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    West Memphis Utility Commission Issues Public Comment to EPA


    July 1, 2022 - Targeted News Service

     

      TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, editor@targetednews.com, Springfield, Virginia; 703/304-1897; https://targetednews.com

      WASHINGTON, June 30 -- The West Memphis Utility Commission, Arkansas, has issued a public comment to the U.S. Environmental Protection Agency. The comment was written on June 21, 2022, and posted on June 23, 2022.

      The comment was on Docket No. EPA-HQ-OAR-2021-0668.

      * * *

      The West Memphis Utility Commission (WMUC) appreciates this opportunity to provide comments in response to Environmental Protection Agency's Federal Implementation Plan Addressing Regional Ozone Transport for the 2015 Ozone National Ambient Air Quality Standard ("Proposed FIP"). WMUC is an agency of the City of West Memphis, Arkansas ("West Memphis") tasked to provide electric service to a population of 24,150 residents that is safe, reliable, affordable, and consistent with good environmental stewardship. West Memphis is a small governmental jurisdiction as defined by the Regulatory Flexibility Act.

      Introduction

      WMUC provides these comments because the citizens of West Memphis will be financially impacted by the Proposed FIP. WMUC has a financial interest in the output from electric generating units (EGUs) that will be affected by the Proposed FIP. The magnitude of the cost associated with implementation of the Proposed FIP is currently unknown, but the existence of a cost increase under the Proposed FIP is certain. That increase will in turn cause wholesale power costs for WMUC to increase. Because WMUC is municipally owned and operated on a not-for-profit basis, increased costs will not be borne by shareholders, but by the citizens of West Memphis. This is particularly troublesome in Arkansas where median income ranks among the lowest in the nation./1

      In fact, much of the area served by WMUC has been identified as Historically Disadvantaged Communities under the Justice40 Initiative./2

      WMUC holds small minority interests in White Bluff (ORIS ID 6009) and Independence (ORIS ID 6641). Thus, even though the Proposed FIP includes a list of proposed NOx control strategies, WMUC will have little ability to determine which strategy is employed. Despite having little control over methods of compliance, WMUC would bear significant cost and risk related to implementation of the Proposed FIP. In Table 6-3 of the Regulatory Impact Analysis ("RIA") performed for the Proposed FIP, the EPA indicated that there would only be three small municipal utilities that would incur compliance costs greater than 1% of revenues in 2026./3

      WMUC questions this analysis. More specifically, WMUC questions this analysis because WMUC is a small municipal utility that would be affected by the Proposed FIP and, in all likelihood, the financial impact will exceed 1% of revenues. WMUC requests that EPA reevaluate the...

      1 https://www.bea.gov/sites/default/files/2022-03/spi0322_0.pdf

      2 Executive Order (EO) 14008. For designation of historically disadvantaged community, refer to https://datahub.transportation.gov/stories/s/tsyd-k6ij

      3 https://www.regulations.gov/document/EPA-HQ-OAR-2021-0668-0151

      * * *

      ...regulatory impact of the Proposed FIP on small municipal utilities and provide relief for disproportionate impacts on their customers.

      Comments

      In the comments below, WMUC expresses opinions shared with the Arkansas Municipal Power Association ("AMPA") and submits that: (1) further economic analysis should be performed in light of current market conditions; (2) implementation schedules should be reevaluated in light of current supply chain constraints; (3) generation shifting as a control strategy should be eliminated; (4) Compliance should be waived for EGUs that will cease operations by the end of 2030; and (5) EPA should afford the State of Arkansas additional time to complete a state implementation plan prior to imposing the Proposed FIP.

      1. Current Market Conditions.

      When calculating the cost of reagents in the Proposed FIP, the EPA stated, "In the cost estimates presented here, EPA uses the cost for urea, which is greater than ammonia costs, to arrive at conservative estimate. ... EPA assumed the cost of $350/ton for a 50% weight solution of urea."/4

      This statement is inconsistent with current data from the Energy Information Administration ("EIA"). In its report dated May 10, 2022, EIA stated that the price of ammonia "has risen by a factor of six in the past two years" with current prices at $1,600/ton./5

      The cost-benefit analysis performed by EPA was based upon market assumptions that no longer exist and should be reevaluated prior to implementation.

      2. Current Supply Chain Constraints.

      In the Proposed FIP, EPA proposes to require emissions limitations beginning in 2026, stating, "If finalized in early 2023, the final rule would provide more than three years for EGU and non-EGU sources to install whatever controls they deem suitable to comply with required emissions reductions by the 2026 ozone season ... The EPA views this timeframe for retrofitting post-combustion NOx emissions controls and other non-EGU controls to be presumptively reasonable and achievable."/6

      This statement fails to acknowledge the current supply chain constraints faced by the electric utility sector. The American Public Power Association ("APPA")/7 previously provided comments to the Department of Energy earlier this year describing supply chain difficulties affecting the electric sector./8

      While those comments focus on the current shortage of transformers, they express a greater concern that the supply chain of steel will significantly impact future projects. Moreover, municipal utilities are reasonably concerned that the current supply shortage may last several years.

      In the Proposed FIP, EPA does not address the current supply chain disruption affecting the electric sector. EPA's assertion that retrofitting could be accomplished within three years may be reasonable under normal conditions; however, the electric sector supply chain is not operating under normal...

