EPA timeline: New concerns about electric reliability and costs for Hoosier ratepayers

NEWS RELEASE
Indiana Office of Utility Consumer Counselor (OUCC)

For Immediate Release
December 12, 2011

State utility consumer advocate: EPA timeline threatens power reliability for Indiana consumers, may exert unnecessary pressure on electricity rates

Indiana Utility Consumer Counselor David Stippler is urging the U.S. Environmental Protection Agency (EPA) to reconsider its timeframe for implementing new regulations on air emissions from coal-fired power plants, citing new concerns about electric reliability and costs for Hoosier ratepayers.

In a December 9 letter to EPA Administrator Lisa Jackson, Stippler explained that the EPA's timetable for implementing the Mercury and Air Toxics Standards (MATS) rule and other new rules is too short, threatening the safety and reliability of Indiana's power supply while ignoring the fact that compliance will be extremely expensive. Indiana law allows electric utilities to recover environmental compliance costs through rates, raising the importance of not forcing utilities to take a rushed, inefficient approach that would lead to even higher rates than those consumers would already bear.

Stippler's agency - the Indiana Office of Utility Consumer Counselor (OUCC) - represents consumer interests in cases before the Indiana Utility Regulatory Commission (IURC) and the Federal Energy Regulatory Commission (FERC). While he raised concerns about the timeframe in an August 3 letter to Jackson, his December 9 letter cites new data reinforcing his concerns from the two independent regional transmission organizations (RTOs) that coordinate power flows in Indiana and neighboring states. That information raises credible issues as to the vulnerability of the power grid, particularly if utilities are forced to eliminate many coal-fired units from service at the same time plants are down for retrofitting in order to meet the EPA’s deadlines.

A key concern is that the EPA's three-year timeframe for implementing the MATS rule greatly increases the likelihood of construction errors, financial miscalculations, and engineering mistakes being made on the part of utilities. The concern is amplified by anticipated shortages of the components and highly skilled labor that will be needed to complete scrubbers and other construction projects at Indiana power plants to meet the EPA’s new requirements.

"A great deal can go wrong when too little planning on the front end meets up with supply limitations in the marketplace, resulting in unnecessary and excessive costs" commented Stippler. "It is absolutely necessary that the EPA take seriously the recent RTO analyses of the potential reliability issues triggered by attempting to comply with these EPA regulations in too short a period of time."

Stippler's letter also noted new cost figures from the Indiana Energy Association, provided at the OUCC's request last week. Aggregated data show that it may cost Indiana's five large investor-owned electric utilities a total of up to $11.5 billion in capital expenditures to comply with 4 new EPA mandates. These are costs that would ultimately be borne by ratepayers, and translate to an overall rate increase of approximately 22 percent over the long term (when compared to the combined 2010 operating revenues of those utilities).

"I hope you would share my concern that ratepayers not be exposed to exacerbating such costs by imposing unrealistic timeframes on the industry," wrote Stippler. "Cleaner, more efficient energy infrastructure is a goal shared by us all, but recent experience with cost overruns on new infrastructure in Indiana has confirmed in my mind that we need to take the time to do everything we can to ensure new infrastructure is built as efficiently, prudently, and responsibly as possible."

To read Stippler's letter to the EPA, please click here.

###

The Indiana Office of Utility Consumer Counselor (OUCC) represents Indiana consumer interests before state and federal bodies that regulate utilities. As a state agency, the OUCC’s mission is to represent all Indiana consumers to ensure quality, reliable utility services at the most reasonable prices possible through dedicated advocacy, consumer education, and creative problem solving. To learn more, visit www.IN.gov/OUCC.