1 TABLE OF CONTENTS

4.5 Errors in 2012 Baseline Data ..................

................................................... ............................ 2
4.6 Rate-to-mass Conversion........................

................................................... ........................... 35
4.7 state flexibilities ...........................

................................................... ..................................... 133 4.7.1 Opportunities to adjust the goals............

................................................... ..................... 134
4.7.2 Stranded assets/stranded investments.........

................................................... ................ 169
4.7.3 Other .......................................

................................................... ....................................... 238 4.8 Other goal-setting approaches .................

................................................... ....................... 308
4.9 Choice of Baseline Other than 2012 ............

................................................... ................... 3682

4.5 ERRORS IN 2012 BASELINE DATA

Section 4.5 covers public comments related to error s in the 2012 baseline data in relation to the computation procedure of the final and interim goal s.

Commenters have raised a number of issues related t o this subsection which are organized by topics (comments) below. Responses are provided for these topics.

Comment 1: The EPA should provide more information about the baseline calculations.

Response 1: The EPA made the underlying data available at both proposal and again in final. This data can be found in Appendix 1 of the CO2 Emi ssion Performance Rate and Goal Computation TSD for CPP Final Rule and a descriptio n of its derivation found in Appendix 9. The underlying unit-level, state-level, and regiona l level data are available along with the calculations so any stakeholder can replicate The E PA’s calculations. The EPA made all the information on calculating state-level generation t otals available in Appendix 1, Appendix 7, and the 2012 baseline data at proposal. This was avail able in the docket and on the EPA’s website

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The following are summaries of the specific public comments under this comment:

Commenters stated EPA must provide more information on its methods and rationale in calculating 2012 electricity generation data for th e states.

Commenters added EPA has not provided sufficient in formation on how it derived the final state-wide generation totals based on the spreadshe et listing unit-level 2012 electricity generation data nationwide. The commenters stated NDEQ has bee n unable to reproduce the precise totals in megawatt-hours that match EPA's numbers, without this information, the NDEQ cannot confirm the accuracy of EPA's findings or accuratel y assess the potential impact of the Clean Power Plan on regulated sources. The commenters req uested that EPA provide the raw data, spreadsheet calculations, and detailed methodology and procedural information demonstrating how it derived each state's 2012 electricity genera tion numbers, as this will increase the credibility and transparency of the Clean Power Pla n by allowing NDEQ to reproduce and verify EPA's findings and input data; if there are inconsi stencies or errors, NDEQ requests an opportunity to make corrections.

Comment 2: General Errors in baseline

Response 2: The EPA appreciates the information regarding corr ections to the baseline values. Please see sections VI and VII of the final rule pr eamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP F inal Rule supporting the final CPP for more information about the final goals and how they were calculated.

The following are summaries of the specific public comments under this comment:3

Commenters stated the EPA misstates the emission ra te using EPA published technical data and its own calculation formula; the 2012 base year sho uld be 1255 pounds of CO2 per megawatthour not 1234. Commenters stated the 2030 target fo r Delaware should be 890, not 841. Commenters stated the coal model is wrong.

Comment 3: The use of 2012 as the baseline limits flexibility

Response 3: See Section VI of the Preamble for the EPA’s discu ssion why it relied on 2012 data as the starting point for forming its baseline. The EPA believes starting with 2012 data and only making limited adjustments uses the best available historical data and most accurately reflects an appropriate baseline from which to evaluate BSER po tential

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See the Chapter 2 of the GHG abatement TSD for the EPA’s discussion about use of regional interconnections to assess potential heat rate impr ovements and the potential impact of new air pollution control devices to comply with other Fede ral pollution control requirements, including the Mercury and Air Toxics Standards

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The following are summaries of the specific public comments under this comment:

Commenters stated the use of 2012 as a baseline doe s not recognize either the unusually mild 2011 /2012 winter, which reduced overall demand, or the temporarily very low price of natural gas, which caused a considerable customer switching from coal-fueled power generation to optional to sources fueled by natural gas. The comm enters said the four Building Blocks EPA defines as its Best System of Emission Reductions a re based upon arbitrary and hypothetical estimates of reductions, not realistically achievab le; multiple states including Kansas and Texas have already provided comments on the Clean Power P lan that seriously question whether heat rates improvement in Building Block #1 reductions a re achievable, given their coal plants already operate in the most efficient manner; furth er, generators in Illinois and other states are concerned that compliance with additional environme ntal requirements as a result of the Mercury
and Air Toxics Standards will cause heat rates to d eteriorate and net power output, per ton of carbon emitted, to decline. The commenters said the combined result of a non-representative baseline year, together with the overstatement of r eduction potential under the Best System of Emission Reductions, effectively limits compliance strategy to a reduction in coal-fired generation; thus states do not have the flexibility in compliance represented by EPA.

Comment 4: The EPA should make corrections to the baseline va lues.

Response 4: The EPA appreciates the information regarding corr ections to the baseline values. Bayfront Unit 5 was not included because, according to EIA data, the unit used less than 10%
fossil fuel. Useful thermal output is not included in the quant ification of BSER in the final rule. Affected sources would be responsible for all emiss ions regardless of their useful thermal output activity or biomass use. The EPA added categories indicating units that wer e under construction or commenced operations in 2012. Please see section s VI and VII of the final rule preamble of
the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final4

Rule supporting the final CPP for more information about the final goals and how they were
calculated.

Bayfront was not included as a likely affected unit because of data on its capacity and its fuel use. However, this does not constitute a final app licability determination. See section VII.E of the preamble regarding and goal adjustments.

The following are summaries of the specific public comments under this comment:

Wisconsin

Commenters stated EPA needs to make the following a dditional corrections to the data used in calculating Wisconsin's baseline.

A. EPA should include Bayfront unit 5, operated by Northern States Power Wisconsin, in the baseline; this unit fired both coal and natural gas in 2012, generating 6,214 MWh of electricity and emitting 5337.8 tons CO2, based on EPA's Acid R ain Program database for 2012.

B. EPA must remove MWh and CO2 emissions resulting from biomass fuels fired with fossil fuels at Manitowoc Public Utilities unit 9; comment ers provided Table 4. Generation and
emissions data for Manitowoc Public Utilities unit 9.

C. EPA should include useful thermal output (UTO) i n 2012 for the following power plants in Wisconsin, as part of the data derived using the eG RID methodology and used in the goal
calculation:

• Manitowoc Public Utilities

• Valley

• West Campus Cogeneration Facility;

Also note that in the October 2014 notice of data a vailability for the proposed rule, when seeking comment on including 2010 and 2011 as part of the b aseline, EPA included UTO in 2010 and 2011 for these plants in the eGRID methodology.

D. EPA should remove MWh and CO2 emissions resultin g from biomass fuels fired from the baseline at Wisconsin combined heat and power (CHP) and industrial generators; commenters provided Table 5: Generation data for biomass at Wi sconsin CHP and industrial generators.

Oregon

Commenters sought clarification regarding whether i nvestments made under Oregon's CO2 Standard (ORS 469.503) were taking into considerati on when determining Oregon's 2012 baseline under the proposed Clean Power Plan.5

South Dakota

Commenters stated EPA’s use of 2012 data, in its pr oposal, as the criteria for establishing state goals fails to recognize carbon dioxide reductions achieved before 2012 and results in disparities of impact from one state to another; South Dakota i s especially negatively affected for several

reasons.

Commenters stated South Dakota's total energy produ ction in 2012 was one of the highest on record; therefore, the mandate to increase renewabl e energy generation and decrease usage through energy efficiency mechanisms (goals that ar e tied to the state's total generation in 2012) is more onerous than the mandate would be using a m ulti-year approach or if EPA had used another year as the baseline.

Commenters stated South Dakota's one natural gas co mbined cycle plant was under construction in 2012; despite the fact that it operated at less than a 1 percent capacity factor for the year; EPA considers it an existing unit under its proposal. T he commenters said using data from an earlier year would reduce this plant's impact on South Dako ta's state goal or eliminate it from being considered as an operational unit depending on the year selected.

Commenters stated wind generation in South Dakota d rastically increased between 2008 and 2012; by using 2012 data to create the criteria for the state goal, South Dakota receives no credit for the dramatic increase of renewable energy added to the state's generation portfolio prior to
2012. The commenters said if EPA had used 2010 data to calculate state goals, the goal for South Dakota would be approximately 1,148 pounds of carbo n dioxide per megawatt-hour; Building block 2 would continue to be a factor in the equati on because EPA includes natural gas combined cycle plants that were already planned. Th e commenters said this plant was already planned, as evidenced by Basin Electric Power Coope rative's submission of an air quality permit application for the plant in 2009.

