Jacksonville utility says the proposed EPA rule could cause rate increases to local customers and across the state

JEA casts a critical eye toward President Barack Obama’s proposal seeking to curb pollution from the nation’s power plants, using unusually pointed language to say the regulations would imperil local ratepayers, strip Florida utilities of needed fuel flexibility and have major impacts on the state economy.
Jacksonville’s electric utility says the complex Environmental Protection Agency rule, aimed at reducing carbon emissions 30 percent by 2030, is too soon and unnecessarily expensive and that interim goals starting in 2020 are “crazy, unnecessary and unattainable,” according to a draft outline of comments JEA is preparing to send to the EPA.

In sum, the utility makes its position clear: The rule is “the most disruptive energy policy proposal in modern times.”

JEA says the EPA’s aggressive goal would quickly render coal-fired power plants obsolete in favor of cleaner natural gas plants, nuclear and renewable sources. Though the industry, as well as JEA, has invested in natural gas for electric generation, coal remains a major fuel source.

With utilities potentially scrambling to comply, ratepayers across Florida would likely pick up the bill.

The state’s efforts to coordinate a compliance plan could also put utilities at political odds — pitting private, investor-owned utilities that have been able to more nimbly invest in cleaner technology against public utilities like JEA, which are largely limited to revenue generated by ratepayers.

“You’re restricting the way utilities prefer to do business,” said Ted Kury, director of energy studies for the University of Florida’s Public Utility Research Center. “It’s going to raise costs.”

JEA has said its compliance costs could top $1 billion.

“Practically eliminating coal as a generation source will result in undue reliance on natural gas in times of supply deficits or disruptions and price spikes,” JEA’s draft comments say. “It would be impractical and economically irresponsible to mothball coal plants needed to meet such events.”

The EPA says the rule is a “commonsense plan” to cut pollution and, because it gives states the discretion to decide how they will meet the goals, solutions can be tailored to the needs and interests of each state.

UNCERTAINTY

The debate is taking place amid much uncertainty.

Republicans could retake the U.S. Senate in November and the White House in 2016, recasting the political balance against Obama’s plan.

Federal regulators are accepting comments through Oct. 16, which could sway some aspects of the finalized rule. The proposal has also sparked legal challenges — lawsuits are already underway.

Some environmental activists don’t think the rule goes far enough, while large segments of the industry echo JEA’s concerns.

“If the EPA moves forward with regulations that call for too much change too fast, we will likely see unnecessary coal-plant retirements without long-term plans for viable, cost-effective alternatives; higher electricity prices; and potential shortage of electricity supply,” the American Public Power Association, of which JEA is a member, said in a statement on the rule.

Should the proposed rule be finalized, state governments will face their own set of political and industry pressures as they set up compliance plans.

For example, Florida Power & Light, the state’s largest utility, already uses far more natural gas and nuclear power for electric generation — those sources generated about 87 percent of FP&L’s power in 2013 — than JEA or other Florida utilities.

That means those utilities could face larger costs, and potential rate increases, than the better-positioned FP&L.

In the competitive utility industry, that could rankle.

JEA says the rule will create “winners/losers among states and among utilities.”

“Since municipal utilities may face unique challenges that the investor-owned utilities may not, adjustments to the proposed rule specific to these rules are warranted,” JEA says.

Kury said, given the uncertainty, it’s too early to know what the economic impact will be or for consumers to worry about massively higher utility bills.

Assuming the rule moves on its proposed timeline, states would have to begin submitting compliance plans in June 2016, with the potential for a one-year extension or two years if states group together on a plan.

‘ENTRAPMENT’

One particularly frustrating aspect of the EPA rule, JEA says, can be seen in its Northside Generating Station.

In 2002, JEA unveiled the revamped Northside Station, a $630 million project built with significant help from the federal government because it fell under the “clean coal” program, aimed at reducing air pollution from coal-powered plants. The Department of Energy contributed $72 million to the construction.

The Northside station allowed JEA to increase electric generation by 250 percent while reducing air pollution by 10 percent, even as environmental advocates said federal policies should discourage the use of coal-powered plants because they contribute to global warming.

Now — with the political tide shifting substantially in the years since — the future of Northside is in doubt. JEA and industry groups say facilities like Northside will have to be retired too early. Retrofits would not be economically feasible, said Bud Para, JEA’s chief public affairs officer.

Paul McElroy, JEA’s chief executive officer, said it’s akin to “entrapment.”

OTHER ISSUES

JEA details a laundry list of concerns with the proposal, many of which are technical but several that include broad worries about its potential impact locally and statewide.

■ Forcing a large-scale shift toward natural gas will rob Florida utilities of flexibility.

For example, this year, about 65 percent of the power JEA generated came from its coal plants, a ratio that depends on the price of natural gas. The utility can use either one to generate a majority, but not all, of its electricity.

If it loses the ability to use coal, the flexibility will no longer exist, meaning price spikes in natural gas could have big impacts on customers’ electric bills.

“It puts Florida more at risk to higher prices,” Kury said.

In the event of a natural disaster, like a hurricane, natural gas lines could be disrupted, causing serious problems with no comparably large fuel source available.

■ Florida’s natural gas pipeline network is inadequate to accommodate the additional surge in use the rule will require. FP&L is pursuing a project to construct the state’s third natural gas pipeline that will stretch from Alabama to Central Florida.

It would improve natural gas access in the state — Duke Energy, for example, expects to use it for a planned $1.5 billion natural-gas power plant in Citrus County — but JEA doubts even that will be enough to satisfy demand.

■ JEA does not have access to nuclear energy and other renewables to meet the interim or final goals.

“JEA has no reasonable access to significant wind resources,” the draft comments say. “Solar energy for electric power generation in Florida is inadequately reliable, difficult and costly to scale for baseload.”

See the article here.