360 Portage Ave (18) • Winnipeg Manitoba Canada • R3C 0G8 Telephone / N o de téléphone : 204 360

- 3692 • Fax / N o de télécopieur : 204 360

- 4103 wjhamlin @hydro.mb.ca

2013 12 1 1

Reid P. Harvey Environmental Protection Agency
Director, Clean Air Markets Division 1200 Pennsylvania Avenue, N.W. Mail Stop 62041 Washington, D.C. 20460

Dear Mr. Harvey:

M ANITOBA H YDRO ' S C OMMENTS ON N EW S OURCE P ERFORMANCE S TANDARDS FOR CO2

E MISSIONS FROM E XISTING P OWER P LANTS

I. I NTRODUCTION

President Obama’s June

, 2013 Presidential Memorandum to the Environmental Protection Agency (“EPA”, the “Agency”) called for the development of carbon pollution standards that

ensure continued provision of rel iable and affordable electric powe r for consumers and

businesses as well as the continued development and deployment of cleaner technologies

. Manitoba Hydro is providing these comments to assist the EPA in its consideration of New Source Performance Standards (“NSPS”) for existing power plants

.

Manitoba Hydro is a Canadian Provincial Crown Corporation with $2 billion in annual revenue and $15 billion in assets . We are a fully integrated part of the North American electricity g rid

with long

- term power purchase agreements with utilities in Minnesota and Wisconsin. Our existing generating capacity is 5,685 megawatts (MW) and 98% of our energy production comes from renewable, low

- emitting hydropower.

Canadian hydropower imports re duce American utilities' greenhouse gas (“GHG”) emissions and

cross

- border electricity trade support s a reliable and secure United States (“US”) electricity

market.

Manitoba Hydro advocates that the EPA's performance standards should allow states and ut ilities the flexibility to meet their compliance obligations through the purchase of Canadian hydropower that is consumed in the US

. Further, to the extent that states are given credit for early action on climate change, EPA should fully recognize US utili ties' efforts to reduce their

CO 2 emissions through the purchase of Canadian hydropower.

Page 1 of 6Many states rely on imports of Canadian hydropower to meet a portion of their load. These imports not only reduce emissions, but also deliver many other benefits to A merican utilities and

consumers. Failure to recognize the important role that Canadian hydropower plays would penalize existing purchasers of this electricity and preclude the potential to expand the benefits through additional resources and sales.

Th e remainder of this submission will explore the follow ing benefits associated with imports of Canadian hydropower:

• reliability benefits;

• enhanc ing US energy security;

• supporting the development of U

. S, renewables; and

• affordable CO 2 emission reductions

.

II. I NTEGRATED M ARKETS AND R ELIABILITY B ENEFITS

The integrated nature of our mutual electrical grids, reliability regulation, and market rules delivers many benefits. It is critical that new regulations reflect this reality and do not introduce obstacles to the free flow of electrons but rather enhance and support it. Regulations should

strive to treat resources the same on both sides of the border.

T he electrical grids of the US and Canada are highly interconnected. Indeed, they are more accurately thought of as a single North American electrical grid, composed of over 200,000 miles of high

- voltage transmission lines and 35 interconnections between the US and Canada

. In

201 2

, approximately 70 TWh flowed across the US

- Canada border throug h this system of power

lines

– from Canada to the US and vice

- versa

.

These interconnections allow electricity networks to better withstand sudden disturbances caused by weather or unexpecte d issues with system components. Because of its flexibility and very fast response time s
, interconnecting with hydropower enhances regional reliability . Hydropower almost instantaneously responds to fluctuations in supply and demand, helping to avoid syste m failures during emergencies and rapidly re

- establishing system operation in the event of a

blackout.

This electricity trade help utilities on both sides of the border to balance generation and demand,

and helps ensure that needs are met as efficiently as possible. The sharing of electricity resources

also enables both countries to maximize the efficiency of their generation resources during peak load periods. Where US demand is generally highest in the summer, Canada's is generally highest in the winter

. The result is that our systems can support each other and that Canada has an ample supply of virtually emission

- free energy available to meet US peak (and ongoing)

needs.

