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Planning Versus Regulation

The trouble with most 100-page studies is that few people want to take the time to read them. The clunky title of one published about a year ago certainly doesn’t sound exciting. What casual reader would be inspired to open the pages of something called 2010 Special Reliability Scenario Assessment: Resource Adequacy Impacts of Potential U.S. Environmental Regulations?

As it turns out, this huge report is getting a lot of attention—and not just in the insider’s world of electric utility companies. The study, prepared by the North American Electric Reliability Corporation (NERC), gives a detailed look at how the nation’s power grid works today—and how it will function in the future.

Reliability—keeping the lights on—is the key goal.

When consumers think about reliable electric service, they usually have right-here-in-my-neighborhood concerns in mind. During a thunderstorm, consumers worry about what will happen. If lightning hits a transformer and the power goes off, will the local electric utility be able to restore service quickly?

Study warns against making changes too fast
When electric utilities think about reliable service, they have the consumer’s concerns in mind, too. But utilities must also think beyond today’s events in their local service territories. Utilities have to set up maintenance schedules, plan construction, predict how much electricity customers will need days and nights, in this season and five and more years ahead, then figure out how to supply the power to keep the lights on, nice and steady.

Paul McCurley, manager for power supply and chief engineer for the National Rural Electric Cooperative Association, says, “This NERC study is a ‘heads-up’ that there are things going on beyond that thunderstorm, things that may have an effect on your lights going out or staying on, and what that is going to cost you.”

NERC, the international group that sets and enforces reliability standards for the electric power industry and monitors the operation of the bulk power systems in the United States and Canada, makes regular annual reports about the entire electric system. But in 2010, McCurley and 11 other industry pros served on a special task force to prepare a different kind of report.

Starting with facts and figures used in the 2009 report, they added new information from all public power systems, investor-owned utilities, independent power producers, and rural electric cooperatives during early 2010. Then they looked at all the pending and planned U.S. Environmental Protection Agency regulations scheduled to take effect in 2013, 2015, and 2018.

The usual NERC reports are planning tools for electric utility personnel, a way to share the big picture within regions and in neighboring areas. Reliable electric service depends on having a bit of extra generation ready to jump in to supply power in an emergency. Reliable service also depends on the proper amount of space in transmission lines to move electricity from power plants to consumers at the right times.

The new NERC report looked at these familiar concerns, and then took things a step forward to examine how so many new EPA regulations will affect utilities’ day-to-day operations and their long-range planning.

The short version of the report’s conclusions goes like this: moving too fast to change the mix of energy resources within the United States will cut things too close for comfort. If the amount of power flowing into the grid from coal-based power plants is reduced before other changes are made to the entire system to make up the difference, in certain situations there may not be enough electricity to meet demand. The lights may blink.

Exactly where they might blink depends on the kinds of generating resources available within a local area, and whether transmission lines can move enough power quickly to where it’s needed.

Meeting new EPA rules will raise power rates
Scaring people is not at all what NERC had in mind when it published this report. And that’s not what NERC President and CEO Gerry Cauley said when he presented a copy of the report during his remarks before the Congressional Subcommittee on Energy and Power hearing in Washington in April.

Cauley said the purpose of this NERC report is “to investigate, assess, and report on the potential impacts of new and evolving electricity market practices, new or proposed regulatory procedures, and new or proposed legislation (e.g., environmental requirements) on the adequacy and operating reliability of the bulk power systems.”

Then Cauley said, “The report is intended to inform NERC’s stakeholders, industry leaders, policymakers, regulators, and the public so that sound and informed decisions can be made on resource requirements.”

The long report with the complicated name is a much-needed reality check.

Throughout the electric utility sector, engineers and chief financial officers have already been examining how much extra money they will have to spend to keep the power on amid all these new EPA rules and regulations. Whatever they must spend to keep the lights on and comply with new EPA rules will increase the rates consumers pay for their electricity.


THE HIGH COST OF BUILDING

Tony Campbell, CEO of East Kentucky Power Cooperative, which operates generating plants and transmission lines that provide electricity to co-op members in 87 counties, says, “So many electric utilities in this region depend on coal-fired generation and new rules are coming along so fast, I am concerned about what will happen when everyone wants to add devices to old plants or build new ones to meet these regulations.

“There will be so much demand for steel and equipment and engineers, and these are limited resources. I expect the costs for these improvements to go up significantly. When a lot of utilities are competing for the same things, the cost to do them will increase.”

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