By Institute for Energy Research ——Bio and Archives--July 30, 2014
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Question: “Describe each consultation you have had with EPA regarding the Proposal, including where it occurred, the date(s) on which it occurred, with whom it occurred and identify any other participating agencies.” Moeller: “I have had no consultations with EPA on its proposal.” Question: “The Proposal includes a Technical Support Document entitled ‘Resource Adequacy and Reliability Analysis’. Did FERC prepare this analysis?” Moeller: “To my knowledge, FERC did not prepare this analysis.” Question: “Did FERC have an opportunity to review this analysis before the Proposal was announced?” Moeller: “I am aware that a FERC staffer was allowed to visually review the draft rule prior to its release, but I do not know if that included this analysis.” Question: “Has FERC independently reviewed this analysis? Does FERC agree with EPA’s conclusion that the “proposed rule will not raise significant concerns over regional resource adequacy or raise the potential for interregional grid problems”? Moeller: “I am not aware of an independent review of this analysis by FERC.”[1]Thus, the EPA created its own reliability assessment without asking the experts at FERC. How much weight should interested parties give EPA’s assessment? Chairman LaFleur’s responses suggest that EPA’s analysis is speculative at best.
Question: “Does FERC staff possess the expertise to complete an independent reliability assessment that…evaluates the potential regional, state, and local reliability impacts resulting from such retirements.” LaFleur: “FERC staff has the…capability to evaluate reliability on regional, state and local levels. However, to do so in regards to the Proposal involves making many assumptions on key factors…. Given the uncertainty and substantial number of assumptions, the results from any study would depend greatly on the assumptions chosen as inputs. Thus, a study could be more speculative than informative, especially for later years.”In short, the EPA left FERC out of its formal process to evaluate reliability problems despite FERC’s obvious expertise in electric reliability. Furthermore, EPA’s own reliability assessment should be treated as “more speculative than informative” for the reasons outlined in Chairman LaFleur’s written responses.
“FERC's ability to alter or reject an RTO-proposed compliance mechanism would present a conflict with EPA's evaluation of the compliance plans. Absent Congress stepping in and clearly defining FERC authority and EPA authority, it is not hard to envision a future jurisdictional train wreck.”
“Yes, markets would need to be fundamentally altered and redesigned to implement EPA’s proposal to accommodate environmental dispatch…Changing from economic dispatch to environmental dispatch is truly a fundamental change that would require a complete redesign of markets to include essentially a carbon fee on any resources that emit carbon dioxide.”[iv]To reiterate, FERC Commissioners Moeller and Clark acknowledge that implementing the EPA rule would require a “complete redesign” of electricity markets that has “never before existed.” Essentially, EPA will force electricity markets and regulated utilities that currently operate on a least-cost basis to operate instead on a least-carbon dioxide basis. To fully implement such a redesign, states will have to impose some sort of state-level carbon tax or cap-and-trade scheme. Again, Congress never gave EPA the authority to impose a carbon tax or a cap-and-trade scheme for carbon dioxide emissions. As IER has previously noted (along with others, including the Wall Street Journal), carbon taxes are highly unpopular with the American people (and perhaps the English-speaking world at large, as Australia just voted to repeal their carbon tax). A survey conducted by the American Energy Alliance revealed that 78 percent of the American public agree that a carbon tax will increase energy prices, 69 percent agree the tax will fall hardest on the poor, the elderly, and those on fixed incomes, and 77 percent agree a carbon tax will force them to pay more for gasoline and electricity.[v] Thus, the EPA’s proposed rule is essentially forcing states to levy a very unpopular carbon tax on people—a tax that would never be approved by the U.S. Congress. When the American people are told about the costs of EPA’s regulation, they reject the regulation, as a new poll conducted by the American Energy Alliance revealed. The American people do not want to see their electricity prices “necessarily skyrocket” as President Obama promised, especially not for a very, very minimal environmental change. Because the impact of these carbon dioxide restrictions on power plants is so small (0.02 C reduction in temperature by 2100 according to EPA’s climate model) it is implausible that the point of the regulation is climate change. Maybe EPA’s motivations are better explained by a high-ranking EPA official’s comments on the record about the EPA’s desire to “modify the DNA of the capitalist system.” In John Beale’s sworn deposition during his trial, he revealed:
“Phase 3 [of his long-term project at the EPA] would have been coming up with specific proposals that could be – could have been proposed either legislatively or things which could have been done administratively to kind of modify the DNA of the capitalist system.”[vi]
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The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.