Commenters stated if EPA had used 2005 data to calc ulate state goals, the goal for South Dakota would be approximately 1,627 pounds of carbon dioxi de per megawatt-hour, which is consistent with EPA's goals for many other states. The comment ers added there would be continuity between the data used to calculate state goals and EPA's goal of reducing carbon emissions by 2030 from carbon emissions levels recorded in 2005; in this case, building block 2 is eliminated because the natural gas combined cycle plant was no t planned in 2005.

Commenters recommended EPA recalculate state goals based on calendar year 2005 electrical production and sales data instead of 2012.

Kansas

Commenters recommended that non-Kansas wind be subt racted out from total state electric generation to estimate its RE target, the same proc ess should be carried out for setting the baseline CO2 emission rate, which EPA calculated as 1,940 lbs/MWh (1,939lbs/MWh using corrected 2012 data). The commenters said the corre cted Kansas 2012 baseline CO2 emission rate, after data correction and accounting for wind generation owned by non-Kansas entities, comes to 2,088 lbs/MWh.6

Comment 5: Planned retirements.

Response 5: As explained in the CO2 Emission Performance Rate and Goal Computation TSD for final CPP, the EPA did not adjust the baseline based on scheduled or planned retirements

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The following are summaries of the specific public comments under this comment:

Commenters stated the units for which retirement de cisions have already been made for
VA include:

• Chesapeake Units 1, 2, 3, 4_12

• Yorktown Units 1 and 2_13

• Clinch River Unit 3_14

• Glen Lyn Units 5 and 6_15

The commenters said the electric generation and carbon emission levels from these four coalfired EGUs were included in Virginia's baseline 201 2 carbon emissions rate; however, EPA did not include the planned retirement of these EGUs wh en calculating Virginia's emission reduction target. The commenters said combined, these units r epresented 2,391,610 megawatt hours ("MWh") of generation in 2012, including 16 percent of the carbon emissions and 17 percent of the electric generation in Virginia's coal-fired EG U fleet.

The commenters said applying these retirements to V irginia's 2012 baseline emission rate results in a decrease from 1,438 lbs/MWh to 1,383 lbs/MWh, a reduction of 55 lbs/MWh; it should be noted that this reduction is larger than the emissi ons rate reduction for EPA's building block 1 (6 percent heat rate improvement at existing coal-fire d EGUs), which reflected a reduction of 49 lbs/MWh. The commenters said thus, simply continuin g on course with the plan to retire these units would reduce Virginia's 2012 emissions rate b y more than EPA's application of building block 1; this demonstrates that the assumed reducti ons from Virginia's coal-fired EGUs are
achievable.

Commenters stated some units simply retire and ques tioned why didn't the EPA account for the changing profile of the coal fleet from 2012 forwar d when setting state goals.

Comment 6: Units that were out of service or retired.

Response 6: See section VI of the final rule preamble of the C PP and the CO2 Emission Performance Rate and Goal Computation TSD for CPP F inal Rule for an explanation on why the EPA believes unit-level variation does not impact i ts regional calculations, and why the EPA relied on a historical baseline rather than a proje cted future-year baseline that projected behavior post inventory turnover

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EPA notes that there are both NGCC and coal units t hat retired in 2012, but that are still in EPA 2012 baseline reflecting their reported generation and emission from that year. EPA discussed in the CO2 Emission Performance Rate and Goal Computat ion TD for CPP Final Rule why it was not removing scheduled retirements from its baselin e. It appreciates the comment on 55 MW Hansel as one of the unique NGCC untis that retired in 2012. EPA notes there were many more
fossil steam units that retired in 2012. More unit s of each technology will retire before the first year of compliance in 2022. Consistent with its ap proach to remain with a historical baseline and not begin projecting the impact of retirements in its baseline, EPA leaves these units in its baseline. Commenters suggest that 55 MW of capacit y from Hansel therefore overstates BB2. However, EPA believes its decision on retirement tr eatment has the opposite impact. It is
conservative to leave the units in the baseline. I f it removed Hansel, to be consistent it would also need to remove the fossil steam generation alr eady scheduled for retirement (and therefore no longer around to absorb incremental NGCC generat ion). As stated above, EPA steers clear of attempting to adjust for retirments, but if it chos e to go the route expressed by commenters - the effect would likely be one of a more stringent impa ct, not less stringent, as the amount of incremental generation potential removed from the b aseline would be drastically smaller (one 55 MW plant in the east) relative to the amount of fos sil steam.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA also errors in its treatment of "existing" units that were out of service,
or retired in 2012.

Commenters added units that were out of service dur ing 2012 may report artificially low capacity factors because they did not accumulate a full year of operating data by the end of that

year.

Commenters added units that retired in 2012 would a ppear to have capacity available for redispatch that will not actually be available to dis place coal generation in the future.

Commenters added retired units should not be includ ed in state goal calculations; Plant Hansel was included in Florida's goal calculation despite the fact that the facility retired in 2012; if a un it is no longer in operation then it is impossible to dispatch.

Comment 7: Canceled, indefinitely postponed, no longer in res ource plan, or that construction had not been commenced units, should be included in baseline

Response 7: For the EPA’s response to this comment, see the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule support ing the final CPP. Plant Washington is not considered a likely affected units in EPA BSER quantification. However, this does not constitute a final applicabily determination.

The following are summaries of the specific public comments under this comment:

Commenters stated canceled, indefinitely postponed, no longer in resource plan, or that construction had not been commenced projects, and s hould be included in baseline.8

Commenters stated the Plant Washington project was mistakenly excluded from Georgia's baseline calculation due to EPA's assumption that t he project has been "canceled" or "indefinitely postponed". The commenters said that P4G executed contracts for the purchase and erection of the Plant Washington boiler prior to th e publication of the New Source Proposal and that the development of the project is continuing t o this day. The commenters added that on October 15, 2014, the Director of the Georgia Envir onmental Protection Division ("GAEPD") issued a final permit amendment extending the const ruction deadline under Plant Washington's PSD permit until April 2016. The commenters stated that the New Source Proposal expressly exempts Plant Washington as one of three projects f rom coverage because as currently designed they could not meet the proposed standard of 1,100 pounds of CO2 per gross megawatt-hour (lb. CO2/MWh) because they were not sited or designed to incorporate carbon capture sequestration ("CCS") technology. The commenters added since Plan t Washington was excluded from coverage under the New Source Proposal, there is cu rrently no proposed greenhouse gas standard of performance applicable to the facility if the Ex isting Source Proposal does not apply; that being so, EPA would be required to complete a site- specific rulemaking, or to make a case by case determination, before a standard could be appl ied to the facility. The commenters concluded given these uncertainties and the advanced stage of Plant Washington's development, estimated emissions from Plant Washington as currently permit ted should be included in the baseline.

Comment 8: Offline units should be included in the 2012 basel ine calculation.

Response 8: As described in preamble section VI, the EPA has ma de an adjustment to the 2012 data to account for the Sherburne County Unit 3 out age. Its final coal steam generation estimate
for baseline is consistent with levels observed in years where Sherburne County Unit 3 is operating.

The following are summaries of the specific public comments under this comment:

Commenters stated the Northern States Power Minneso ta (Xcel Energy)-Sherburne County-Unit 3-0RIS 6090 938 MW (nameplate capacity) coal-fired electric generating unit was out of service during the entire calendar year 2012 due to an expl osion in 2011 in the turbine as the unit was returning to service after an outage. The commenter s said the unit was off line for about 2 years while repairs were made, and did not return to full service until January 2014 where it will be
used henceforth. The commenters stated that the ave rage generation from 2009 to 2011, the three years prior to the explosion, is the best approxima tion of likely generation at Sherco Unit 3 in the year 2012, that is, 5,492,640 MWh releasing a total mass of 5,775,175 tons of CO2, as calculated from the monthly data reported to the CAMD database for this unit. The commenters added the selection of these years reflects generation during the recession (2009) as well as the increasing reliance on wind generation by Xcel to meet its ren ewable energy generation required by
Minnesota statute. The commenters stated since reac hing full capacity in January 2014, the unit has operated at an average monthly load of 469,000 MWh, which represents an annual average generation of 5,630,000 MWh, thus the MPCA's recomm endation is a slightly conservative but reasonable approximation of likely 2012 generation at Sherco 3.9

Commenters were aware that EPA's baseline emissions data did not include the emissions from Xcel Energy's Sherburne County Generating Station ( "Sherco") Unit 3 because Sherco Unit 3 was not operating in 2012 due to an unexpected outa ge. The commenters said there are other, more minor, data errors identified in Minnesota's d ata set, and the commenters assumed that
other states have identified certain data errors an d are likely to request corrections or updates.
The commenters said Clean Power Plan stakeholders i n Minnesota have held many discussions about how to best account for these necessary data corrections; although we are not advocating for any particular data correction approach, the co mmenters recognized that some corrections may occur and we simply urge EPA to protect the ove rall Clean Power Plan target, and the individual state targets, as much as possible when adjusting for these errors in its final rule.

