Wisconsin Public Utility Institute
Impact of New EPA Regulations on
Electric Utilities
Industrial Ratepayer Perspective
January 26, 2012
Attorney Todd Palmer
Michael Best & Friedrich LLP
One South Pinckney Street, Suite 700
Madison, WI 53703
(608) 283-4432
[email protected]
www.michaelbest.com
Clean Air Act Initiatives Impacting Utilities and Boilers
Ozone
NAAQS
NOX
NAAQS
PM2.5
NAAQS
Remand
CAIR
Replacement
SO2
NAAQS
EGU
MACT
ICR II
NSR
Changes
Boiler MACT
Boiler MACT
O3 (New)
Controls
EGU MACT
CISWI MACT
EGU
MACT
ICR I
NOX NAAQS
SO2 NAAQS
Boiler GACT
2010
PM
Controls
PM NAAQS
Boiler GACT
2009
Regional
Haze II
Ozone NAAQS
CAIR
Replacement
CISWI MACT
H2 S
2011
2012
2013
H2 S
Controls
EGU
MACT
2014
2015
2016
2017
2018
NSR
Reforms
Revisited
CISWI MACT
PM (06)
Controls
Boiler
GACT
Expand CAIR to
Boilers
Tailorin
g Rule
GHG
Reporting Rule
NSR
Changes
CAIR
Proposal
H2S MACT
Proposal
GHG
Reporting
GHG
Utility
Decision
Point
Utility
MACT
July
2009
Tailoring Rule
NSR
H2 S
Final
Ozone
(New)
Control
s
MACT
PM
Ozone
Implemented
NOX
2020
CAIR
Implem
entatio
n
SIPs for
NOX &
SO2
Johnson Memo
Endangerment
Finding
April 2009
Johnson
Memo
Boiler
Ozone
SIPs
2019
PM
(ne
w)
SIP
s
Boiler MACT
H2 S
Listing
Regional
Haze
NOX/SO2
Controls
ICI and
EGU
Boiler NSPS
SO2
Haze II
Impact on Utilities
 Recent Baird analysis predicts increases in utility
profits as power companies invest in pollution controls
and infrastructure projects to meet new environmental
requirements.
 Predicts $750 billion over next decade.
 Expenditures will be a key driver for EGU profits as they obtain
rate recovery with a rate of return on the investment.
 NERA predicts 21.7% increase in Wisconsin by 2016.
More increases in the subsequent 10 years.
 Rate payers will absorb these expenditures.
Wisconsin EGU Short Term Costs
 WEPCO (fuel filing 6630-FR-102)
 CSAPR indirect costs of $500k
 PSC assumed $5.5 million in new revenue from selling excess
SO2 and NOX allowances.
 WEPCO (05-UR-105)
 Zero increase
 Asked for $148 million as a proxy for the costs of environmental
retrofits and a wind farm to be recovered starting in 2013.
Wisconsin EGU Short Term Costs
 WPS (6690-UR-120 reopener)
 CSAPR more than doubled the rate impact on industrial
customers.
 Started at $35 million and CSAPR led to a new total of $65
million.
 CSAPR costs were deferred.
 WPL (fuel filing 6680-FR-104)
 Original filing sought $13.5 million increase driven by CSAPR
and other EPA rules.
 CSAPR later pushed increase to $27 million.
 CSAPR costs were deferred.
Wisconsin EGU Short Term Costs
 NSPW (4220-UR-117)
 CSAPR added $3 million in requested increase.
 CSAPR costs were deferred.
 MGE (reopen 3270-UR-117)
 Original CSAPR estimate at $14.5 million.
 CSAPR costs were deferred.
Cost of New Clean Air Act Regulations
Cost of New Air Regulations on the
Forest Products Industry (Capital and O&M)
8
Average Forest Products Industry Profits (2001-08)
7
$ Billions
6
5
4
Average Industry Profits (2008-09)
3
2
1
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Industrial Ratepayers Costs
 Market forces make it difficult for many industrial
ratepayers to pass compliance costs through to
customers.
 Difficult to increase product prices.
 Operating and maintenance expenses have been cut
to the bone due to the recession.
 Creates a structure budget problem for many
companies.
 Who is going to pay for these costs?