      4 See pp 4-5 in EGU NOx Mitigation Strategies Proposed Rule (April 5, 2022) available at: https://www.regulations.gov/document/EPA-HQ-OAR-2021-0668-0125

      5 https://www.eia.gov/todayinenergy/detail.php?id=52358

      6 Federal Register, Vol. 87, No. 66, Page 20101 available at: https://www.regulations.gov/document/EPA-HQ-OAR2021-0668-0007

      7 APPA is the national representative organization of community-owned utilities, including those in Arkansas.

      8 https://www.regulations.gov/comment/DOE-HQ-2021-0020-0043

      * * *

      ...conditions. EPA should either reconsider the deadline for retrofits under current conditions or delay issuance of the Proposed FIP until after supply chain challenges have been resolved.

      3. Generation Shifting.

      Municipal utilities object to the strategy of generation shifting. When generation is shifted away from an EGU that provides power to a municipal utility, the community served by that municipal utility is exposed to the volatility of market energy and capacity pricing. Further, the strategy of generation shifting would necessarily cause uneconomic EGUs to be dispatched, thereby increasing market energy costs for all municipal utilities. The financial harm realized by the municipal utility - and its customers - could be substantial. For example, the average day-ahead energy price for Arkansas in the Midcontinent Independent System Operator's (MISO's) market last Friday (June 17, 2022) was $87.50/MWh - substantially higher than the cost of energy from White Bluff or Independence./9

      The cost increase due to generation shifting would be borne directly by customers and trigger significant rates increases.

      Municipal utilities are also concerned about the concept of generation shifting because it assumes the existence of low-NOx-emission EGUs that are available to operate in place of higher-NOx-emission EGUs. This assumption may be true in some markets, but not MISO. In the Summer 2022 Seasonal Readiness Workshop, MISO projected that available generating capacity (119 GW) would be insufficient to meet the probable peak load in July (124 GW) and August (121 GW)./10

      Given that MISO forecasts a shortfall in generation for 2022, EPA should reevaluate whether generation switching is a viable strategy for NOx reduction.

      4. Amortization of Capital Costs.

      EPA evaluated the costs and benefits of capital expenditures used to reduce NOx emissions over 20 years (2023-2042)./11

      However, the White Bluff and Independence EGUs are subject to agreed orders that will cause the permanent cessation of all coal combustion by December 31, 2028 and December 31, 2030, respectively./12

      For White Bluff and Independence, EPA should have evaluated costs and benefits of compliance in light of this shortened operational life. More specifically, the cost of compliance should include full cost recovery of capital expenses prior to the mandated retirement date and the benefit of compliance should exclude emission reductions after the mandated retirement date. Under this analysis, White Bluff and Independence should be excluded from regulation under the Proposed FIP, as should any EGU that agrees to cease operation before the end of 2030.

      5. State Implementation Plan.

      On November 7, 2019, EPA approved Arkansas's state implementation plan ("SIP") addressing the interstate transport of air pollution that affects downwind states' ability to attain and maintain NAAQS...

      9 https://www.misoenergy.org/markets-and-operations/real-time--market-data...(xls)&t=10&p=0&s=MarketReportPublished&sd=desc

      10 See Slide 29 of MISO's Summer 2022 Seasonal Readiness Workshop available at https://cdn.misoenergy.org/20220428%20Summer%20Readiness%20Workshop624245.pdf

      11 Federal Register, Vol. 87, No. 66, Page 20048 available at: https://www.regulations.gov/document/EPA-HQ-OAR2021-0668-0007

      12 Sierra Club vs. Entergy Arkansas, Inc., USDC Case No. 4:18cv854 (March 11, 2021) available at https://www.sierraclub.org/sites/www.sierraclub.org/files/83%20-%20CD%20Entered.pdf

      * * *

      ...and the 2015 ozone NAAQS. On February 22, 2022, EPA proposed to disapprove Arkansas's SIP. On April 6, 2022, EPA published the Proposed FIP with hundreds of pages of documents and a limited timeframe to provide meaningful comments. WMUC encourages EPA to afford the State of Arkansas ample opportunity to establish a revised state implementation plan prior to implementation of the Proposed FIP.

      Conclusion

      WMUC submits that EPA's analysis is incomplete. EPA's analysis is based on market conditions that do not exist. The cost of reagents has skyrocketed. Supply chains that are necessary to install NOx controls have been disrupted. EPA's proposed compliance methods are flawed. Generation shifting will exacerbate the financial impact of compliance on municipal utilities. The cost to install NOx controls on generators slated for retirement cannot reasonably be recovered. EPA should afford the State of Arkansas an opportunity to submit a revised SIP prior to adoption of the Proposed FIP. Last, WMUC encourages EPA to identify and consider small government entities that will be directly and substantially affected by the Proposed FIP, especially those serving Historically Disadvantaged Communities such as WMUC. EPA should tailor relief to minimize the price impact of the Proposed FIP to customers who cannot reasonably afford to pay it.

      * * *

      Original text here: https://downloads.regulations.gov/EPA-HQ-OAR-2021-0668-0404/attachment_1.pdf

      TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, editor@targetednews.com, Springfield, Virginia; 703/304-1897; https://targetednews.com

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