Comment 9: Units that were off-line for most or all of the bas eline year/ not operational in 2012

Response 9: In the final CPP quantification of BSER, the EPA h as made adjustments to the state-level data for Minnesota recognizing the sign ificance of the Sherco unit 3 outage highlighted below. See preamble section VI and the CO2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule for a descriptio n on how the EPA tested for and identified significant outages that warranted an adjustment to state-level totals

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The Kemper facility is maintained in the baseline a s it is a likely affected source as identified by the commenters. The EPA recognizes the 2012 baseli ne did not provide accurate emission and generation data for the facility given it’s commenc e operation date. Therefore, the EPA used assumptions for plant-level operation consistent wi th the expectations by the facility owners and on which it proposed and took comment

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The following are summaries of the specific public comments under this comment:

Commenters stated EPA should address corrections re lated to affected units that were off-line for most or all of the baseline year.

Commenters added EPA did not adjust for extended ou tage periods. The commenters stated Unit 3 at Xcel Energy's Sherburne County Generating Stat ion, the largest electric generating unit in Minnesota, was offline for the entirety of 2012 due to a major unplanned outage. The commenters added in Kansas, Westar Energy experienc ed extended outages for half of its coalfired fleet in 2012; during these extended outages, Westar Energy was installing pollution control equipment (electrostatic precipitators (ESPs), fabr ic filter baghouses, wet limestone scrubbers, selective non-catalytic reduction (SNCR), etc.) in order to ensure compliance with other Clean Air Act obligations.

Commenters added for Mississippi's 2012 baseline em ission rate, EPA included emissions from the Kemper Integrated Gasification Combined Cycle ( IGCC) plant as "other emissions" and "other generation" in the goal computation table; a lthough this plant satisfies the definition of an existing affected source, the plant was not operati onal in the proposed 2012 baseline period; therefore, this plant provides no credible emission s or operational data towards establishing standards for existing units. The commenters recomm ended these units be removed from the goal computation table.10

Commenters stated the proposed target emission rate s set for Minnesota under the Proposed Rule are arbitrary and capricious because they are based on faulty data and erroneous assumptions resulting from the use of 2012 as the baseline year ; specifically, Sherco 3 - the largest coal-fired plant in Minnesota - was offline during the entiret y of 2012; as a result, the plant's generation capacity and emissions levels were not factored int o EPA's baseline assumptions. The commenters said in light of EPA's flawed assumption s, compliance with the Proposed Rule's emission reduction goals for Minnesota would likely require retirement of Sherco 3 not long after its co-owners invested $21 million in efficie ncy upgrades, and spent an additional $200 million repairing the facility after a turbine fail ure in 2011; this would result in a significant stranding of assets.

Commenters stated on November 19, 2011, Sherco 3 ex perienced a catastrophic failure as the unit was being returned to service following a turb ine efficiency upgrade; the event caused extensive damage to the turbine, generator, exciter , and some associated plant systems, and resulted in the facility being offline for the rema inder of 2011, the entirety of 2012, and the majority of 2013 while repairs were made. The comme nters said the nearly two-year-long restoration of the facility was completed on Octobe r 27, 2013, at a cost exceeding $200 million; the plant resumed full commercial operations in Jan uary 2014.

Commenters stated because EPA used 2012 as the base line for the Proposed Rule - a year when Sherco 3 was completely out of service - its starti ng assumptions for coal-fired generation in Minnesota are fundamentally flawed; the EPA erroneo usly attributed a negative generation capacity of -55,562.0 MWh to Sherco 3, with a mere 131.3 tons in emissions. The commenters said by contrast, from 2009 to 2011, Sherco 3's ave rage generation was 5,492,640 MWh, releasing a total mass of 5,775,175 tons of CO2. Th e commenters said it is highly likely that, for Minnesota to meet the Proposed Rule's mandatory goa ls of 873 and 911 pounds of CO2/MWh, both of which are based on the faulty assumption th at Sherco 3 does not generate power, the facility would have to be off-line for most of each year; unfortunately, this would likely force Sherco 3 to retire prematurely, as it would be unec onomic to operate a baseload generation unit like Sherco 3 so infrequently, particularly after t he unit has undergone a capital-intensive environmental retrofit to comply with unrelated EPA rules. The commenters said this result
would strand the millions of dollars that SMMPA and , in turn, its members, have invested in the facility. The commenters said as EPA is aware, base load generating units like Sherco 3 are planned, designed and built to last a long time, an d they are capital-intensive undertakings, the costs of which are recovered during a long period o f years; if a generating unit that takes years and millions (if not billions) of dollars to build is forced to prematurely close when it has not yet reached the end of its useful life, the owners of t hat unit are left with stranded assets. The commenters said in this case, if Sherco 3 is forced to retire prematurely, not only would SMMPA be left with a stranded asset, but it would also ha ve to incur additional costs to either build
another baseload unit or enter into PPAs with other utilities to provide the same energy that Sherco 3 now provides. The commenters said it would be unfortunate if SMMPA's multi-million
dollar investment to serve its members and the cont inued viability of its primary and most efficient source of baseload electric energy were j eopardized because of EPA's patently flawed assumptions about the emissions levels in Minnesota

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Commenters stated one of Minnesota's newest and mos t efficient coal power plant (Sherco 3) was offline during all of 2012, due to a major outa ge. The commenters said Minnesota's historic11

coal generation data relied upon in developing the rule is therefore abnormally low and must be adjusted to include the energy produced by the 884 megawatt plant in a typical year. The commenters said based on some preliminary calculati ons and the base line for Minnesota coal generation the plant produces a substantial change in Minnesota's interim and final goals.

Comment 10: Units that came online during, and were operationa l for only part of, 2012

Response 10: As described in section VI of the preamble, the EP A is adjusting the baseline data to account for the likely affected units that comme nced operation in 2012. This adjustment (made at the state-level) substitutes in higher uti lization assumption consistent with the incremental impact of a full year operation rather than lower utilization observed in 2012 due to partial year operation. The EPA made this adjustme nt to address the concerns expressed in the
comment below. The states in which the EGUs mentio ned below are located now have generation and emissions values assumed commensurat e with a full year of baseline operation of the under construction units typical for that techn ology

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When assessing the incremental generation and emiss ion to add to a state’s baseline for under construction sources, EPA was mindful of comments t hat noted there would be some replacement effect to this incremental capacity. S ome commenters suggested using a baseline value utilization of only 15% for particular under construction NGCC as the rest would have a replacement impact rather than an incremental impac t. Some commenters suggested using a higher capacity factor. EPA had assumed an increme ntal impact on states generation for under construction NGCC at proposal of 55% utilization (a nd 70% for the under construction Kemper unit). At proposal, EPA had looked at (and dockete d) data on the 2012 utilization of NGCC that had commenced operation in the previous five years. 2012 was a year when the NGCC units had a particular incentive to operate more given lower natural gas prices. EPA felt the 55%
utilization rate was in line with historic data and a reasonable capacity factor to assume when estimating the incremental impact on baseline data. EPA recognized that some newly under construction NGCC may operate at utilization rates greater than 55% in some cases, but also recognizes that some of this generation may offset existing 2012 generation and not reflect a purely incremental change to the baseline. EPA als o performed a 10-year look back in the final rule to complement the 5-year look back at proposal . Based on all of these factors and comments, EPA determined that the proposed 55% util ization for under construction NGCC capacity was reasonable estimate when estimating th e incremental impact on a state’s 2012 data.

Likewise, commenters noted that although EPA had id entified no under construction coal units in post-2012 years at proposal, that there were a s everal coal plants that commenced operation partway through 2012 and therefore the 2012 annual data was not representative. In response to these comments, EPA adjusted its baseline approach in this final rule for states to better reflect the incremental impact of these under construction coal EGUs. EPA had to derive a similar capacity factor assumption for newly categorized un der construction coal units in the final rule. It used a similar approach to that which it had use d at proposal for under construction NGCC. It looked back at a significant sample size (greater t han 30 units) of relatively new coal units and
their utilization in 2012. Because fewer coal unit s have come online in the last five years relative to NGCC, EPA had to rely on a 10-year lookback to g et a reasonable sample size. At proposal,12

EPA had used heat input and maximum hourly heat inp ut capacity to estimate capacity factors and retained it when beginning its assessment of re asonable coal utilization rates (EPA had used this data as the “commenced commercial operation” d ata point was not readly available in the 2012 data file) . The 10 year look back using this metric suggested a 60% capacity factor. EPA considered this, along with comments that pointed o ut that under construction capacity would have some replacement value instead of incremental value. EPA took all of this into account along with the notion that these coal EGUs were loc ated in coal intensive regions or states that
had some coal retirements scheduled to occur. As d iscussed in section VI, EPA did not want to project where under construction generation would p otentially replace 2012 generation. EPA recognizes that some of these coal units do and lik ely will continue to operate at capacity factors greater than 60% utilization, but it determined tha t 60% utilization was a reasonable estimate to utilize given the resulting generation and emission s were assumed to be incremental to the 2012 data. EPA also notes that 60% was within the range of 2013 net capacity factors provided by
commenter for the coal units that had commenced con struction in 2012.

