The Clean Power Plan

Copyright © 2015 ScottMadden, Inc. All rights reserved.
The Clean Power Plan
Presentation to GenForum 2015
By: Todd Williams
December 7, 2015

Copyright © 2015 by ScottMadden, Inc. All rights reserved.
Today’s Agenda
 Overview of the Clean Power Plan
 Current State – Where are We Now?
 Battle Lines – Litigation
 Politics
 State Regulatory
 Wrap Up
1

Overview of the Clean Power Plan

 Why is it important for opponents?
 “Coal-country” states such as Kentucky, Wyoming and West Virginia may be doubly impacted because they rely on coal for
electricity and their economies depend on mining it
 Critics argue that the rule will lead to increased electricity costs (4%–15%), kill jobs and harm low-income/minority communities
 Detractors estimate higher costs than EPA numbers; $41B–$50B/year, a total economic impact of $366B–$900B by 2030 to
implement
3
Background and Overview of the Rule
On August 3, 2015 the EPA released its 1,500-page final rule governing performance standards for greenhouse gas emissions
for existing and new power generation sources, termed the Clean Power Plan (CPP)
 The CPP was originally released for review in June 2014 – EPA received more comments on this one proposed rule than any other
proposed rule to-date
Sources: BuzzFeed; EPA; EENews; Forbes; NERA consulting; NextGenAmerica; SierraClub; ScottMadden analysis; Vox; U.S. Chamber
 Why is it important to the EPA & supporters?
 First-ever national standards that address CO2 emissions
from power plants
 EPA cites benefits including reducing health hazard,
advancing clean energy innovation, and laying the
foundation to address climate change
 EPA analysis indicates the combined climate and health
benefits of the CPP will far outweigh implementation costs;
estimated at $26B–$45B in 2030
4,300,000
900,000
425,000
64,000 43,000
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
Clean Power
Plan (CPP)
Mercury and
Air Toxics
Standards
(MATS)
Disposal of
Coal
Combustion
Residuals
Cooling Water
Intake - 316(b)
Cross-State
Air Pollution
Rule (CSAPR)
Number of Public Comments

4
What Changed?
The final rule has significant modifications from the 2014 draft
 Compliance timeframe and reduction timing
 Begins in 2022 (final rule) instead of 2020 (proposed rule)
 No “cliff” in reduction targets (proposed rule), instead there are step-down “glide paths” in three two-year periods prior to final
compliance (final rule)
 Building blocks – the final rule dropped increased implementation of end-use energy efficiency, leaving three “building blocks”
1. Improve the heat rate of existing coal-fired power plants
2. Substitute natural gas plants for coal-fired power plants
3. Increase electricity generation from new zero-emitting renewable energy sources (like wind and solar)
 Other key changes are shown in the table below
Sources: Brookings; EPA
Area Proposed Rule – 6/14 Final Rule – 8/15
Reliability Impacts  Not addressed  Safety valve added to final rule
CO2 Targets  Projected 30% cut from 2005 levels  Projected 32% cut from 2005 levels
Fossil Steam Heat Rates
 Assumed 6% improvement  Interconnection-specific improvement of
2.1%–4.3%
Nuclear Generation
 Used in goal-setting  Not used in goal-setting; new build and uprates
may be in state plans
Natural Gas  Assumed 70% of nameplate  Assumed 75% of net summer capacity
Renewables  22% of MWh generation  28% due to lower installed costs

5
What Changed? – Compliance Timing
Notes: *2012 emissions are unadjusted and exclude under construction units; goals exclude New Source Complement, which increases
emissions limits to accommodate load growth but pegs incremental emissions at compliance rates
Sources: EPA; industry reports; ScottMadden analysis
States have until September 2016 to complete implementation plans or petition for extension
“Glide Path” Goals: Targeted Emissions Change
(in Tons) from 2012 Observed CO2 Emissions*
2022-2024: Decrease of 9%
2025-2027: Decrease of 17%
2028-2029: Decrease of 21%
2030-On: Decrease of 23%

6
What Changed? – Target Setting
The final rule demands more from high emitting states and focuses on greenhouse gas emitters who have done little to control
their emissions to this point
Sources: EPA; ScottMadden analysis; Vox

7
What Changed? – Performance Rates by Technology
Notes: Dotted lines show current technology emissions rates based upon illustrative configurations; *emissions based on net power;
**CT without combined heat and power
Sources: EENews; EPA; DOE Nat’l Energy Technology Laboratory; ScottMadden analysis
 Final state goals lie
between the fossil
steam and combustion
turbine (CT) technology
targets
 Existing technology
(supercritical and
natural gas CT)
emissions exceed
targets
 All but the coal unit
“building block” fall
“outside the fence line”
of a power plant and,
critics say, outside of
EPA's Clean Air Act
authority to enforce
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Fossil Steam Units Combustion Turbines
PoundsperMWh
Target Existing Source Emissions Rates and Illustrative Emissions Rates by
Technology (in Pounds of CO2 per MWh)
Interim Rate (2022-29 Avg.) Final Rate (2030-On)
Range of State Final Goals
NG combustion
turbine: ~1,110**
NG combined
cycle: ~786*
Supercritical
coal : ~1,705*

