Enforcement of the Cross State Air Pollution Rule Nears
The Environmental Protection Agency begins enforcing the Cross-State Air Pollution Rule January 1, 2012. To meet the terms of this ruling, power companies are being forced to significantly reduce their sulfur dioxide and nitrogen oxide emissions. One Dallas power company has made the decision to shut down two of its coal plants.
Energy Future Holdings (EFH) generation unit, Luminant, announced last Monday their plans to suspend generation in Monticello and Mt. Pleasant, Texas.
NRG Energy Inc. also made a decision to cease operation at three of their natural gas plants near Houston. The combination of EFH’s and NRG’s plants amount to more than 1,600 megawatts of electricity – enough to power 400,000 households at any one time.
Another proposed environmental regulation could begin affecting natural gas plants. According to ERCOT, the Clean Water Act requires cooling-water intake structures to minimize negative affects on fish populations. The proposed revision to the Clean Water Act requires closed-loop cooling tower systems to be installed at all existing
facilities that currently utilize once-through cooling.
The combination of the two rules could significantly affect generation in Texas. As you can see in the above chart, more than 75% of Texas’ electricity is generated by natural gas and coal plants. Approximately 36 plants would need to make a choice by 2016 on whether to stop producing electricity entirely or comply with the new rules.
The top figure shows expected power plant retirement with the CSAPR enforced. The bottom figure shows potential retirement with the CSAPR and the Clean Air Act combined.
More operators could follow suit due to the high costs of retrofitting the plants with equipment to comply with these standards. With the decision to retire plants comes the realization that grid operators may have an increasingly difficult time meeting demand, especially when temperatures begin rising again.
Aside from new guidelines tightening the grid, the record-high electricity demand in August eliminated profits for several Texas retailers. This has forced many to purchase more insurance to protect against extreme swings in the wholesale market. Insurance costs would then be passed along to the customers, increasing retail rates.
With the combination of high insurance costs and limitations on production, customers might see increases in their electricity prices on any contracts moving forward. RPM will continue to monitor any changes in the ruling.