Nov. 27, 2000 (The Detroit News)The utility industry was jolted recently by news of a $1.2 billion clean-up agreement negotiated between a Virginia power company and the Environmental Protection Agency. The settlement intensifies pressure on utilities in Michigan and other Midwest states.
But for the sake of both ratepayers and shareholders, the utilities must balance costs as well as benefits as they confront regulators’ demands.
The agreement ranks as the costliest action ever taken under the Clean Air Act. That reflects the priority the EPA now places on achieving drastic reductions in power plant emissions, which may make coal-burning plants too costly to operate.
Virginia Electric Power Co. agreed to reduce emissions from eight coal-burning power plants by 70 percent over 12 years. Targeted pollutants include smog-forming nitrogen oxides as well as sulfur dioxide, a precursor of acid rain.
In return, the EPA will drop enforcement actions filed against the utility for allegedly failing to install proper pollution controls. Likewise, New York will abandon its legal case against Virginia Electric for supposedly “transporting” pollution to the Northeast.
Whether Michigan utilities will likewise be forced to re-engineer operations is under court review. The EPA in 1998 ordered Michigan and 21 others to cut utility emissions by a whopping 85 percent a requirement substantially upheld by a federal appeals court. But the states and utilities have appealed that decision to the U.S. Supreme Court.
Invoking a different section of the Clean Air Act, the EPA also has ordered 277 utilities in the Midwest and South to meet new emission limits intended to cut pollution transport to the Northeast. Oral arguments on a legal challenge to that requirement are slated for next month.
Finally, the agency has unilaterally redefined the rules under which utilities must install new emissions controls. Older plants undergoing routine maintenance and repair are being subjected to the more stringent regulations crafted for far newer facilities. Consequently, the EPA has filed violation notices and lawsuits against dozens of facilities.
EPA Chief Carol Browner says the regulatory crackdown is needed to protect the environment. But there is little evidence to support the ozone “transport” theory, and utility emissions have consistently fallen over the past three decades. Despite a near-tripling of coal consumption by utilities, for example, power plant emissions have decreased by one-third. And emissions per ton of coal burned have been reduced 70 percent since 1970.
The EPA and the Clinton administration appear intent on achieving through regulation the level of emission reductions that Congress has so far refused to ratify in the Kyoto manifesto.
It is not entirely surprising that Virginia Electric has acquiesced. The company already had budgeted some $950 million for capital improvements, and the settlement provides a level of operational certainty that ongoing litigation destroys.
But the courts have yet to determine whether the EPA is acting within its statutory authority. Of course, cleaner air is a desirable goal. But Michigan utilities should await a legal determination before embarking on a course that could significantly increase power costs for industry and consumers.
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