Cross border trade between our two countries is made possible by adherence to a c ommon set of operational and commercial rules. This includes mandatory electric reliability standards developed by the North American Electric Reliability Corporation (“NERC”) for purposes of ensuring reliable operation of the integrated grid. All Canadian provinces with a footprint in the

Page 2 of 6larger North American bulk power system have crafted legislative, regulatory or other

mechanisms to ensure NERC standards are adopted and enforced within their borders.

Market coordination is also essential to ensuring a seamless, uninterrupted flow of electrons

across our shared border. Canadian utilities follow a common set of practices and protocols in order to transact with Independent System Operators, Regional Transmission Organizations and other market participants in the US

. In fact, the province of Manitoba is located within the footprint of the US

- based Midcontinent Independent System Operator (“MISO”)

. Compliance with these terms ensures greater liquidity in wholesale and bilateral marke ts, and a greater diversity of cost competitive supply options for customers throughout North America.

Canadian utilities may also participate in renewable energy tracking systems across the U S

. These state and regional tracking systems provide a transparent and verifiable process for identifying hydropower electricity imports from Canada. The Province of Manitoba is a participating jurisdiction in the Midwest Renewable Energy Trading System ( MRET S ). Manitoba Hydro registers its renewable generation within this system and transfer s renewable attributes to American counterparties

.

I II. E NHANCING US E NERGY S ECURITY

Canada plays an important role in the overall energy security of the US. Unlike overseas resources, Canadian hydropower is a secure North American resource. The two countries are

each others ’ largest trading partners. In 2012 , Canada export ed approximately 5 8 TWh of electricity to the US

. The vast majority of that electricity ( ~80%) wa s from hydropower. These imports to the US represent 10% of the hydro currently consumed in the US

, equivalent to powering 3.5 million US homes.

Cross

- border interconnections offer customers on either side of the border more options to maintain sufficient resources for delivery and to withstand sudden disturbances or unanticipated losses in system equipment. In some b order s tates, Canadian imports provide an important portion of the electricity necessary to meet the state’s needs. Fo r example, Manitoba Hydro typically provides the Upper Midwest with about 10,000 GWh of electricity per year. This is enough to power nearly 1 million homes, and accounts for over 30 % of the region’s supply of renewable generation. Manitoba Hydro currently delivers electricity into the Midwest that is approximately equivalent to 11% of Minnesota ’s total electricity demand

.

In Minnesota, Manitoba Hydro maintains long

- standing partnerships with a number of utilities. Minnesota Power currently purchases hyd roelectricity from Manitoba Hydro, and the

relationshi p supports Minnesota Power's North Dakota wind farms. These two companies reached a long

- term power purchase agreement in 2011, under which Manitoba Hydro will sell 250 MW of electricity to Minnesota Po wer for 15 years beginning in 2020. Xcel Energy and Manitoba Hydro also recently extended and enhanced a power purchase agreement for 8 50 MW. These two companies have been partners since the early 1970s. Finally, Manitoba Hydro recently extended a 200 MW seasonal diversity exchange arrangement with Great River Energy of Minnesota, which will run until 2030.

Page 3 of 6In Wisconsin, Manitoba Hydro recently entered into a power purchase agreement with

Wisconsin Public Service for the sale of 100 MW of electri city from 2021

- 2027. The parties are negotiating to expand the sale to up to 500 MW.

IV. S UPPORTING THE DEVELO PMENT OF US RENEWABLES

In many border states, Canadian hydroelectricity can help to support the development of intermittent renewable energy sources (e.g., wind, solar). Hydropower is unique in providing large scale energy storage

. When excess US wind enters the market, Canadian hydropower

operators can store water behind dams and absorb that wind power. When less US wind blows, they can releas e water and send clean power to the grid.

