CNAS Recommends a First 100 Days Energy Agenda for Next President

Posted on October 25, 2016 by Jeff Bayne

With the 2016 U.S. election just two weeks from today, several organizations have released reports examining the energy-related issues confronting the next president.  Earlier this month the Nicholas Institute at Duke published a report on the energy and environmental issues facing the next president, and last week the Center for a New American Security (CNAS) published a report entitled Increasing Prosperity, Resource Stewardship, and National Security: An Energy Policy Strategy for the Next President.

The CNAS report identifies vulnerabilities to both the international and U.S. energy systems that the next administration will have to address.  Internationally, the report focuses on geopolitical unrest in major energy producing regions, as well as developments in Europe, such as the recent U.K. vote to leave the European Union, that have hindered Europe’s ability to coordinate on energy-related issues.  At the national level, the report identifies several vulnerabilities related to infrastructure.  The increasing prevalence of renewable resources and distributed generation necessitates a modernizing of the U.S. electric system, and, even aside from grid modernization issues, existing energy infrastructure is aging and requires further investment to avoid congestion problems.  The report is also concerned that the domestic energy system is at major risk of a physical or cyber attack, or natural disaster, either of which could have widespread economic consequences.

The CNAS report concludes with policy recommendations and outlines a bipartisan energy agenda for the first 100 days of the next administration.  While two of the report’s authors disagree in some areas, one having served under President George W. Bush and another having served under Secretary of State Hillary Clinton and President Bill Clinton, they focus on a set of policies on which they believe there can be broad agreement across the political spectrum.

These recommendations include modernizing, upgrading, and expanding the U.S. electricity system to keep up with new energy sources and new physical and cyber threats.  Relatedly, the report recommends improving the infrastructure permitting process and proposes specific changes, such as having FERC, rather than the Department of State, conduct the environmental assessment of cross-border oil pipelines.  On the international side, the report recommends that the Department of State’s Bureau of Energy Resources and the Department of Energy’s Office of International Affairs engage in proactive diplomacy towards vulnerable oil-producing regions to ensure the stability and security of energy resources

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North Dakota Opening Briefs Filed in D.C. Circuit

Posted on October 20, 2016 by Anjali Patel

UPDATED 07.25.2018 On August 10, 2017, the D.C. Circuit issued an order indefinitely holding this case in abeyance. EPA is ordered to continue filing status reports in 90-day intervals. 

Petitioners have filed their opening briefs in North Dakota v. EPA, the consolidated appeal of EPA’s carbon dioxide emission standard for new, modified, and reconstructed fossil fuel-fired power plants (also referred to as the New Source Performance Standards or NSPS).

The three opening briefs each assert that EPA concluded incorrectly that its Best System of Emission Reduction (BSER) for fossil-fuel-fired units is “adequately demonstrated” and “achievable.”  Clean Air Act Section 111(b) authorizes EPA to establish standards of performance:

which reflect[] the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.

Petitioners allege that the EPA failed to identify a “real-world,” “commercial-scale,” “non-subsidized” project that adequately demonstrates the application of all of the components of its BSER.  North Dakota’s brief addresses specifically the application of the NSPS on lignite-coal-fired electric generating units, and the Non-State Petitioners address EPA’s alleged failure to account for regional variability when setting the BSER.

Both North Dakota and the other State Petitioners allege that EPA’s regulation treads on their authority over energy production.

State Petitioners (other than North Dakota)  and the Non-State Petitioners further allege that EPA failed to make the prerequisite “significant contribution” and “endangerment” finding as required under Clean Air Act Section 111(b)(1)(A).

Because the Clean Power Plan appeal is running on a faster schedule, it could be decided before the conclusions of the NSPS briefing schedule.  Nevertheless, the outcome of North Dakota could impact the ultimate legality of the Clean Power Plan because Section 111(d), under which the Clean Power Plan was promulgated, authorizes the Administrator to establish emission standards for existing sources “to which a standard of performance . . . would apply if such existing source were a new source.”  Should the court vacate NSPS in its entirety or should the court agree that EPA failed to make the prerequisite “significant contribution” and “endangerment” finding, it could raise the question as to whether the Clean Power Plan was authorized.  The impact of the NSPS appeal on the Clean Power Plan remains to be seen.

EPA is scheduled to file its responsive brief on December 14, 2016.

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West Virginia Court Directs EPA to Consider Impact of Regulations on Coal Jobs

Posted on October 18, 2016 by Jessica Bell

Yesterday, a federal district judge in West Virginia presiding over a challenge brought by Murray Energy Corp. held that Section 321(a) of the Clean Air Act requires EPA to consider impacts of its Clean Air Act regulations on the coal industry. Section 321(a) requires the Administrator to “conduct continuing evaluations of potential loss or shifts of employment which may result from the administration or enforcement of the provision of this chapter and applicable implementation plans, including where appropriate, investigating threatened plant closures or reductions in employment allegedly resulting from such administration or enforcement.”

