November 2011 Manager's Message
Consumers across the Midwest are beginning to see the first results of the coming wave of Environmental Protection Agency (EPA) regulations, higher costs for electricity generated by the region’s power plants.
For well over a year, many sources within the utility industry have shouted their concerns about the 1/5th of the United States’ coal-fired generation could become on-economical to operate over the next 4 years due to pending EPA regulations. This past month brought a new flurry of concerns from both the corporate executives and many state regulatory agencies.
Minnkota Power Cooperative (a North Dakota Generation and Transmission Cooperative that serves many distribution cooperatives in Northwestern Minnesota) recently spent $425 million complying with EPA directives. This expenditure has lead to a double-digit rate increase already this year to all cooperative members, with more increases expected to happen in the future. This event has prompted the North Dakota state agencies to join the fight on the side of the cooperatives. The North Dakota Department of Health is considering a court challenge if the EPA pushes ahead with requiring additional nitrogen oxide emission cuts under its regional haze program.
In a complaint common to recent arguments over EPA initiatives, North Dakota officials contend EPA requirements would cost another half billion dollars without yielding better results than less expensive alternatives that are favored by the industry.
Almost simultaneously in Wisconsin, the Wisconsin Public Service Corporation amended its rate request pending before its state regulators, nearly doubling the rate filing amount requested due to the EPA’s Cross-State Air Pollution Rule that is projected to be implemented. WPS nearly doubled it rate increase requested by including installation of additional emission controls, reducing its power plant operations and buying on the wholesale market or buying additional emission allowances.
A WPS executive said one of those three options would contribute to continuing uncertainty about the Cross-State Air Pollution Rule due to the impact on market prices for electricity.
In Nebraska, a municipal utility official called the Cross-State Air Pollution Rule “the tip of the iceberg” and warned of more than a dozen EPA initiatives that will continue to drive up costs and close down generation assets from fossil fuel resources. A Nebraska Public Power District CEO was also quoted as saying, “Looking forward, all you can really see is more costs, more equipment, probably more shutdowns of power plants that will be a huge change in the way we do business.”
The head of the Texas Public Utility Commission, Donna Nelson, said the Cross-State Air Pollution Rule that is set to go into effect at the beginning of next year, will cause rolling blackouts throughout the Midwest. She also said with confidence, “I have no doubt in my mind that this rule will result in reliability issues and rolling blackouts in Texas.” Elsewhere, may be a reality as well.