**From:** Robert Talley [ mailto:rob@talleyandassociatesinc.com ]

**Sent:** Friday, November 14, 2014 6:03 PM **To:** Harvey, Reid **Subject:** Re: Rate/Mass Conversion Consideration Good afternoon Reid, Pleasure to visit again. I took another look at the mass conversion calculations to get a better sense of the process and think, after reading them more closel y, that the issue I tried to raise is not actually

addressed. I now read the mass conversion prox y emission s rates to apply to "new" units that are brought into the "existing" unit compliance program b y states that see the opportunity

to use them as a compliance mechanism.
I am now concerned that I originally misread the mass conversion to appl y to existing units with no operating history

in the base y ear. Instead, it appears to onl y appl y to new NGCC units that are "new

. " I just wanted to clarify this issue as I fear I may

have left you with the impression the model proposed addressed the concern I raised. Thanks for your time, Rob Talley As an aside and unrelated to my specific concern, Iunderstand why a state might want to bring a "new " NGCC into a rate based program to lower the rate but not I remain a bit baffled as to why a state would want to bri ng an exempted "new" unit into a mass program. Such a move only adds ton s o f CO 2 to a program that would otherwise not be in there. On Mon, Oct 6, 2014 at 1:50 PM, Harvey , Reid < Harvey .Reid@epa.gov > wrote:
Rob: Thanks for your note and for coming in last week. We will certainly give these comments and your suggestions careful consideration. I appreciate the detail and background you’ve provided, which will help us consider the way forward with these concerns in mind. Best,
Reid Director, Clean Air Markets Division Office of Atmospheric Programs/OAR U.S. Environmental Protection Agency 1200 Pennsylvania Ave., NW (6204J) Washington, DC 20460 202

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- 9429 www.epa.gov/airmarkets**From:** Robert Talley [mailto: rob@talleyandassociatesinc.com ]

**Sent:** Friday, October 03, 2014 9:33 AM **To:** Harvey, Reid **Cc:** Ashlie Kuehn; Harre, Alyssa; Andrew, James; Natalie; Goffman, Joseph **Subject:** Rate/Mass Conversion Consideration Reid: It was a pleasure to see you yesterday and thank you again for the time. Per our discussion, I wanted to follow up with a specific issue on the mass/rate conversion guidance that is under consideration internall y for release in the near term. The Prairie State Generating Company is two 800MW Supercritical, mine

- mouth, coal fired power plants co

- located in Southern IL that just recently completed construction. PSGC operates as a single entity

and 95% of the ownership is held by public power utilities serving customers in 8 states. Using the 111(d) proposed baseline date, PSGC was still under development and in the testing and shakedown phase and did not have representative emissions. For a Mass conversion this creates some issues. We have encountered this problem in the Waxman

- Markey legislative discussion over emissions allocations, in the CSAPR over credit allocations and we see a similar issue for treatment of under

- construction NGCC plants that the proposed rule chooses to treat as if they are built for the purposes of setting a state goal. My outreach here is to make a fairl y simple request; that in proposing guidance for a rate to mass conversion EPA discuss the need, and states be given the opportunity , to address and credit emitting units that do not have representative emissions in the 2012 baseline y ear in a manner that does not require taking from other units to make the new units whole. There is precedent for this approach: In Waxman Markey

credit allocation, new units were allocated a specific set

- aside to allow new entrants to enter the market without an immediate disadvantage. In the CSAPR, new units were give n a credit allocation based on anticipated emissions tied to unit design and anticipated capacit y factor. If guidance is not provided to make clear that new units without emissions history we fear the state

- by

- state credit fight that the newest units will have to undertake to secure sufficient credits to operate will be insurmountable if we are required to 'take' credits from an existing pool that incumbent units will argue are 'theirs

. ' This will be especiall y problematic for PSGC. Because the vast majority of our owners are in states that, for the moment, do not appear inclined to develop multi

- state compliance systems,our owners will not be able to provide offsetting credits directly. With no fleet of existing units

from which to transfer credits we wi ll be forced to the market to secure operational credits at an unknown cost. This fight will be difficult in IL if the rule states as proposed, however, if EPA chooses to link source emissions to load (as has been discussed for renewables) we see absolute ly

NO ability

to secure credits given the need to 'fight' in 8 states. While we are not alone, the pool of impacted entities is not large. It will comprise the identified new NGCC units as well as new coal plants that had not completed construction or th e necessary shakedown period before the end of 2012. Should EPA consider allowing states to evaluate other baseline ye ars, as we understand man y utilities are requesting, the pool may grow to some degree. Failure to provide a mechanism is virtually certai n to create a circumstance contrary to EPA's overall goals. New NGCC units and the most efficient coal plants (PSGC anticipates a GHG intensity close to 15% below a traditional pulverized coal plants) will immediately be at a material operational disadvantage if they cannot access a credit pool that is comparable to existing plants. Such a material disadvantage will affect dispatch decisions and will result in older, less efficient and less clean power plants running before the most efficient plants.
I w ould be happ y to provide additional, more detailed information or to schedule a conference call with you and the technical advisers to PSGC should y ou feel additional discussion would be helpful. However, given the understood time frame, I assumed it was best to get to you quickl y. I can be reached at this email address or via cell phone at (202) 460

- 9114

. Thank you in advance for y our consideration, Rob Talley