Power Companies Await EPA Emissions Rule

Date : 12/16/2011 @ 4:02PM
Source : Dow Jones News
Stock : Southern Company (The) (SO)
Quote : 44.9  -0.15 (-0.33%) @ 12:06AM

Power Companies Await EPA Emissions Rule

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Power companies are watching closely as the Environmental Protection Agency readies new limits on toxic pollution from power plants in what could be one of the centerpieces of President Barack Obama's environmental resume.

A flurry of lobbying from the industry came to a close Friday with the arrival of a court deadline for the agency to act. The EPA was expected to sign the rule Friday and officially announce the details next week.

As proposed by the EPA this summer, the rule would impose strict limits on mercury and other hazardous pollutants from power plants that burn coal or oil to produce electricity, forcing older, dirtier plants to install pollution controls or shut down entirely.

Some companies may decide it is cheaper to close down a coal plant then to install scrubbers or other controls. Exactly how many plants will have to close as a result of the rule has been hotly debated, but it is clear the rules will benefit companies that rely more heavily on natural gas and nuclear generation, while imposing costs on firms that have more coal plants that will need retrofits.

Exelon Corp. (EXC), Constellation Energy Group Inc. (CEG), and Public Service Enterprise Group Inc. (PEG) are among the companies that have supported EPA's effort. American Electric Power Co. (AEP) and Southern Co. (SO) have lobbied for more time to comply.

Unlike EPA limits on smog-forming ozone pollution, which the administration delayed earlier this year, this rule has been explicitly backed by Obama. His campaign website lists the proposed standards among the president's environmental accomplishments, saying they will "help to clear our skies of pollutants that can make health problems like asthma and bronchitis worse."

When the EPA proposed the rule this summer, it said it would avert more than 6,800 premature deaths per year, mostly because the equipment installed to capture pollutants like mercury would also catch tiny particles that are known to worsen heart and lung problems. The agency also said the true benefits of the rule are much larger than it can calculate. Mercury, for example, can impair brain development in children, but it is difficult to quantify the societal cost of a child with a lower IQ.

Some power companies, however, dispute EPA's analysis, which puts the cost of the rule at about $10.9 billion per year, compared to more than $59 billion in benefits. In particular, Southern, American Electric Power and others have said the agency has not given enough consideration to the consequences of closing or retrofitting so many coal-fired power plants at once.

Organizations that oversee the electrical grids in Texas, the Midwest, and New England have said if the EPA rules cause too many plants go offline, they could cause blackouts. "What hangs in the balance is the reliability of the electrical system," said Scott Segal, director of the Electric Reliability Coordinating Council, whose members include Southern and American Electric Power.

EPA insists the rules are achievable without threatening the reliability of the grid. But it could appease industry by signaling more flexibility on the timeline for complying with the rule.

The Edison Electric Institute, which represents the utility industry, has asked EPA to give all plants that choose to install retrofits at least four years to comply, and to make it clear that plants needed for reliability can have five years to comply if necessary.

But allowing more time to install pollution controls would irk public health advocates, who have been conducting their own public relations blitz in support of EPA.

"We are hoping for a strong rule," said Paul Billings, vice president of national policy for the American Lung Association. "Anything to delay the rules would be a problem."

So far, the EPA has said only that it will consider extensions of the existing three-year timeline on a case-by-case basis.

-By Ryan Tracy, Dow Jones Newswires; 202-862-9245; ryan.tracy@dowjones.com

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