8
States must choose rate- or mass-based goals while balancing stakeholders’ interests
Source: EPA
EPA Compliance Pathways to Achieve Goals

9
Implementation Plans – State Decision Rights
According to the EPA, states should develop plans that take into account their unique circumstances
 Plans must achieve interim CO2 emissions performance rates and final performance rates
 There are two implementation plans: “emissions standards” and “state measures”
 “Emissions standards” focuses on plant-specific requirements for affected generation units
 “State measures” mixes generator emissions limits with other measures (e.g. renewable energy standards) to meet mass-based
goal—includes federally enforceable backstop triggered by reduction schedule failure
 States may choose to work with other states (e.g. emissions trading) or submit their own plan
If the EPA deems a state plan unsatisfactory, the state will default to the Federal Implementation Plan
The Federal Implementation Plan
 Notice signed on 8/3/15
 Proposed both rate- and mass-based trading programs and model
trading rules
 Can stand alone as a Federal plan or act as a model for state plans
 Final rule expected summer 2016
 EPA intends to implement a single plan (rate or mass) for every state
where it finalizes a Federal plan
Source: EPA

Current State – Where Are We Now?

Battle Lines
Battle lines are drawn between energy companies, trade groups, and NGOs
Against Support
Energy
Companies
Trade Groups and
NGOs
 Peabody Energy
 Murray Energy Corporation
 Southern Company
 Exelon
 NV Energy
 NextEra Energy
 Calpine Corporation
 Austin Energy
 PG&E
 U.S. Chamber of Commerce
 National Association of Manufacturers
 American Fuel & Petrochemical Manufacturers
 American Public Power Association
 Independent Petroleum Association of America
 National Mining Association
 The American Coalition for Clean Coal
Electricity
 Utility Air Regulatory Group
 American Wind Energy Association
 Advanced Energy Economy
 Ceres- 365 Companies in support of CPP:
General Mills, Nestle, Staples, Mars etc.
American Lung Association
 Clean Air Council
 Sierra Club
 Environmental Defense Fund
 Conservation Law Foundation
11
Sources: Energy Institute; Utility Dive; EPA; U.S. Court of Appeals D.C.

Battle Lines ― The States Divided
West Virginia and 23 states filed a suit vs. the EPA in the U.S. Court of Appeals for the District of Columbia Circuit. Oklahoma,
North Dakota, and Mississippi each filed suits. Eighteen States support CPP
12
Sources: Energy Institute; Utility Dive; The Daily Caller; ScottMadden analysis
ID
IL IN
IA
KS
KY
LA
ME
MI
MN
MS
MO
MT
NE NJ
NM
NY
NC
OH
OK
OR
PA
SC
TN
TX
UT
VT
VA
WA
WV
WI
WY
NH
CT
AL
AZ
AR
CA
CO
FL
GA
AK
HI
NV
SD
ND
RI
MD
DE
MA
Boulder
South
Miami
Broward
County
Philadelphia
States Suing EPA with WV
States Suing EPA Separately
States in Support of CPP
Neutral States
Areas in Support
New York, NY.
Washington D.C.
Chicago, IL.
Boulder, CO.
Philadelphia, PA.
South Miami, FL.
Broward County, FL.

Battle Lines ― Litigation
Legal Arguments
 CPP violates Fifth Amendment/Takings
Clause by upending “settled investment
expectations,” likely eliminating coal use in a
dozen states
 Constitutional State sovereignty
 EPA decision that the “Best system of
emission reduction” includes the entire
electric grid is unprecedented
 EPA cannot use multiple sections of the
Clean Air Act to regulate, since the new
Mercury and Air Toxic Standards are
regulated via Section 112, the EPA cannot
base the CPP on Section 111
13
Sources: U.S. Court of Appeals D.C.; Utility Dive; Legal Planet; The Daily Caller
Primary suits vs EPA filed after the CPP was published in the federal register
West Virginia +23 states
D.C. Circuit, Oct. 23
Oklahoma
North Dakota
U.S. Chamber of
Commerce
Murray Energy Corp.
National Mining Assn.
American Coalition for
Clean Coal Electricity
Utility Air Regulatory
Group
Alabama Power Co.
CO2 Task Force of the
FL Elect. Power Group
Montana-Dakota Utl. Co.
Tri-State Gen. &
Trans. Assn. Inc.
United Mine Workers of
America
National Rural Elect.
Coop. Assn., Inc.
Westar Energy, Inc.
Northwestern Corp.
National Association
of Homebuilders
Association of
American Railroads
Luminant Gen. Co.
Basin Electric Power
Mississippi
D.C. Circuit, Nov. 5

