Dear <<Salutation>> <<Last Name>>, I thought you might be interested in this piece I did on the implications of the Power Plant Rule for rural families and businesses. While the EPA plan is harmful for the nation as a whole, no segment of the population will be more adversely affected than the 42 million people served by rural electric cooperatives in 47 states. I have discussed these issues in my presentations at NARUC and CERAweek as well as several other presentations around the country. Regards-- Frank Clemente, Professor Emeritus, Penn State University


EPA Power Plant Rule Will Harm Rural America

"New EPA regulations that add to the price of electricity have serious consequences for our communities, jobs and families...the fallout from the EPA’s rule will cascade across the nation for years to come" Jo Ann Emerson CEO, NRECA

 

Rural Americans will Pay a High Price for EPA's Rush to Judgment

  • Irreparable harm as members must keep paying for plants they were forced to close
  • Drastic rate increases for millions of rural electricity consumers
  • Lost jobs as higher power costs drive layoffs and business closures
  • Higher food costs as farms, ranches, irrigation systems and distributors pay more for power
  • Reliability reduced as Co-ops are forced to use intermittent sources or price volatile fuels
  • Opportunity costs as Co-ops can no longer benefit from their affordable coal generation
  • Outmigration of young adults unable to find jobs in economically depressed areas
  • Social Injustice -- Co-ops serve 93% of America’s “Persistent poverty counties”
  • No segment of the population will suffer more from the EPA Plan than rural Americans

“Rural citizens are now on the front lines of the EPA’s power play without a fallback position. They’ll dig into their own pockets to pay for EPA’s plan and they’ll have to dig deep” Mac McLennan, CEO, Minnkota Power Cooperative.

 

Electricity is the lifeblood of modern society. Rural electric cooperatives in the United States have a long history of providing reliable and affordable power to farms, villages and small communities throughout the nation. When the Rural Electrification Act (REA) was signed by President Roosevelt in 1935 less than 10% of farms had electricity. Today that figure is 99%. Over 900 co-ops serve 42 million people in 47 states, covering 75% of the nation. These not-for-profit electric providers serve 2,500 of our 3,134 counties, reaching remote areas where consumers are truly “at the end of the line”. Co-ops serve over 2 million farms in support of a food production network that is the envy of the world. It would be difficult to find a greater energy success story than America's vibrant network of rural electric cooperatives.

Yet, despite these continuing contributions to improve the lives of tens of millions of rural Americans for over three-quarters of a century, the Environmental Protection Agency has proposed a Power Plant Rule that will have significant and long-lasting consequences not only for the Co-ops themselves, but for all the families, businesses and institutions they serve. Formally called the Clean Power Plan (CPP), the EPA Rule forces the hasty adoption of regulations which will raise electricity rates, destroy jobs, reduce reliability, do little to or nothing to improve the environment and inflict unrecoverable costs on rural consumers by forcing the premature shutdown coal power plants that have decades of useful life remaining. In short, the EPA is creating a whole class of stranded assets which Co-op customers will continue to pay for but from which they will receive no electricity. As a double whammy these rural consumers will then have to pay for the power they expected from the closed plants.

           Why America's Rural Electric Cooperatives are so Important

 

75% of the U.S. land mass is served by rural cooperatives -42 million people in 47 states 
 
 

Rural Co-ops are Collateral Damage in the EPA Assault on Coal

For over a century, coal has been America's most reliable and affordable source of electricity, especially in rural areas where Co-ops generate 70% of their electricity from secure domestic coal. Nevertheless, despite decade after decade of contributions to our quality of life, forces are gathering to knock coal out of the US generation mix and thereby increase electric rates and decrease reliability. The EPA Rule is all about coal and part of a concerted attempt to remove the fuel from its cornerstone role in the production of electricity. Given the extent of the harm projected to be inflicted on the rural heartland by the Power Plant Rule, it is important to recognize four key issues relating to coal generation in America:

(1) Prudence –Why are Co-ops so dependent on coal? Answer: Federal mandates. As Environmental Policy expert Ted Cromwell has stressed, from 1975 to 1987 Congress banned natural gas use for electricity generation and, to meet the needs of members, Co-ops built 70% of their coal fired plants during that time. In fact, by 1980 there was overwhelming consensus that coal generation was the pathway to affordable rates, energy security and a better environment. Co-op coal plants were state of the art, have been continuously upgraded to meet environmental obligations and have decades of useful life remaining. That is, if EPA gets out of the way.