The court determined that undertaking these evaluations is a “mandatory duty upon the EPA.” And, while EPA “may have the discretion as to the timing” of these evaluations, EPA cannot “categorically refuse to conduct any such evaluations,” as Murray Energy alleged is the case.

In reaching this conclusion, the court looked at the EPA’s history of conducting evaluations, including through the Economic Dislocation Early Warning System, which began in 1972. The court noted that while EPA discontinued these evaluations at some point, it had not claimed—until this case—that its inaction complied with Section 321(a).  The court found that the most EPA does is “conduct proactive analysis of the employment effects of [its] rulemaking actions.” The court said this “is simply not what § 321(a) is about” and noted that EPA’s witness admitted the agency “is not investigating power plant and mine closures and worker dislocations resulting from the utility strategy on an ongoing basis.”

The court rejected EPA’s contention that Murray Energy lacked standing to pursue the action—i.e., that Murray had demonstrated an actual or threated injury traceable to EPA’s action that could be redressed by the court.  Instead, the court concluded that Murray Energy’s allegations “that the actions of the EPA have had a coercive effect on the power generating industry, essentially forcing them to discontinue the use of coal” were sufficient to meet constitutional standards.

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Energy-Related Impacts of Upcoming Election

Posted on October 13, 2016 by Jessica Bell

The Nicholas Institute at Duke recently published a report that considers the energy and environmental issues that the next president will face, Illuminating the Energy Policy Agenda: Electricity Sector Issues Facing the Next Administration.  The report covers federal regulation of electricity markets, climate policy, nuclear energy, natural gas, economic development, and federal government procurement.

The next administration will impact these areas through appointments to federal agencies, including filling several current vacancies at the Federal Energy Regulatory Commission (FERC) and Nuclear Regulatory Commission (NRC). The issue of state versus federal jurisdiction—which has been before the Supreme Court multiple times in the past year (FERC v. EPSA, Hughes v. Talen Energy)—has important implications for how state policies on generation mix and long-term planning may be implemented and is not a fully-resolved question.

The D.C. Circuit recently heard arguments in litigation over the Clean Power Plan, and a key decision for the new administration regarding the CPP may be whether or not to seek Supreme Court review of any unfavorable aspects of the court’s decision, once issued.

The new administration will likely have a number of important decisions about nuclear generation, including projected retirements, nuclear waste, second extensions of operating licenses, and possible incentives or credits for nuclear generation (such as that in New York State’s Clean Energy Standard).

Other changes in generation mix, including increased generation from natural gas and renewables, pose questions about land use, environmental regulation (such as concerns about possible threats to drinking water from hydraulic fracturing), and tax incentives—to name a few. There will also be decision points regarding programs to assist communities impacted by the decline in coal-powered generation, including the Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Initiative, launched by the Obama Administration in 2015.

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Brattle Group Surveys Consumer Advocates on Demand Charges

Posted on October 11, 2016 by Jeff Bayne

Recently, Ryan Hledik and Ahmad Faruqui of The Brattle Group published Competing Perspectives on Demand Charges: Survey of Consumer Advocates Identifies Areas of Agreement and Disagreement (originally published in Public Utilities Fortnightly).

Traditionally, residential electricity rates have been flat, meaning that the price is the same regardless of the time of day or season.  As the article explains, this rate structure “do[es] not sufficiently reflect time-differentiation in underlying resource costs . . . [nor does it] sufficiently reflect the peak demand-driven nature of infrastructure investments.”  The problems with this traditional approach to residential electricity rates have garnered increasing attention with the rise of distributed generation and so-called smart appliances, as well as the growing interested in demand response.

Demand charges, which are one rate methodology related to grid modernization, are based on a customer’s peak demand, rather than on his or her total monthly consumption.  Hledik and Faruqui conducted interviews with nine consumer advocates at national and state-level organizations about residential demand changes and attended a dozen industry events that addressed this topic.  The authors found that opinions from consumer advocates ranged from “direct opposition to guarded support for residential demand charges.”  The article also provides a summary of common concerns about demand charges and common responses to these concerns.  For example, interviewees expressed concern that demand charges may result in increased bill volatility due to isolated high-electricity demand occurrences.  However, the common response to this is that customer peak demand often varies less than monthly usage and that there are ways to minimize demand charge volatility through rate design.

The article concludes by listing several activities that will help stakeholders (such as utilities, consumer advocacy groups, environmental groups, policy makers, and regulators) address these and other concerns and come to consensus on the issue of demand charges.   These activities focus on further quantifying the benefits of demand charges and their impacts on consumers’ bills as well as tailoring demand charges based on specific local concerns.  While this article is centered on the concerns and opinions of the consumer advocacy community, it notes that focusing on other stakeholders will be valuable for future research.

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