‘See if we’re still singing Kumbaya in July’

WASHINGTON — EPA Secretary Gina McCarthy told no secrets last week as she continued her charm offensive in advance of the agency’s long-awaited greenhouse gas rules for existing power generators.

The proposed regulations are due to be released June 1, and McCarthy, the star attraction at a Bipartisan Policy Center forum April 7, knew she wasn’t allowed to spill the beans.

“I know I can’t be tellin’ what the rule says, so kick me if you think I’m starting to get on the verge,” she joked to BPC President Jason Grumet.

Instead, she continued her promises to provide states “flexibility” and to honor reliability concerns. She also made clear that the rulemaking to be released in about 50 days will not be the final word.

McCarthy, deputy Janet McCabe and other agency officials have won widespread praise for their outreach to state regulators, including a shout-out at the forum from Colette Honorable, president of the National Association of Regulatory Utility Commissioners (NARUC).

But McCarthy, an earnest, plain-spoken former state environmental regulator with a strong Boston accent, acknowledged that the warm and fuzzy feelings may evaporate once the details are released.

“I think we’re presenting a little bit of a rosy picture. I think everyone realizes that I’m a stark realist. I know the challenge we’re having,” she said near the end of her session, before being hustled out a side door away from reporters. “The only thing I really hope when this proposal goes out is that people will look at it and say ‘EPA listened.’”

Mission accomplished, said Honorable, who shared the stage with McCarthy at the Grand Hyatt hotel.

“Gina has certainly been no stranger to NARUC,” she said, playfully noting the contrast between McCarthy’s accent and her own Arkansas drawl. “She’s fearless. … It really has been a pleasure to engage with her.”

Informed by Further Discussion

The proposed GHG rules — now undergoing an interagency review — will leave “lots more room for improvement,” McCarthy said. As a result, she promised, the final rule will be “informed by further discussion” in the comment process.

“I think many times we get criticized because there’s so much change between the proposal and final. That’s when I dance in the streets. Because I think that is exactly as it’s supposed to be, because you’ve put concrete ideas on [the table] — instead of lofty discussions — and you start digging in to what really matters to people, which is all the details.

“It needs to be incredibly smartly crafted … to make sure it provides the flexibility that states need while continuing to provide the impetus for the carbon reductions we need,” she added. “States that are out in front can continue to be there and get rewarded for that and recognized for that, while states that haven’t yet gone down this road can craft a way to do that in a time frame that will be meaningful for them.”

RTO Involvement

RTOs such as PJM “are going to have to be a strong voice” in the final rule, McCarthy said, “because the president has made clear … nothing we can do can threaten reliability.” (See related story, RTOs Weigh Role in GHG Compliance)

Honorable agreed that “certainly the regions will have a role to play.

“The nuance here is … who’s on first,” she added. “The states … are the sole entities with jurisdiction over things such as resource adequacy. We can’t allow utility regulators to check that duty.”

Not an Aspirational Goal

McCarthy made clear that while states will be given flexibility, the rule will be “federally enforceable. It is going to be a requirement.

“We are going to be looking at the state plans to determine whether or not they are conforming with the guidance and getting us significant carbon pollution reductions … We’re going to make them cost effective,” McCarthy continued. “We’re going to make them make sense. We’re going to recognize that different regions … are in different places [regarding compliance]. But we’re not going to rely on an aspirational goal.”

Don’t Reinvent the Wheel

That’s fine by the states, said Honorable. “We’re not saying let everything count. But we’re saying let’s not reinvent the wheel,” she said. “We aren’t saying ‘let’s throw it all against the wall and see what sticks.’”

McCarthy and Honorable led off the day-long conference, which also featured panels with economic and environmental regulators from New Jersey, Ohio, Delaware, Michigan and other states, and representatives from Dominion Resources and PJM. Several PJM staffers were among the hundreds watching from the ballroom or via webcast.

The panelists discussed the roles of energy storage, energy efficiency, combined heat and power, nuclear energy and carbon capture under the new rules.

Coal, Wind Roles

Jon Brekke, vice president of Great River Energy, said that worldwide coal capacity additions over the next five years will equal the current U.S. coal fleet, potentially negating any emissions cuts the U.S. makes.

“If you simply turn away from coal we won’t contribute to global solutions. We won’t contribute to technological development,” he said, urging continued research on carbon capture technology. “This is the country that can lead the world in innovation.”

Commissioner Greg White, of the Michigan Public Service Commission, put in a pitch for research to improve energy storage, which would address the intermittency of wind and solar. “It should be a national imperative,” he said.

PTC Help or Hindrance?

Speakers differed over the impact continuation of the production tax credit (PTC) for wind would have on meeting emission goals.

Tom Vinson, the American Wind Energy Association’s vice president for federal regulatory affairs, predicted the PTC, which expired Dec. 31, will be renewed. Although wind’s costs have dropped substantially in the last decade, Vinson said the industry isn’t ready to compete without subsidies just yet.

But White noted that the PTC allows wind generators to make money even in overnight hours, contributing to negative prices that nuclear operators say threatens the viability of their carbon-free baseload generation.

Cost Concerns

The impact of the regulations on customer bills was on the minds of many of the panelists.

Ohio Public Utility Commissioner Asim Haque said he was concerned that his state, which is considering freezing its energy efficiency program, get credit for its past reductions. If the state legislature approves the freeze, he said, EPA shouldn’t take over the state program but simply require other savings. “I still think people will pursue energy efficiency,” he said.

Pamela Faggert, Dominion Resources’ chief environmental officer, said the utility, which once had 17 coal-fired plants, expects to have only five by 2016. The company’s most recent Integrated Resource Plan includes “eight or nine” scenarios based on different levels of emission reductions that may be required by the EPA — with a big spread in potential costs. “We do expect the price of power will go up in the U.S.,” she said.

“It’s going to be a real test of agility for all of us,” said Robert Balazar, principal consultant for the Tennessee Valley Authority. “Where I come from we already have a large number of people who can’t afford their [electric] bills.”

Michigan’s White was one of several speakers who acknowledged the hard work is yet to come. The EPA is “saying all the right things, but I’m waiting for the details,” he said.

Elizabeth (Libby) Jacobs, chair of the Iowa Utilities Board, agreed. “Check with me … in July to see if we’re all still singing ‘Kumbaya,’” she said.