In September , MISO release d its draft "Wind Synergy Study " that examined this relationship. This study explored the benefits of incorporating new and existing hydroelectric facilities located

in Manitoba with the current and planned wind generation in the remaining MISO footprint. For the first time, this study used five

- minute intervals to examine market interactions , and the results clearly demonstrated hydropower's ability to quickly ramp up or down to adjust t o variability in wind generation. According to the report, these synergies have the potential to provide weighted average load cost savings in the US Midwest of $430 million annually 1

.

Hydro increases when MISO wind drops off and decreases when wind genera tes strongly

1 https://www.misoenergy.org/_layouts/MISO/ECM/Download.aspx?ID=160821

Page 4 of 6V. A FFORDABLE CO 2 EMISSION REDUCTIONS

Cross

- borde r interconnections also offer US customers expanded access to low

- carbon and
competitively

- priced resources. For years, clean electricity from Canada has competed with a
diverse set of supply options in both bilateral and wholesale power markets across the US

. And

from 2006

- 2012, Manitoba Hydro’s net annual 9.1 TWh of power exports to the US have
reduced global GHG em issions by approximately 48 million tonnes through the displacement of
fossil fuel generation in neighboring Midwest jurisdictions.

A lifecycle analysis of Manitoba Hydro's recently constructed Wuskwatim Generating Station
conducted by the independe nt, non

- profit Pembina Institute, shows GHG emissions from

Wuskwatim are comparable to other renewable power generation such as wind and insignificant
relative to those of conventional thermal generating station s. Lifecycle analyses such as these
consider not just the emissions associated with the direct fuel use but also the emissions
associated with such things as the manufacture and transportation of materials/components, fuel
use during construction, land

- use c hange and the eventual decommissioning.

Comparison of Life

- Cycle Greenhouse Gas Emissions from Electricity Generation

As existing coal units retire and electricity demand in North America increases, it is important to

note that C anada still has lar ge un developed hydropower potential. The total technical potential

Page 5 of 6of 163 GW in Canada is more than double the capacity currently in service. 2 Manitoba Hydro's

resource s provide the potential for another 5 GW of low

- carbon hydro power to come online over the coming years, with more than 2 GW in the regulatory approval process.

However, to harness this undeveloped potential, US policymakers must provide the framework

that allows for the benefits of this low

- carbon resource to be realized. New hydropower projects involve large capital costs and long lead times which are offset by subsequently low, predictable operating costs and long operating lives (50 to 100 years). Without US customers for new Canadian hydropower, that hydropowe r would be developed at a later date for use by domestic Canadian customers and without the transmission infrastructure necessary to enhance the US with energy storage, wind

- hydro synergy and energy cost savings.

F ailure to recognize Canadian hydropower u nder EPA's NSPS could result in perverse incentives

for US utilities that would undermine the Agency's goal of cost

- effectively reducing CO 2 emissions in the power sector. For example, in 2012

, Minnesota Power estimated that using natural gas instead of Can adian hydropower to provide back

- up energy support for its North Dakota wind power projects would result in an increase of 560,000 metric tonnes of CO 2 per year by 2025. Furthermore, exclusion of Canadian hydropower could penalize US regions and

utilities that have arranged purchases of Canadian hydropower as part of their strategies to pursue cost effective emission management strategies.

V I

. C ONCLUSION

Assuming the EPA allows the s tates flexibility over the design of their NSPS program for existing plants under Section 111(d)

, existing and new renewable energy resources, including Canadian hydropower

, can play a significant role in cost

- effectively reducing US CO 2 emissions.

In addition, if EPA provides credit for state s and utilities that have taken early action on reducing

CO 2 emissions, then utilities should be recognized for their efforts to reduce their CO 2 emissions through the purchase of Canadian hydropower.

Thank you for the opportunity to make this submission.

Yours truly,

Bill Hamlin Manager

, Energy Policy & Analysis Manitoba Hydro

2 Study of the Hydropower Potential in Canada: Final Report. Canadian Hydropower Association, 2006.

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