West Virginia vs EPA
Status
 U.S. Court of Appeals for the D.C. Circuit consolidated all challenges: West Virginia v. EPA, D.C. Cir., No. 15-1363
 In early 2016, a three judge panel will decide whether to stay the rule before hearing arguments on the merits
Timeline
 The panel might not render a final decision until late 2016 or early 2017
Expectations
 In order to obtain a stay, petitioners must demonstrate that rule will cause irreparable harm
 EPA has an excellent track record in court
• Consensus is that West Virginia vs EPA is going to be a long legal battle
 Court watchers predict the case will end up in the U.S. Supreme Court in 2017 or 2018
 A new president will influence the course of litigation and rule implementation
14
Sources: U.S. Court of Appeals Doc.; Utility Dive; Legal Planet; The Daily Caller
August 2015 October 2015 November 2015 December 2015
8/10 8/17 8/24 8/31 10/10 10/17 10/24 10/31 11/9 11/16 11/23 11/30 12/10 12/17 12/14 12/31
• Final version CPP
unveiled: Aug. 3
• CPP published in
Federal Register:
Oct. 23
• West Virginia sues
EPA: Oct. 23
• 18 other parties:
Oct. 23
• Suits consolidated WV
vs EPA: Oct. 29
• Additional Motions for
stay: Nov. 5
• EPA’s consolidated
response to motions for
stay: Dec. 3
• Respondent-intervenors’
responses to motions to
stay: Dec. 8
• Replies in support
for motions for
stay: Dec. 23

Politics—The Candidates
The newly elected President has the power to dismantle the Clean Power Plan, including:
 Sign a bill that amends the CPP and/or handcuffs the EPA
 Replace the CPP with a new regulation
15
Support CPP Unknown Against CPP
VetoBlock
 Implement the CPP, but very loosely
 Fail to defend climate regulations in court
Sources: Congress.gov; U.S House of Reps E&C; Vox; USA Today; NY Times; CNN

 Congressional Republicans are extending the Clean Power Plan battle to the halls of the Capitol
 Senate Resolutions to Fight Administration's Cap and Trade Assault was introduced under the Congressional Review Act (CRA) to
disapprove two final EPA rules issued for new (S.J. Res. 23) and existing (S.J. Res. 24) power plants. Arguments include:
• Protect ratepayers and American jobs—The Administration’s regulatory cap and trade scheme will drive up electricity prices, cost
jobs, threaten grid reliability, and make our country less competitive
• Protect states and citizens from a highly complex, intrusive, and unworkable regulatory scheme that requires states to reorganize
their electricity sectors to meet mandatory emissions “goals” set by EPA without Congressional approval
• S.J. Res. 24 was approved by Senate on November 17; it is still under House consideration
– President Obama vowed to veto the resolution should it reach his desk
– The resolution needs a two-thirds majority vote to override a presidential veto
 House H.J. RES. 72 (existing plants) – Congress disapproves of EPA CPP rule—rule shall have no force or effect
– Since November, the resolution passed committee—on union calendar for a House of Representatives vote
 In June 2015 the House passed H.R.2042 - Ratepayer Protection Act of 2015
• The bill would allow governors to refuse CPP compliance
• The bill delays implementation of CPP until all the court challenges are resolved
• The White House promised to veto the bill
• The bill is in the Senate for consideration
16
Politics—Legislation
Sources: Congress.gov; U.S House of Reps E&C

State Regulatory
Public utilities commissions are preparing (or not) for CPP in various ways
17
 Had or are holding public hearings
Information from websites of public utilities commissions of each state:
Sources: State Utilities Commissions Websites
 Website search results on “CPP” or “Clean Power Plan”
 Websites that had news releases pertaining to CPP
 Websites with CPP on their current/hot topics section
 Websites with any type of information about CPP
12 38
0 50
23 27
4 46
22 28
4 46

 Inevitable litigation
 Possible nuclear benefit
 Complex interactions with other environmental regulations
 Reliability implications
 New source rules, too
 Less carbon removal required
 CT rate linked to CCs
19
ScottMadden Perspectives and Takeaways
Sources: EENews; Environmental and Energy Study Institute; ScottMadden analysis

Todd Williams
Partner and Fossil
Generation Practice Leader
ScottMadden, Inc.
3495 Piedmont Road
Building 10, Suite 805
Atlanta, GA 30305
toddwilliams@scottmadden.com
O: 404-814-0020
Contact Us
20

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