruling on EPA Suit
Arizona Energy Regulators Cheer Ruling on EPA Suit
By: Rachel Leingang and Luige del Puerto  azcapitoltimes.com/June 29, 2015 , 5:39 pm
epa ruling
In a much anticipated environmental case, a divided U.S. Supreme Court today ruled that the Environmental Protection Agency may not disregard costs in deciding whether to regulate coal-fired plants in order to reduce mercury and other toxic emissions.
 
The EPA “must consider cost – including, most importantly, cost of compliance – before deciding whether regulation is appropriate and necessary,” wrote Justice Antonin Scalia, who penned the majority opinion in Michigan v. EPA.
 
At issue are the EPA’s regulations of mercury and other pollutants like arsenic, selenium and cyanide from power plants, known as the Mercury and Air Toxics Standards (MATS) rule.
 
Though the ruling does not apply to the EPA’s Clean Power Plan, which is aimed at reducing greenhouse gas emissions, Arizona’s energy policymakers believe the decision could have implications on the forthcoming rule, which is expected to be finalized this summer.
 
Last year, the EPA had proposed rules to cut carbon emissions from power plants by 30 percent from 2005 levels. In Arizona, the EPA wants CO2 emissions from fossil-fired plants cut by roughly half by 2030, a task that local policymakers and the utilities say is unfeasible.
 
Corporation Commission Chairman Susan Bitter Smith called the decision today a “significant win for Arizona.” She said there’s now a mandate for the EPA to consider costs associated with the Clean Power Plan rule.
 
“They’re going to have to make time to look at the cost factor. My hope is they were already doing that, based on our comments,” Bitter Smith said.
 
The commissioner added that the Clean Power Plan, if finalized at the same level originally proposed by the EPA, would cost utilities $3 billion in stranded costs, which refer to the cost of building the infrastructure after the carbon rule had all but rendered them useless. It’s hard to determine added costs for new natural gas plants and other infrastructure needed to comply with the carbon rule, but that would add billions of additional dollars to the costs, Bitter Smith said.
 
“It’s certainly beyond the capability of Arizona ratepayers to bear,” she said.
 
But Sierra Club-Grand Canyon Chapter Director Sandy Bahr said the health benefits in preventing lung disease and cardiovascular problems have huge positive effects, which often aren’t fully considered by companies that will be regulated.
 
“If you really do a full analysis, protecting our air and, ultimately, our health, that’s going to come down on the plus side,” Bahr said.
 
MATS Ruling
The MATS rule had been in the works under the Clinton administration. It was derailed when George W. Bush was president and finalized under President Obama. After the final rule came out in 2012, a lawsuit was filed by the coal mining industry and roughly two dozen states, including Arizona.
 
The question before the justices was quite straightforward: Should the EPA take into account the cost of compliance when adopting rules for power plants? Scalia said the answer is yes.
 
What is not at issue in today’s opinion is the agency’s ability to regulate greenhouse gases. In April 2014, the U.S. Supreme Court had upheld the EPA’s authority to regulate smog from coal plants that drift across state lines.
 
Also, the court already ruled in June 2014 that the EPA has the authority to regulate greenhouse gases from sources that already need a permit to emit conventional pollutants.
 
In today’s ruling, Scalia noted that, in passing the Clean Air Act, Congress treated power plants differently from other sources of pollutants. Specifically, Congress mandated the EPA to regulate power plants only when it is “appropriate and necessary.” That phrase, he said, necessitates looking into costs.
 
“Read naturally in the present context, the phrase ‘appropriate and necessary’ requires at least some attention to cost,” Scalia wrote, adding, “One would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”
 
The coal industry told the court that it would cost $9.6 billion annually to regulate the power plants, while the quantifiable benefits from curbing hazardous-air-pollutant emissions would only amount to $4 to $6 million a year.
 
The EPA also said counting the ‘ancillary benefits,’ which would include cutting down on particulate matter and sulfur dioxide, would result in $37 to $90 billion in annual benefits. However, the EPA conceded that this analysis played no role in its initial decision to regulate toxic emissions from power plants.
 
Scalia chided the EPA for contending that it doesn’t need to consider the costs when first deciding whether to regulate power plants because it can look at it later when determining “how much” to regulate them. That logic is faulty, he said.
 
“By EPA’s logic, someone could decide whether it is ‘appropriate’ to buy a Ferrari without thinking about cost, because he plans to think about cost later when deciding whether to upgrade the sound system,” he said.
 
Clean Power Plan Implications
Today’s decision on the EPA’s mercury rule won’t have an immediate impact on the Salt River Project, a utility spokesman told Arizona Capitol Times.
 
SRP has been in compliance with most of the rule’s provisions since April 2015, and will work on complying with the rest of the provisions by April 2016, SRP spokesman Scott Harelson said in an email.
 
Both the state and the EPA approved of the schedule to comply by April 2016, he said.
 
“If the Supreme Court decision results in future change to the MATS (Mercury and Air Toxics Standards) rule, SRP will comply with these new provisions when they are put in place,” he said.
 
Insofar as its impact on the Clean Power Plan, Harelson said it’s “just too difficult to determine” what that might be.
 
Most utilities in Arizona are already in compliance with the MATS rule, but the justices’ opinion could have implications for the Clean Power Plan if the EPA doesn’t fully consider compliance costs, said Will Barnow, director of federal government relations at the Grand Canyon State Electric Cooperative Association.
 
The EPA had produced a cost estimate for its carbon rule, but basically said those costs didn’t need to be fully considered as part of the plan, Barnow said. For instance, the EPA estimated a 3 percent rate increase because of compliance for the Clean Power Plan, but Barnow said the increase for Arizona ratepayers would probably be higher. Instead, today’s ruling implies that an EPA regulation should be looked at from a cost-benefit perspective, he said.
 
“The hope would be that [the EPA] would be working to seriously consider these economic and cost impacts,” Barnow said.
 
The EPA included a brief cost-benefit analysis in its proposed carbon rule. The EPA said if the states opted for a regional approach, its plan would yield “climate” benefits of about $17 billion in 2020. Meanwhile, the benefits associated with reducing exposure to PM 2.5 and ozone would be $16 billion to $37 billion in the same year. Using this regional compliance approach, it would cost $5.5 billion to comply with the carbon rule. The net climate benefits could be between $28 billion to $49 billion in 2020, while the health benefits could be as high as $59 billion, the EPA said.
 
If the states adopted a state-specific approach to compliance, the climate benefits in 2010 are expected to be $18 billion, while the health benefits could be as high as $40 billion, the EPA said, adding it would cost roughly $7.5 billion a year by 2020 to comply with the rule. However, the net benefits far outweigh the costs, the EPA said, adding they are estimated to be between $27 and $50 billion.
 
If the finalized rule doesn’t include a fuller cost analysis, “one would imagine that there’s going to be litigation,” Barnow said, adding that most EPA regulations result in litigation.
 
In particular, the EPA needs to look at stranded assets and the cost implications of closing down coal plants before the end of their useful lives, Barnow said, though he said the state and utilities will need to wait and see what’s in the final rule for costs before pursuing litigation to that effect.