These types of considerations were necessary as EPA tried to reconcile the commenters support
to continue to use a historical dataset for its bas eline, but also to reflect the remaining affected
EGUs that were still under construction in 2012. O ne alternative would be to use a projected
model baseline that estimated the incremental versu s replacement impact of these sources. However, as described in preamble section VI and su pported by commenters, EPA continued to use a historical baseline for its final rule analys is.

Finally, for the handful of under construction coal plants, EPA conservatively assumed the state average coal emission rate for existing units as th e emission rate for the under construction sources. This is consistent with EPA’s proposed tr eatment of under construction NGCC. EPA recognizes that some of these coal facilities (e.g. , Edwardsport) will likely operate at emission rates well below this state average value. However , EPA took the conservative approach to estimating emissions from these under construction fossil steam sources to be consisistent with its proposed approach, support from from comments t o use such an approach for under construction coal units, and to avoid potentially u nderstating the emission rates expected from
the under construction units.

The following are summaries of the specific public comments under this comment:

Commenters stated partial year operation of new uni ts in 2012 affected state baseline emissions.

Commenters stated EPA should give such units the be nefit of at least a 55% capacity factor, which EPA presumes for NGCC capacity that was under construction in 2012.

Commenters added EPA did not adjust for these parti al year operations. The commenters stated in Arkansas the newly-constructed Turk Power Plant came on-line and operated for only nine days in 2012. The commenters said in Idaho, Idaho P ower's new Langley Gulch NGCC came online half-way through 2012; due to start up and the partial year operation, Langley Gulch had only a 20 percent capacity factor. The commenters a dded because of Idaho's emission goal of 228 lbs/MWh, it will be impossible for Idaho Power to increase utilization of its most efficient unit to offset the declines in imported coal-fired generation from other states.13

Commenters added many of the EGUs that EPA has clas sified as "existing" for the purposes of re-dispatch under Building Block 2 did not commence commercial operation in 2012 at all. The commenters stated EPA incorrectly assumes that thes e units were available to provide generation throughout the year but operated at a zero percent capacity factor, meaning that their entire capacity was available for re-dispatch under Buildi ng Block 2. The commenters said the Agency's faulty analysis added substantial amounts of NGCC generation to the state goal calculation for Alaska, California, Florida, Louisi ana, and Utah - and as a result, inappropriately reduced generation from Subpart Da units in equal a mounts. The commenters stated these units
should have been considered to be "under constructi on" and unavailable for redispatch in state goal calculation.

Commenters added South Dakota's Deer Creek Station appears to have a 1 percent capacity factor based on nameplate capacity, but in fact did not begin commercial operation until August
2012.

Commenters added the state goals for California, Co lorado, Connecticut, Georgia, Idaho, Mississippi, North Carolina, Ohio, and Tennessee (a nd potentially others) all include artificially low 2012 generation levels from NGCC units that com menced operation during that year. The commenters stated for nearly all of these units, th e annual capacity factor increased significantly during the following full year of operation. The co mmenters added North Carolina's Dan River facility commenced operation in December 2012 and r eported an annual capacity factor of only 1 percent, but reported a 73.2 percent annual capacit y factor the following year.

Commenters added as described in the Marchetti Repo rt, for Florida, EPA's value for existing NGCC capacity incorrectly includes the 1,210 MW Cap e Canaveral NGCC facility (which did not begin commercial operation until April 2013) an d the 122.4 MW Orlando Cogen facility (a compressed storage facility).

Commenters added as described in the Marchetti Repo rt, EPA's goal calculation for North Carolina includes "existing" NGCC capacity from the 691.1 MW Dan River facility, which only commenced operation in the last month of 2012, and the 1068 MW Lee Combined Cycle Plant, which did not provide any generation to the grid un til 2013.

Commenters added the proposed Rule's current baseli ne year (2012) does not include annual emissions from the John W. Turk, Jr. Power plant; t he plant was placed in service in December
2012.

Comment 11: Under construction Units

Response 11: Under construction units are identified in Appendi x 1 and 2 of the CO2 Emission Performance Rate and Goal Computation TSD for CPP F inal Rule. The Dresden unit is categorized as under construction based on comments that the EPA treat units commencing operation in 2012 as under construction. The Dresd en facility is not double counted in the final CPP rule inventory of likely affected units

.14

Cheyenne Prairie Generating Station capacity assume d in building block two has been adjusted down to the reported net summer capacity value whic h his most more closely aligned with the
commenters’ value

.

The Moselle units 1 and 2 constitute the 150 MW of identified under construction NGCC capacity in Mississippi.

The EPA has categorized Cane Rune facility as a lik ely affected unit that is under construction based on the under construction status reported in the 2013 EIA-860 form and based on Louisville Gas and Electric public statements (and comment) regarding the construction start of the facility such as those available at https://lge-ku.com/our-company/power-plants-andcompressor-stations/cane-run-generating-station/can e-run-updates

In regards to the applicability status of the Orlan do Cogeneration unit. EPA has left them in the baseline inventory as a likely affected units upon review of its status in other EPA air programs, the size of the unit, and the amount of net electri city generation of the unit. However, EPA notes that this does not constitute a final applicability determination. See section VII of the preamble
for further discussion.

The following are summaries of the specific public comments under this comment:

Commenters stated the treatment of certain under-co nstruction EGUs contains errors.

Commenters added least one NGCC unit - Ohio's Dresd en Energy Facility - is double-counted as both existing and under-construction in 2012, meani ng that a portion of its generation is redispatched twice in the goal calculation.

Commenters added American Electric Power's ("AEP") NGCC plant in Dresden, Ohio and American Municipal Power's NGCC plant in Fremont, O hio both operated for 11 months in 2012; EPA, however, incorrectly concluded that thos e plants operated for a fraction of that time; as a result, Ohio's actual NGCC generation in 2012 was much higher than is reflected in EPA's calculations for Ohio. The commenters added equally important, EPA assumed that 539 MW of new NGCC capacity is "under construction" in Ohio; however, that figure is attributable to the AEP Dresden plant, which is already fully operation al and has been accounted for in the existing
NGCC calculations. The commenters said the correct value of NGCC capacity "under construction" in Ohio is 0 MW; EPA significantly ov erstated the potential for redispatch to NGCC units in Ohio, resulting in more stringent emi ssion standards for Ohio.

Commenters stated the Dresden Plant was operational on January 31, 2012; therefore, the
commenters asserted that there were no under-constr uction NGCC units in 2012 and that the value in the goal setting calculation should be 0 M W for Ohio.

Commenters added the amounts of under-construction capacity listed for California, Colorado, Florida, Mississippi, and North Carolina are also q uestionable, and the fact that EPA is unable to identify any under-construction units in those stat es by name suggests that development of those units is too uncertain to rely on those units for r e-dispatch.15

Commenters stated the EPA lists 1,157 MW of unspeci fied under-construction capacity for Florida as described in the Marchetti Report.

Commenters added EPA included NGCCs under construct ion in state goal calculations subsequently making emission rate goals more string ent, particularly in North Carolina. The commenters said first, EPA assumed NGCCs under cons truction will meet the operational applicability criteria. The commenters said second, EPA assumed NGCCs under construction will operate at a 55 percent average capacity facto r in the absence of this proposal. The commenters said finally, EPA did not identify the s pecific NGCCs under construction in each

state.

Commenters added EPA cannot and should not incorpor ate NGCCs that are under construction into state goal calculations; for an NGCC to become an affected source it must supply "one-third or more of its potential electric output...to a uti lity distribution system on a three-year rolling average basis." The commenters said EPA has not pro vided any data to support that NGCCs under construction will meet the proposed applicabi lity criteria because it is not possible for EPA to predict the future electric output of units that are not commercially online and EPA must remove these units from state goal calculations.

Commenters added EPA did not identify the unit name s that are under construction further complicating the inclusion of these units. The comm enters said for example, one can surmise that Florida's unit under construction is Riviera; howev er, the capacity that EPA used does not match Riviera's actual capacity of 1,212 MW. The commente rs said the only under construction unit that Southern Company could identify in North Carol ina is L.V. Sutton with a capacity of 622 MW, which leaves 1,627 MW of unidentified under con struction capacity in North Carolina. The commenters said EPA should omit or clarify these da ta anomalies.