Why do we have coal power plants?

 

(2) Environment -- Under the EPA rule, Co-ops get virtually no credit for the tremendous strides they have taken to greatly reduce regulated emissions. Since 1990, electricity producers (including Co-ops) have invested over $110 billion in clean coal technologies and have had resounding success. In order to meet earlier EPA regulations, many Co-ops had to take out substantial loans to purchase and install advanced new equipment. These loans will still be outstanding for years but EPA wants to close the plants while Co-ops are still carrying the debt. Thus, many Co-ops would be paying twice for electricity, once for the debt still owed on their fully capable, but closed, coal plants and again to purchase the power needed to replace the electricity those plants would have produced.

Clean Coal Technologies Work

 

Department of Energy: “Technologies... have helped to dramatically reduce potentially harmful emissions, even as coal use for electricity generation has risen substantially.”
 

If it were not for the billions of dollars to be lost throughout rural America, this would all be sadly ironic. EPA does not even claim that the Rule will do anything to halt or mitigate climate change. In fact, even by 2040 only 3% of projected global CO2 emissions will come from the entire fleet of US coal plants without the EPA Rule. Something else is at work here.

 

Why the EPA Rule is Meaningless


(3) Reliability -- America has long had the most reliable power system in the world, largely due to the secure and stable energy supply provided by coal. EPA has no expertise or responsibility in power system planning in the US - or anywhere else. Yet, the agency wants to restructure the nation’s complicated grids by greatly reducing the electricity generated by certain types of facilities (coal-based power plants) and shifting that generation to EPA’s favorite facilities (wind and solar). Actually, as John Novak at NRECA has pointed out, Co-ops are already on the forefront of renewables and have a long history of energy efficiency programs. But the unrealistic requirements of EPA will substantially increase costs to the public and jeopardize the reliability of the entire system.

The organizations that in fact are responsible for power system planning have consistently warned of the dire impact EPA’s actions will have on reliable power.

  • The North American Reliability Corporation (NERC), the group actually designated by the Federal Power Act to oversee electricity reliability, has stated that the EPA rule “presents reliability challenges” and “Industry needs more time to develop coordinated plans”. Further, NERC states the precipitous changes required by EPA could have the effect of “potentially eroding plant economics and operating feasibility” as “ it is uncertain whether adequate equipment” to meet the plan will even be available. Thus, “it is likely that the infrastructure to support the required interim reduction in CO2 emissions at this pace will not be in service” in time to meet EPA’s schedule, thereby putting vast segments of the power grids at risk.

  • MidAmerican Independent System Operator (MISO) concluded “Compliance with the Clean Power Plan has the potential to adversely impact grid reliability and resource adequacy”

  • Southwest Power Pool found that there is a very real possibility of cascading power outages, rolling blackouts and voltage collapses since the Rule requires coal plants to retire faster than replacement units can be built.

  • Electric Reliability Council of Texas (ERCOT) projects the potential for significant impacts on the planning and operation of the grid resulting from compliance with the CPP. “These impacts are likely to intensify and occur earlier when the effects of the CPP are combined with other environmental regulations”
     

Reliability-- Polar Vortex of 2014: Coal Accounted for 92% of Incremental Power

 

"There's nothing like a cold winter to remind utilities of the value of their coal fleet," Paul Forward, Managing Director, Stifel Financial 2014
 

(4) Affordable rates -- Coal has long been the low cost provider of electricity for rural America, protecting families from escalating power costs and giving businesses a competitive advantage here and abroad. Even today, coal is the main reason the cost of electricity is only 10 cents per kWh in the US but more than 16 cents per kWh in Ontario, a province that recently eliminated coal generation and now has a youth unemployment rate of 15% and steady outmigration of jobs.  Further, the US would face much higher rate increases.  We do not have the hydro resources that buffer power prices in Ontario.

