Supreme Court Denies DTE Energy Petition for Review; EPA Administrator Pruitt Issues Guidance on EPA’s New Source Review Authority

On Monday, the Supreme Court denied DTE Energy Company’s July 31 petition for review of United States v. DTE Energy Co., 845 F.3d 735 (6th Cir. 2017), which held that EPA may use its New Source Review (NSR) enforcement authority to challenge a plant operator’s emissions projections for a project prior to construction and operation.  The decision comes on the heels of a December 7 Memorandum in which EPA Administrator Pruitt indicated that EPA does not intend to initiate NSR enforcement actions “unless post-project actual emissions data indicate that a significant emissions increase or a significant net emissions increase did in fact occur.”

The Memorandum begins by observing that “two recent appellate court decisions in the pending enforcement action against DTE Energy have created uncertainty regarding the applicability of NSR permitting requirements in circumstances where the owner or operator of an existing major stationary source projects that proposed construction will not cause an increase in actual emissions that triggers NSR requirements.”  Rather than utilize EPA’s pre-project enforcement authority, the agency intends to use post-project monitoring, recordkeeping, and reporting to evaluate the source’s pre-project conclusion that NSR does not apply.

As long as “a source owner or operator performs a pre-project NSR applicability analysis in accordance with the calculation procedures and regulations, and follows the applicable recordkeeping and notification requirements in the regulations, that owner or operator has met the pre-project source obligations of the regulations.”  By focusing on post-project, actual emissions data, Administrator Pruitt explains, EPA will avoid “substitut[ing] its judgment” for that of the plant owner or operator and “second guessing” the owner’s or operator’s emissions projections.

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Strengthening the Power Grid of Puerto Rico

On Monday, a working group comprised of a variety of governmental and industry representatives issued a report, Build Back Better: Reimagining and Strengthening the Power Grid of Puerto Rico.  Prepared for New York Governor Andrew Cuomo, Puerto Rico Governor Ricardo Rosselló, and FEMA Administrator William Long, the report looks at damage to the power system caused by Hurricanes Irma and Maria and proposes rebuild recommendations to strengthen the grid.   

The devastating damage from wind and flooding during the hurricanes resulted in the longest power outage in U.S. history.  Only 15% of transmission lines are built to mid-Category 4 criteria, and narrow rights-of-way, steep hills, and muddy slopes impede access for repairs.  The distribution system was not originally designed to a Category 4 standard and has limited redundancy or automation that can provide aid in the restoration of service.  Substations and generation were also hit hard.

The report looks at resiliency and hardening measures that will increase Puerto Rico’s power system’s ability to withstand future storms, suggesting the incorporation of certain modern grid technology and distributed energy resources (DER).  For example, hardening of substations would include flood barriers and high capacity pumps, as well as individual protection for stand-by generators and control buildings as a backup form of defense for critical equipment.

DER can build resilience and reduce fossil fuel imports.  Puerto Rico has about 157 MW of installed distributed solar PV projects.  DER can help remote communities, in particular, restore power faster in the future.  The report states that about 470,000 homes need to be rebuilt or undergo major repair following the hurricanes, providing an opportunity to incorporate energy efficiency and solar technologies.

The report proposes a 7- to 10-year implementation roadmap for the recommended activities.

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DOE Grants FERC Extension Request in Grid Resiliency Pricing Rule Proceeding

Yesterday, DOE granted FERC’s request for a 30-day extension of the 60-day deadline to take final action on its Grid Resiliency Pricing Rule proposed late September.  New FERC Chairman Kevin McIntyre sought the extension in a letter dated Thursday, December 7, citing the need to give new Commissioners time to consider the voluminous record—consisting of over 1,500 comment submissions—and to engage fully in deliberations.  Chairman McIntyre was sworn in earlier that same day, and Commissioner Richard Glick was sworn in on November 29, 2017.

Although Secretary Perry agreed to FERC’s request for extension, he nevertheless urged the Commission to act expeditiously: “The voluminous comments filed in the record of this proceeding provide substantial evidence of, and otherwise confirm, the threat to the nation’s electricity grid and the urgent need for Commission action to reform market rules to preserve fuel-secure generation resources.”

The new deadline for final Commission action on the Grid Resiliency Pricing Rule is January 10, 2018.

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Upcoming Program: “The Clean Power Plan—What Lies Beyond”

The Energy Bar Association (EBA) will be presenting The Clean Power Plan—What Lies Beyond on December 19 as a panel discussion.  Panelists include Justin Schwab (U.S. EPA), David Doniger (NRDC), Michael Dowd (Virginia DEQ), and Thomas Lorenzen (Crowell & Moring).  You can attend (for a fee) in-person in D.C. or via video conference.  More information is available on EBA’s event homepage.

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Climate Risks and Preparedness to Impact Credit Analysis

Moody’s Investor Services Inc. recently issued a report describing how the effects of climate change will become a negative credit factor for issuers absent sufficient adaptation and mitigation strategies (subscription required to view full report).  Moody’s says that its analysts “weigh the impact of climate risks with states and municipalities’ preparedness and planning for these changes” and in cases of higher exposure to climate risks, its analysts will look at mitigation steps as well.

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