Commenters added EPA has mistakenly identified the Under Construction Capacity of the Cheyenne Prairie Generating Station as 220 MW. The commenters said as constructed and put into operation on October 1, 2014, the net output o f the combined cycle (NGCC) unit is 95 MW; which is the net output adjudicated and authorized for inclusion in rate base in proceedings recently concluded before this Commission. The comm enters said although the name plate capacity of the unit is 100 MW, its capacity has be en adjusted to account for the fact that it will be operated at over 6000 feet above sea level, as b oth elevation and air density affect output. The commenters said Wyoming's target should be correcte d to accurately reflect the 95MW net
output.

Commenters identified an error in the data used to calculate Mississippi's 2012 baseline emission
rate. The commenters said EPA identified a 150 MW N GCC believed to be under construction and included its projected emissions in the goal co mputation table, the commenters have been unable to identify this unit and is unsure of its e xistence; therefore believe its inclusion to be in

error.

Commenters stated Building Block 2 includes the re- dispatch of a separate category of units that EPA determined were "under construction," but that had not commenced operation as of January 8, 2014 - the effective date of proposal for the 11 1(b) guidelines. The commenters said EPA's approach for re-dispatching these "under constructi on" units assumes that these facilities are16

intended to be constructed to meet a demand that is equivalent to a 55 percent capacity factor; based on this assumption, EPA calculated that 15 pe rcent of this "under construction" capacity would be re-dispatched under Building Block 2.

Commenters stated EPA determined that nine states h ad NGCC units that were "under
construction" - a determination that has been found to be incorrect for each of the nine states. The commenters said for five of nine states, the un its determined to be "under construction" by EPA represent "potential" units identified within E PA's NEEDS database and Integrated Planning Model; NEEDS describes the potential units as follows: "'Potential' units refer to new generating options used in IPM for capacity expansi on projections of the electric industry... whereas potential units are endogenous to the model in the sense that the model determines the location and size of all the potential units that e nd up in the final solution for a specific model run." The commenters said these "potential" units d o not exist and therefore cannot represent real projects that have been proposed, designed, permitt ed, or constructed; to the extent that these "potential" projects come to fruition, they would b e subject to the new, not existing, source requirements; as such, these "potential" units shou ld not be considered in Building Block 2. The commenters added for the remaining four states, ina ccuracies in the "under construction" capacity identified are largely a result of the EPA incorrectly representing the disposition of these units; for example, the one "under constructi on" facility identified by EPA for Ohio is the Dresden Plant that was actually commissioned in 201 2; the one "under construction" facility in Kentucky is the Cane Run project, which has yet to receive an air permit and has not yet
commenced construction.

Comment 12: Units that do not meet the applicability criteria should not be included in state goal calculations; NGCCs not meeting the "one-third " sales criteria and/or the 219,000 MWh net-electric output criteria.

Response 12: The EPA believes that non-cogeneration NGCC facili ties greater than 25 MW likely meet the final rule applicability provisions and are thus included in the baseline

.
The following are summaries of the specific public comments under this comment:

Commenters stated EPA misapplied Building Block 2 to non-affected NGCCs based on the proposed applicability criteria. The commenters sai d the Agency did not complete an evaluation of NGCCs on a three-year rolling average-basis. The commenters evaluated the 2010, 2011, and 2012 eGrid generation data for the NGCCs that EPA i ncluded in the goal calculations for select states; several NGCCs did not meet the Agency's pro posed "one-third" sales and/or 219,000 MWh output criteria on a three-year rolling average basis. The commenters removed these units from the goal calculations; and all other factors a ffected by the removal of these units were adjusted accordingly, such as historic NGCC generat ion, the NGCC emission rate, and the NGCC nameplate capacity. The commenters provided a table (Table 13) of the NGCCs not meeting the "one-third" sales criteria and/or the 2 19,000 MWh net-electric output criteria.17

Comment 13: Incorrect inclusion of co-generation units that do not meet the definition of an
affected source

Response 13: The EPA has revised the proposed goals to not incl ude useful thermal output in subcategory-specific emission performance rate calc ulations or state goals. Moreover, EPA has
reviewed the comment and made corrections to Lamar Stall, Louisianna 1 units, Perryville units, and Washington Parish based on the commenters feedb ack.

The following are summaries of the specific public comments under this comment:

Commenters stated the inclusion of co-generation un its that do not meet the definition of an
affected source was incorrect.

Comment 14: Unpermitted sources should be removed from baselin e

Response 14: The EPA agrees Washington Parish should be removed from the baseline. It is now listed as “EXCLUDE” in column A of The EPA’s Ap pendix 1of the CO2 Emission Performance Rate and Goal Computation TSD for CPP F inal Rule

.
The following are summaries of the specific public comments under this comment:

Commenters stated unpermitted sources should not be included in EPA's computations. Commenters stated the Washington Parish Energy Cent er was first permitted on June 25, 2000, however, construction of the facility was never com pleted. The commenters added on June 19, 2009, at the request of Calpine Corporation, LDEQ w ithdrew the facility's application for a Title V renewal, effectively rendering the existing permi ts for the facility null and void. The commenters stated the facility remains unpermitted as of today, and therefore should be removed from EPA's computations.

Comment 15: Incorrect inclusion of natural gas steam plant emi ssions with co-located gas steam
units

Response 15: The EPA has attributed the emissions from the Arse nal Hill Units 6A and 6B to the
J Lamar Stall units per the comment

.
The following are summaries of the specific public comments under this comment:

Commenters stated the CO2 emissions attributed to t he company's Arsenal Hill natural gas steam plant in Louisiana were mistakenly included with th ose from the co-located gas steam units at
the Arsenal Hill Plant.18

Comment 16: Incorrect inclusion of units that are natural gas steam boilers or simple cycle
units

Response 16: The EPA has made adjustments to the baseline based on this comment and your
attachment. This revised unit-level data is availa ble in Appendix 1 of the CO2 Emission Performance Rate and Goal Computation TSD for CPP F inal Rule. As discussed in Sections IV and VI of the preamble, the EPA does view some of o il gas steam boilers as being likely affected
sources based on the unit characteristics. As note d in Section VI of the final rule preamble, no simple cycle units are viewed as being likely affec ted sources and none are included in the
baseline in this final rule

.
The following are summaries of the specific public comments under this comment:

Commenters stated the inclusion of units that are n atural gas steam boilers or simple cycle units
was incorrect.

Commenters added another data quality concern perta ins to EPA's confusion regarding the configuration and operation the AEP Arsenal Hill an d J. Lamar Stall ("Stall") generation units in Louisiana. The commenters said the Arsenal Hill pla nt is a natural gas steam boiler unit that was commissioned in 1960; the Stall plant is a natural gas combined cycle unit commissioned in
2010 that consists of two combustion turbines and h eat recovery steam generator trains that supply steam to a common steam turbine. The comment ers said the Stall plan is co-located at the Arsenal Hill facility; both units are covered under the same Title V operating permit, which
identifies the Arsenal Hill unit as 5A and the two Stall combustion turbine units as 6A and 6B.
The commenters said the Clean Air Markets Division database identifies CO2 emissions from the units using a common Arsenal Hill facility name (e.g. Arsenal Hill 5A, Arsenal Hill 6A, and Arsenal Hill 6B). The commenters said this nomencla ture led to emissions from the facility being incorrectly considered in the Louisiana state goal calculations. The commenters provided a table identifying the error and correct values. The commenters said CO2 emission data used by EPA to calculate the proposed Louisiana state goal should be updated to accurately reflect the
emissions associated with the Arsenal Hill and Stal l units; specifically (if EPA continues to use the building block approach and 2012 data), the CO2 emissions data for Arsenal Hill should be revised to 38,301 tons (from 1,484,758 tons); for t he J. Lamar Stall facility, the CO2 emission data should be revised to 1,446,457 tons (from 1,46 2,385.1 tons). The commenters provided a summary of other data discrepancies in Appendix B to their comments. The commenters said EPA must correct these issues and perform a th orough quality assurance check of all the data inputs and calculations used to calculated the state goals.

Comment 17: BB1; heat rate improvements

Response 17: See section V.C. of the final rule preamble of the CPP for the EPA’s response to this comment and more information about Building Bl ock 1 and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule su pporting the final CPP for the final goals.19

The following are summaries of the specific public comments under this comment:

Commenters stated owners of generating units have d eployed heat rate improving technologies as usual business practice; with fuel as the larges t variable operating cost component, deriving even small savings provides payoff over time. The c ommenters said the pace of technology deployment - and the specific means themselves - di ffers from those proposed by EPA. The commenters said the key differences are in the mean s selected and the payoff anticipated; the heat rate reducing actions described by EPA have al l been broadly used in industry - for those actions where the pace of application is low, it is usually because cost is prohibitive or that application is not feasible. The commenters said ma ny unit owners or operators employ industry and supplier "best practices" to improve unit heat rates; that many owners have implemented these heat-rate improving techniques means the 2012 baseline for EPA's analysis already includes CO2 reductions due to heat rate improvemen ts listed by EPA.

