EPA Regulations Will Close Coal Plants, Raise Electricity Prices, GAO Says

Matt Cover | August 22, 2012 | 9:27am EDT
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A fossil fuels plant in Tennessee. (AP Photo)

(CNSNews.com) – New regulations issued by the Environmental Protection Agency will lead to the closure of older, coal-fired power plants and boost electricity prices in some parts of the country, according to a new report from the Government Accountability Office.

The GAO, at the behest of Sen. Jay Rockefeller (D-W.Va.), reviewed a host of information from government sources such as the EPA and Energy Information Agency (EIA) as well as private energy-sector forecasters to determine the likely impact of four new EPA regulations aimed at coal-fired power plants.

None of the regulations has taken effect yet and two have yet to be finalized by EPA. In fact, one of the regulations – the Cross-State Air Pollution Rule – was struck down by a federal court on Tuesday, after the GAO issued its findings.

(In a 2-1 decision, a panel of the U.S. Court of Appeals for the District of Columbia Circuit said the EPA’s cross-state air pollution rule – which sought to reduce downwind pollution from power plants -- exceeded the agency's statutory authority. The court faulted the EPA for imposing "massive emissions reduction requirements" on upwind states without regard to limits imposed by law.)

GAO found that as many as 12 percent of coal-fired power plants may be closed because the EPA regulations make it too expensive for power companies to operate them, despite coal being one of world’s cheapest fuels.

“It is uncertain how power companies may respond to four key Environmental Protection Agency (EPA) regulations, but available information suggests companies may retrofit most coal-fueled generating units with controls to reduce pollution, and that 2 to 12 percent of coal-fueled capacity may be retired,” GAO said.

These changes – either installing expensive retrofits or closing power plants – will drive up electricity prices by as much as 13.5 percent in some areas of the country.

“Available information suggests these actions would likely increase electricity prices in some regions,” GAO said. “Regarding prices, the studies GAO reviewed estimated that increases could vary across the country, with one study projecting a range of increases from 0.1 percent in the Northwest to an increase of 13.5 percent in parts of the South more dependent on electricity generated from coal.”

Coal is the country’s single-largest source of electricity, accounting for 42 percent of power generation in 2011, GAO reported.

GAO noted that economic trends can also contribute to the closing of coal-fired power plants, something that makes it difficult to fully account for the impact of the EPA’s new regulations. Many coal plants are decades old, and in some areas of the country, coal can be more expensive than other fuels, such as natural gas, which is currently experiencing a production boom.

The regulations at issue were all put in place by President Obama’s EPA to deal with power plant emissions and industrial waste called coal ash, the byproduct of burning coal.

The first rule, the Cross-State Air Pollution Rule (mentioned above) would have cut emissions of sulfur dioxide and nitrous oxide in 28 states by establishing a cap-and-trade system. The second regulation is the Mercury and Air Toxics Standards (MATS), which seeks to regulate the emission of mercury and other gasses and could force power plants to install expensive scrubbing technologies to remove the gasses from power plant emissions.

The third regulations is the Coal Combustion Residuals (CCR) regulations, which controls how power plants dispose of coal ash, which can contain poisons such as arsenic, mercury and cadmium. This regulation, which has not been finalized, could empower EPA to treat coal ash as hazardous waste – allowing the government to set strict standards for how power plants operators must handle and dispose of it.

The fourth regulation is known simply as a 316(b) regulation and deals with protecting aquatic life from industrial waste. Its name refers to Section 316(b) of the Clean Water Act, which requires the EPA to establish standards for water used to cool power plants. Federal courts struck down the government’s old 316(b) regulations, forcing EPA to write new ones. This regulation would set fish mortality rates for cooling-water intake pumps or require power plants to use pumps that bring water in slower in order to allow fish to swim away from the intake pipes.

GAO said those four regulations would increase the cost of maintaining coal-fired power plants, leading to some plants closing, electricity prices rising, and power companies facing problems providing reliable electricity to consumers.

“These potential changes, which include retrofitting many coal-fueled units and retiring more coal-fueled capacity than has been retired over the past 22 years, have implications for electricity prices and reliability,” GAO said.

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