But the EPA seeks to discard rural America’s advantage by promulgating a Rule many agree will drastically raise electric rates by forcing power producers to close productive coal plants and rely on expensive and intermittent alternatives like wind and solar, sources that are very useful complements to the base power system, but which still have to be subsidized after $80 Billion over 40 years and even now produce only 5% of electricity. Consider just a few conclusions from state regulators:

  • Florida—Office of Public Counsel warned the EPA Rule would cost consumers $25 Billion

  • Nebraska—State Power Board estimated $4 Billion just to build wind infrastructure

  • Ohio—Public Utilities Commission projects a 39% increase in rates.

Or the view of national groups:

  • NRECA—found that EPA underestimated cost to rural consumers by a staggering factor of up to 33. Overall compliance costs from 2022-2030 alone could exceed $20 billion.

  • American Farm Bureau: “EPA’s regulations will impose billions of dollars on the US economy... farmers and ranchers are price takers not price makers”

  • Fitch Financial Ratings Service: “meeting the goals and recovering related costs will likely require sizable rate increases on end users” (that is, consumers)

  • American Public Power Association: “the CPP final rule…increasing operating costs, unduly adding new costs for relating infrastructure, and ultimately raising electricity bills for millions of consumers” EPA Plan means affordable rates in rural areas gone forever.
     

Affordability:  More Coal Means Lower Rates

 

“75% of AEPCO’s total capacity, would become stranded…analysis indicates a precipitous and untenable rise in AEPCO’s costs and customer rates” Logan Gernet, Arizona G&T Co-Ops
 

 

EPA Didn't Get the Memo

“Strong rural communities are key to a stronger America…that’s why I’ve established the White House Rural Council to make sure we’re working across government to strengthen rural communities and promote economic growth” President Barack Obama

 

“First, Do no Harm”

Through the foresight of Co-op power system planners a generation ago, rural Americans have benefitted from low and stable electric rates, adequate and reliable electricity and a cleaner environment. Anyone who has studied the Tennessee Valley Authority or the Rural Electrification Act of 1935 is keenly aware of how important electricity is to the quality of daily life in rural America. Yet, on the basis of unproven guesses, hypotheses and assumptions about the potential of energy efficiency programs, wind and solar, the EPA is prepared to put 42 million rural residents at risk, adversely impact our food production system and irrevocably damage the American Heartland by promoting a Rule that will do virtually nothing to improve the environment. Fortunately, the US Supreme Court has granted a Stay to Co-ops and other groups opposed to the EPA’s headlong flight into the unknown. But the battle is far from over and rural residents, and indeed all citizens, remain at serious risk as EPA continues to work on ways to implement their misguided Plan.

 

"The Clean Power Plan is a direct threat to Co-ops’ ability to provide affordable and reliable electricity to their member consumers and should be erased from the books” Jeffrey Connor, Interim CEO, NRECA

 

Frank Clemente, Ph.D.
Dr. Clemente is Professor Emeritus at Penn State University and specializes in research on the socioeconomic aspects of energy policy. He was formerly Director of the University's Environmental Policy Center. His work has appeared in such media as Electric Light & Power, American Coal, Farm Economics, and Power Engineering. He was primary author of the Global Value of Coal published by the International Energy Agency (IEA). His over 100 presentations include NARUC, National Coal Council, CERA Week, Rural Society, and NRECA. Materials provided here are solely the responsibility of the author and not Penn State. Professor Clemente's contact is fac226@psu.edu