Commenters added discussions with numerous owners s how many heat rate-improving options are already consistently deployed as matter of conv entional practice; for example, one large multi-state system owner has deployed, or has plans to deploy, steam turbine upgrades on over 90% of the 2016 planned generating capacity. The co mmenters said the investments are mostly distributed from 2003 through 2016; steam turbine u pgrades represents the most significant heat rate improvement option available to industry, thus units that have already deployed turbine upgrades receive no credit and have limited options to meet the rule. The commenters said as a consequence, the CO2 emission baseline for 2012 inc ludes for many units the payoff of investments made in recent years.

Commenters stated in setting each state's target go al for CO2 emissions, EPA uses Building
Block 1 to reduce emissions of CO2 from the 2012 ba seline. Building Block 1 assumes an average efficiency increase of 6% for each coal pla nt by reducing the heat rate (btu/kw) by 6%; EPA bases this assumption on a study conducted by Sargent and Lundy in 2009 to assess available heat rate improvement at coal plants in t he United States; EPA further assumes that 2% of the efficiency increase comes from physical chan ges, such as equipment upgrades, and 4% of the efficiency increase comes from changes in opera tional practices. The commenters said these assumptions are flawed; where available, many coal units, such as Independence Unit 2, already have undertaken efficiency improvements; the turbin e for Independence Unit 2 was upgraded prior to the 2012 baseline. The commenters said bec ause EPA's proposal uses a certain, singleyear baseline, this unit gets no credit for reducin g its CO2 emissions prior to the baseline and is, in fact, penalized, because now the unit must imple ment additional measures to further reduce CO2, and these measures likely will have a higher m arginal cost than the actions already taken. The commenters said similar projects, such as the i nstallation of intelligent soot blowers, the operational improvement of feedwater heaters, the i nstallation of improved fan blades, and the installation of neural networks, frequently took pl ace at coal units across the nation prior to the
2012 baseline.

Commenters stated the foundation for EPA's BSER - i ts 2012 baseline - is unreasonable and arbitrary. The commenters said opportunities for im proving heat rate efficiency have already been captured by generators in Texas and elsewhere prior to 2012, mainly due to participation in competitive, wholesale markets that dispatch from l ower cost units. The commenters said these heat rate improvements that have already been imple mented are not accounted for in the analysis20

for building block 1. The commenters said within bu ilding block 1, EPA relies on a database (National Electric Energy Data System ("NEEDS") dat abase) of the existing power plant fleet, including coal-fueled, natural gas-fired, and other units. The commenters said utilizing the NEEDS database as referenced by EPA within the prop osal, there was approximately 314 gigawatts ("GW") of coal-fueled generating capacity operating in 2012. The commenters said of the 314 GW of coal-fueled capacity, approximately 2 07 GW was operating in a competitive wholesale energy market as of 2014, representing ap proximately 65% of the coal fleet. The commenters said due to the nature of the competitiv e wholesale energy market (i.e. plants that are more efficient are dispatched more than units t hat are less efficient), many of the coal-fueled power plants would have likely already implemented many of the heat rate improvements to improve the plants' economic position in the market . The commenters said NERC has confirmed this for U.S. units and, as confirmed by ERCOT, Tex as EGUs in particular have aggressively pursued efficiency improvements already, and thus t he heat rate improvements EPA assumes cannot be achieved from existing EGUs. The commente rs said Texas Public Utilities Commissioner Kenneth W. Anderson, Jr. affirmed this for Texas in recent legislative testimony: "ERCOT's competitive market has in effect, already been implementing Block 1 for over a decade. By using 2012 as the base year, Texas gets no credit for having already achieved a significant amount of EPA's Block 1 goals." The com menters said a major expense in generating electricity is fuel; wherever possible, the comment ers (and other market participants) have looked for and adopted efficiency measures to reduc e the amount of fuel used to generate electricity, thus heat rate improvements are not av ailable for additional reductions.

Commenters stated that Clean Water Act Section 316( b) regulations were finalized in May 2014, and some units could be required to go from once th rough cooling to closed cycle cooling. The commenters stated that if this is required, new coo ling towers will be needed and other compliance controls could include fish screens, new intake structures, and fish handling systems
which could increase heat rate. The commenters stat ed that these heat rate degradations have not
been included in the 2012 heat rate baseline for Bu ilding Block 1.

Comment 18: BB2 NGCC errors

Response 18: See section V.D. of the final rule preamble of the CPP for the EPA’s response to this comment and more information about Building Bl ock 2 and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule su pporting the final CPP for the final goals.

The following are summaries of the specific public comments under this comment:

Commenters stated individual utilities have identif ied specific errors made by the EPA on the amount of NGCC capacity that could be redispatched in submissions to their public service commissions. The commenters said for example, South western Electric Power Company (SWEPCO) in comments to both the Louisiana Public S ervice Commission and the Public Utility Commission of Texas on the Proposed Guideli nes identified several steam electric and simple-cycle units that are not NGCC units, as well as the inclusion of a cogeneration unit that
does not meet the definition of an affected source under the Proposed Guidelines. The21

commenters said the erroneous inclusion of these un its adds almost 7.7 million MWh of excess natural gas-fired generation into the denominator o f the calculation of Louisiana's state goal; this excess generation represents almost 20 percent of L ouisiana's redispatched NGCC generation under Building Block 2.

Commenters added for those units that began operati on after 2012, the EPA needs to shift them to NGCC capacity "under construction." The commente rs said in terms of units that have been either out of service or have/will be retired, EPA should remove them from the 2012 baseline, because they inflate the amount of NGCC capacity av ailable for redispatch. The commenters said also, the EPA needs to remove all non-affected units from the 2012 baseline, such as those identified by SWEPCO; these erroneous inclusions in flate the amount of NGCC generation that is included in calculation of the state goals in Bu ilding Block 2, resulting in greater amounts of coal and O/G steam generation being displaced in a particular state.

Commenters noted several discrepancies with the tre atment of the Dresden Plant, a 539 MW nameplate capacity NGCC facility in Ohio. The comme nters said firstly, it appears that the unit was "double-counted" in the re-dispatch calculation s; that is, the generation of the Dresden Plant was counted as an existing unit, but the 539 MW of nameplate capacity were dispatched as an
"under-construction" unit. The commenters understoo d that the Dresden Plant became operational on January 31, 2012, and is therefore n ot to be treated as an "under-construction" unit in the re-dispatch calculation. The commenters adde d the 2012 EIA-923 report incorrectly published the net generation data for only November and December 2012 for these units; net generation for this facility in 2012 was 2,599,011 MW-h, and not the incorrectly published 470,486 MW-h used in the goal setting calculations. The commenters said via stakeholder outreach to American Electric Power, the commenters were provided corrected generation data for the Dresden facility, as well as AEP's correspo ndence with EIA to correct the publication
issue.

Comment 19: Planned re-dispatch

Response 19: As explained in the CO2 Emission Performance Rate and Goal Computation TSD for final CPP, the EPA did not adjust the baseline based on scheduled or planned retirements or
conversions

.
The following are summaries of the specific public comments under this comment:

Commenters stated under building block 2, EPA eval uated the re-dispatch of existing natural gas EGUs and assumed that such EGUs would operate a t a 70 percent capacity factor; this 70 percent assumption reflects plans that Virginia's u tilities already have in place. The commenters said for example, excluding the units for which gen eration contracts with Dominion will expire in the next few years (Hopewell and Doswell), the a verage capacity factor for existing natural gas EGUs in Virginia was already 71.6 percent in 20 12.

Commenters added EPA assumed that a state's generat ion can only be re-dispatched to this 70 percent level if there is enough historical fossil generation to be displaced; in 2012, existing natural gas EGUs in Virginia were operating at an a verage capacity factor of 60 percent; thus,22

Virginia would require an increase of 6.2 million M Wh to achieve a 70 percent capacity factor. The commenters said since Virginia's 2012 coal and steam generation was 14.8 million MWh, there is already sufficient generation to allow for re-dispatch of the state's natural gas EGUs up to the 70 percent assumption.

Commenters stated the 70 percent natural gas capaci ty assumption is also reasonable in light of existing pipeline capacity; according to the EIA, t he total capacity of the gas pipelines delivering into Virginia is 8,011 MMcf per day, which includes 1,800 MMcf per day of pipeline capacity entering Virginia from the Cove Point LNG terminal. The commenters said the 70 percent capacity assumption would increase the level of tot al gas delivered to customers during the peak month from 1,485 MMcf per day to 1,583 MMcf per day ; even subtracting the 1,800 MMcf per day of gas inflow capacity from the LNG terminal an d the 2,175 MMcf per day that flows out of Virginia to other markets, the average daily amount of pipeline capacity available to supply Virginia markets would still be more than two and a half times the peak month gas use (approximately 4,000 MMcf per day of capacity vs. a pproximately 1,600 MMcf per day of consumption); thus, existing pipeline capacity shou ld be able to accommodate the additional capacity at existing natural gas EGUs.

