Update on EPA s Proposed GHG Rule for Existing Power. Clare Breidenich Western Power Trading Forum WSPP Operating Committee March 11, 2015

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1 Update on EPA s Proposed GHG Rule for Existing Power Plants Clare Breidenich Western Power Trading Forum WSPP Operating Committee March 11, 2015

2 Overview of 111(d) Proposal Sets rate-based emission performance targets (lbs CO2/MWH) for individual states for 2030 and interim Applies to fossil generators with capacity of greater than 25 MW that existed or were under construction as of January 2014 Individual targets determined by EPA application of building blocks that comprise best system of emission reductions (BSER) Significant flexibility for states No mandated compliance approach Conversion to mass-based targets allowed Multi-state or regional approaches allowed

3 Western State Concerns Appropriateness of individual state targets Technical assumptions in building blocks, e.g base year not representative of hydro conditions 70% capacity factor NGCC not realistic Goals for RE and EE not achievable Treatment of exported emissions for fossil generation and renewables not equitable Timeline for interim targets too aggressive Timeline for submission of state plans not sufficient Modular options for regional cooperation

4 FERC s role Chairman Cheryl La Fleur: infrastructure, markets, and convening and facilitating discussions about how to balance the core values of reliability, cost, and the environment. Not going to tell EPA what to do role is advisory General agreement that CPP increases need for new investment in transmission & gas infrastructure No clear ideas on how FERC can encourage regional market-based approaches, but a lot of entities advocating for such Some convergence on Reliability Safety-valve Not MATS model, rather Ex-ante look at state implementation plans. FERC encourage regional reliability organizations, RTOs, BAs to work with states Ex-post if contingencies

5 Reliability Assessments NERC Initial Reliability Assessment Potential issues with resource adequacy, Gas-Electricity interface, integration of variable energy resources Difficult to assess in absence of state compliance plans Ongoing assessment as rule finalized, state compliance plans begin to emerge WECC Preliminary Analysis Reliability risks higher under uncoordinated approaches One state s compliance plan can affect wider grid Input from WIEB on potential regional compliance models NERC & WECC plan more analyses of emerging compliance plans

6 Expectations for final Rule Final Rule Modification of Technical assumptions to BSER Averaging across multiple base year Phase-in of building block 2 Others Changes to individual state targets RE credit will probably stay with consuming state More flexibility in state-defined glide paths Options for regional cooperation Additional reliability considerations Draft Federal Implementation Plan Same stringency as state targets No RE or EE measures EPA signaling options including cap and trade

7 Implications for California Unless target changes, will not drive stringency of California programs California over complies even w/out imported RE EPA likely to accommodate multi-sector nature of California s cap and trade Won t require changes to program design What other states do may necessitate changes to California s rules for electricity imports But CARB won t want to modify unless source state prices carbon CARB awaiting legislative action on post 2020 Will likely initiate some sort of process later this year if no action

8 Looking Forward Final rule and draft federal plan expected mid-summer State implementation plans due 1-3 years later? Legal Challenges Murray Energy State challenges EPA Authority Individual State Targets Outside-the-fence measures

9 Questions?