Commenters stated Synapse Energy Economics analyzed the 2012 U.S. electric dispatch system and evaluated the available, unused natural gas gen eration that could feasibly displace coal-fired generation on a region-by-region basis; parts of Vi rginia are in three different sub-regions: SRVC, SRTV, and RFCW. The commenters said the Synap se analysis indicated that each of these three regions could exceed EPA's natural gas re-dispatch target of 70 percent and could, under the assumptions modeled, reach an 80 percent capacity factor.

Commenters stated as such, based on utility plans a nd the reasonableness of the assumption as applied to Virginia, the commenters included the 70 percent assumption in their calculations; as with EPA's calculation, the increased capacity from existing NGCC units were assumed to operate at the average historical emissions rate of 903 lbs/MWh; applying this assumption results in a decrease from 1,383 lbs/MWh to 1,245 lbs/MWh, a reduction of 138 lbs/MWh.

Comment 20: Nameplate capacity

Response 20: The EPA relies on net summer capacity for building block two and BSER quantification in the final rule. See section V.A of the final rule preamble of the CPP for more
information . EPA has changed the capacity on the Beatrice uni t, although it no longer relies on nameplate capacity for BB2 quantification.

The following are summaries of the specific public comments under this comment:

Commenters stated the interim and final state targe ts increase when select unit data errors are corrected. The commenters used the goal calculatio n spreadsheet provided by EPA and replaced the state's NGCC nameplate capacity with the approp riate net summer capacity while holding all other assumptions constant; this change increased f inal goals: six percent for Alabama; 14 percent for Florida; three percent for Georgia; two percent for Mississippi; and four percent for
North Carolina.23

Commenters added EPA erred by re-dispatching to the nameplate capacity of NGCCs; EPA should have used net summer capacity to represent a ccurately the generation potential from NGCCs. The commenters said EPA's use of nameplate c apacity is in direct conflict with the capacity of existing generating units included in N EEDS v.5.13 and used in IPM modeling, for example, Base Case v.5.13. The commenters said per EPA, the NEEDS unit capacity values implemented in EPA Base Case v.5.13 "reflect net su mmer dependable capacity" to the extent possible. The commenters said EPA further defines " net summer dependable capacity" as "the net capability of a generating unit in megawatts (M W) for daily planning and operation purposes during the summer peak season, after accounting for station or auxiliary services."

Commenters stated in quantifying the amount of ener gy that could be generated from existing NGCC units in Nebraska, the EPA, while using the co rrect nameplate capacity for the steam turbine at NPPD's Beatrice Power Station, used inco rrect data for the nameplate capacity for both Combustion Turbine 1 (CT1) and CT2 at the Station. The commenters said the correct nameplate capacity for each of CT1 and CT2 is 76.6 MW. Commen ters said with these corrections, the total nameplate capacity for Beatrice Power Station shoul d be 247.1 MW.

Comment 21: Incorrect net generation data

Response 21: Based on comments, the EPA is treating units that commenced operation in 2012 as under construction and estimating generation and emissions of a capacity factor assumption of 55% for NGCC units. Therefore, the EPA’s baseline and BSER quantification no longer relies on the EIA 923 generation data – which commenters a sserted was incorrect - for the Dresden facility

.
Also, Red Oak Power is included in the inventory of likely affected units in the final CPP rule

.
The following are summaries of the specific public comments under this comment:

Commenters stated the incorrect net generation data was used in the baseline NGCC capacity
calculation.

Commenters stated the 2012 EIA-923 report incorrect ly published net generation data for AEP's Dresden NGCC plant by only including two months of generation. The commenters said this plant was actually operated for 11 months, so its a ctual generation was much higher than is reflected in EPA's calculations, resulting in a sig nificant error in EPA's calculation of the Ohio state goal. NGCC capacity in Ohio, based on data in the 2012 EIA-923 report.

Commenters added EPA relied upon the 2012 EIA-923 r eport for generation data, which incorrectly reported the generation for the Dresden NGCC unit as 470,486 MWh, instead of the 2,599,011 MWh the unit actually generated. The comm enters said in reviewing the error, it was determined that AEP had correctly reported the gene ration to the EIA, however a publication error by EIA led to the 923 report only reporting g eneration data for November and December of
2012. The commenters said AEP notified EIA of this publication error on August 21, 2014; at the request of EIA, AEP resubmitted the 2012 genera tion data for the Dresden plant on August 27, 2014. The commenters said AEP followed up with EIA on September 3, October 16, and24

most recently on November 19, 2014, regarding the s tatus of revising and republishing the 2012 EIA-923 report with the corrected information. The commenters said EIA's most recent response on November 20, 2014 indicates that the agency is t argeting "mid-January" of 2015 for the
revision.

Commenters stated EPA's spreadsheet titled "2014060 2tst-plant-level-data-unit-level-inventory" failed to include the Red Oak Power generation faci lity. The commenters said based on EIA data, this NGCC facility generated 5,083,335 MWhrs in 2012. The commenters added the facility reported 2,171,353 tons of CO2 to EPA's Cl ean Markets Division in 2012. The
commenters said EPA must revise the baseline calcul ation to include this facility.

Comment 22: NGGC errors; combined cycle units used for cogener ation purposes.

Response 22: For the EPA’s response to this comment, see the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule support ing the final CPP. The EPA no longer quantifies useful thermal output in its BSER quanti fication, and believes this may address the

commenters concern.

The following are summaries of the specific public comments under this comment:

Commenters noted that there appears to be an incons istency in the way that the Sum of Carbon Dioxide (tons), Sum of Electric Generation (MWh) an d Sum of Net Energy Output (MWh) in the Natural Gas Combined Cycle (NGCC) data for Algonqui n Windsor Locks in the 2012 Plant level data for likely covered fossil sources (Goal Comput ation TSD Data File - Appendix 7) spreadsheet was calculated, as compared with the da ta for Capitol District Energy Center. The commenters said on the Unit-Level Inventory (Goal C omputation TSD Data File - Appendix 7) spreadsheet, the Carbon Dioxide (tons), Electric Ge neration (MWh) and Net Energy Output (MWh) data for the STG was not added to the Carbon Dioxide (tons), Electric Generation (MWh) and Net Energy Output (MWh) data for the GTG for Algonquin Windsor Locks; however, the GTG and STG Carbon Dioxide (ton s), Electric Generation (MWh) and Net Energy Output (MWh) data for Capitol District Energ y Center were added together. The commenters said both facilities have combined cycle units that are used for cogeneration purposes. The commenters recommended that the Carbo n Dioxide (tons), Electric Generation (MWh) and Net Energy Output (MWh) data be calculate d on a consistent basis for Algonquin Windsor Locks and Capitol District Energy Center; t he commenters realized that if a data correction is warranted, it will likely not impact Connecticut's final state goal.

Comment 23: Rebalance generation

Response 23: For the EPA’s response to this comment, see the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule support ing the final CPP.

The following are summaries of the specific public comments under this comment:25

Commenters recognized that the EPA would likely be interested in "balancing" the assignment of generation at Sherco 3 by eliminating generation elsewhere. The commenters stated it would not be correct to simply assume that Sherco 3 gener ation could be replaced by adjusting generation at other Minnesota coal plants, or to re move generation from combined cycle plants in an effort to "rebalance" generation. The comment ers added Xcel Energy responded to an inquiry from Minnesota's Department of Commerce, th e state authority charged with reviewing electric utility rate requests: "... Given the dyna mic nature of generation systems and the need to make multiple purchase decisions instantaneously in order to respond to load variations, it is impossible to manually determine what energy source was deployed in place of an out-of-service plant..."

Commenters suggested that EPA conduct an ex post mo deling exercise using an electricity system dispatch simulation model to evaluate which generation resources would be pushed out of the dispatch order if units certain units had ru n in 2012, and adjust all generation accordingly.

Comment 24: Nuclear plant closed post 2012; recommendations fo r adjusting baseline

Response 24: The EPA understands the unique circumstances of t he The Kewaunee Nuclear Plant closure. It has not made an adjustment to th e baseline or the final Wisconsin state goal. EPA has consistently used a 10% threshold when cons idering similar adjustments for unit outage or hydro concerns. While it recognizes the immedia te impact on fossil generation in 2013, the first year of compliance in the final CPP had been moved to 2022 – which provides more time for changes in the states power supply. Moreover, the EPA notes that there are significant capacity additions in the same region that are acco unted for elsewhere in the baseline thay could conceivably be providing replacement generation for scheduled closures such as this one. For more information about how the final goals were cal culated please see the CO 2 Emission Performance Rate and Goal Computation TSD for CPP F inal Rule supporting the final CPP.

The following are summaries of the specific public comments under this comment:

Commenters stated Kewaunee Nuclear Plant closed in May of 2013; the loss of Kewaunee's generation (it provided 7.3% or 4.5 million MWh of Wisconsin's electricity generation in 2012) resulted in other generators (mostly fossil) fillin g the void. The commenters said any historical baseline that EPA could choose based on currently a vailable data would include generation from Kewaunee and thus would not truly represent Wiscons in's power sector going forward. The
commenters said because of the loss of this carbon- free generation source, it will be impossible
for the state to attain the emissions levels achiev ed in 2012 without dramatic actions; accordingly, EPA must adjust Wisconsin's 2012 basel ine to account for the loss of generation from Kewaunee. The commenters said EPA has already adjusted Wisconsin's nuclear goal in building block 3 by eliminating Kewaunee's generati on from the 2012 baseline for purposes of that building block. The commenters requested that the EPA treat the closure of Kewaunee consistently in each building block of the rule by adjusting the 2012 baseline to exclude the generation previously attained from that unit.26

Commenters stated there are four different ways wer e investigated by which EPA could adjust Wisconsin's baseline and goals to account for the r etirement of Kewaunee. These approaches
include:

1. Assuming the generation would be replaced by coal;

2. Assuming the generation would be replaced by a comb ination of coal and natural gas;

3. Assuming the generation would be replaced by a comb ination of coal, natural gas and renewables; and

4. Using a 12-month baseline from July 2013 to June 20 14 to represent how the power sector actually functioned after Kewaunee closed.

Commenters stated electricity sales remained flat f rom 2010-2013, but overall fossil generation in Wisconsin increased significantly from 2012 to 2 013, and all of this increase can be correlated with replacement of Kewaunee's power. The commenter s said because sales were similar in 2011 and 2013, the commenters compared fossil generation in 2013 (when Kewaunee operated on a much smaller scale as it was shutting down) with th at in 2011 (when it was fully operational) to determine the proportion in which NGCC and coal uni ts ramped up during this time. (2012 was excluded because gas prices were so low that year.) The commenters used the amount by which in-state renewable generation expanded from 2012 to 2013 (2012 was used in this case because RE generation would not be directly affected by nat ural gas prices). The commenters said the combination of expanded fossil generation and addit ional renewables accounts for 99% of the needed expansion.

Comment 25: Nuclear in base year

Response 25: Nuclear generation is not part of BSER quantificati on in this final rule. See section V.A of the final rule preamble for discussion of nu clear generation and the final BSER
determinattion. See section VIII of the final rule preamble of the CPP for a discussion on how it may be used in compliance.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA specifically requests comment on the timing aspect of whether nuclear uprates and similar zero-emission source additions to generation should be allowed to count toward a state's compliance with 111(d) goals and i ndicates some flexibility to this baseline year approach, likely because of the long time horizon a nd significant expense of planning and constructing a nuclear uprate. The commenters said EPA also indicates that states are given and should exercise flexibility in development of 111(d ) plans that incentivize fossil emission reductions (such as those that may be created throu gh nuclear uprates).

Commenters stated the inflexible use of 2012 as a s ingle year baseline for a nuclear uprate (even the "end of the base year") is problematic. For exa mple, the commenters completed the construction portion of a 178 MW uprate of its Gran d Gulf Nuclear Station ("GGNS") near Port27

Gibson, Mississippi in June 2012 at an approximate cost of $874 million; from June until September 2012, GGNS continued to operate at its pr e-uprate capacity while finalizing preparations for movement to the higher (post-uprat e) capacity; GGNS began operations at its uprated capacity in September 2012; however, as par t of the extended power uprate project, the commenters included an operational flexibility powe r flow mapping design called MELLA(plus). The inclusion of MELLA (plus), and ope ration under the parameters it allows, requires an additional operating license modificati on approval by the Nuclear Regulatory Commission. The commenters submitted its MELLA (plu s) license request change as a part of the extended power uprate project in the first quar ter of 2014 and expects NRC approval in May 2015; these activities have delayed final close-out of this project.

Commenters stated there is no basis for disallowing the states that use GGNS's capacity and electricity the benefit of applying 178 new MW of z ero-emission electricity toward their compliance demonstrations merely because the constr uction phase of the extended power uprate project ended in September 2012 rather than in Janu ary 2013, or in February 2014, especially since other phases of project approval by the NRC h ave taken until after January 2014 (the rule proposal date). The commenters said this is the typ e of issue that should be left to the discretion of the state in developing its section 111(d) plan and, indeed, in "establishing standards of performance" under section 111(d)(1)(A). The commen ters said the substantial investmentbacked decision, made by the commenters and the co- owners of GONS and approved by state utility regulators through the issuance of a certif icate of public convenience and necessity, likely has avoided or displaced significant fossil emissio ns and will continue to do so for many years to come. The commenters said states should be given th e flexibility to use a variable baseline year when determining which zero-emission projects can b e used for compliance demonstrations.

Commenters stated the rule as it is currently struc tured would almost entirely discount the clean energy contributions (nearly 2/3 of the carbon free energy in the US) of our current nuclear energy facilities and effectively penalize states t hat have new plants under construction. The commenters asked how is it possible that the formul a for calculating the "baseline" emissions profile of each state specifically excludes operati ng nuclear plants; the commenters said the formula must treat clean energy generators equa lly and include 100% of their output in the
baseline calculation.

Comment 26: The EPA should remove all the non-fossil generatio n from the BSER baseline

year.

Response 26: The final rule does not include any non-fossil sou rces in its baseline value of emissions and generation from likely affected EGUs. However, the 2012 unit-level sheet does provide information on approximately 20,000 units – including non-fossil units – but the designation of “exclude” in column A indicates that they were not included in the baseline totals relied on as the starting point for deriving subcat egory-specific rates

.
The following are summaries of the specific public comments under this comment:28

Commenters stated EPA has included non-hydro renewa bles and a portion of nuclear power in calculating the 2012 state emission rates; we encou rage EPA to examine the benefits of removing all the non-fossil generation from the BSE R baseline year starting point in the formula.

Comment 27: The EPA should include all the non-fossil generati on from the BSER year

Response 27: The adjusted baseline value shown at proposal and referred to here by commenters did reflect some of the existing non-fos sil technologies. See section VIII of the final rule preamble of the CPP for more discussion on wha t measures and sources may be counted towards compliance in the final CPP Rule

. The final rule does not include any non-fossil sour ces in its baseline value of emissions and generation f rom likely affected EGUs. However, the 2012 unit-level sheet does provide information on approx imately 20,000 units – including non-fossil units – but the designation of “exclude” in column A indicates that they were not included in the baseline totals relied on as the starting point for deriving subcategory-specific rates

.
The following are summaries of the specific public comments under this comment:

Commenters stated EPA's baseline does not include e xisting renewables, energy efficiency, and nuclear. The commenters said when 2012 generation f rom other sources - in particular, existing non-hydropower renewable energy generation and appr oximately 6% of total nuclear generation is taken into account, the baseline for North Carol ina is much lower: 1,646 lbs/MWh. The commenters said EPA refers to this as the "adjusted baseline." The commenters said the adjusted baseline shows how far North Carolina had already g one toward achieving its target in 2012 (it does not, however, include energy efficiency saving s as of 2012); North Carolina has progressed even farther toward its Clean Power Plan target sin ce 2012.

Comment 28: Renewable Portfolio Standards

Response 28: See section V.E of the final rule preamble of the CPP for a discussion on building block three and RE potential assumed in quantifying BSER

.
The following are summaries of the specific public comments under this comment:

Commenters stated EPA explains that Block 3 focuse s on renewable energy requirements "established through Renewable Portfolio Standards (RPS), which provide specific quantifiable RE generation requirements over time." The commente rs said generally speaking, an RPS requires a retail seller of electricity to supply i ts customers with a specified percent of its electricity originating from documented renewable e nergy sources; states generally have jurisdiction over retail sales within their borders

.
Commenters stated EPA started its Wyoming calculati on with the wrong number, applied an unrealistic growth factor and reached a wrong concl usion. The commenters said EPA relied on Energy Information Administration (EIA) data for Wy oming wind facilities to quantify Wyoming's 2012 renewable energy generation of 4,369 ,107 MWh. The commenters said EPA then applied an annual escalator of 6.095% to this base number beginning in 2017; the escalator is said to reflect past performance in an eleven-st ate region designated as "the West." The29

commenters said the resulting Block 3 portion of Wy oming's overall goal reaches 9,427,996
MWh in 2029.

Commenters added the EPA did not determine what por tion of the 4,369,107 MWh was Wyoming consumption subject to Wyoming jurisdiction over retail sales; with or without an RPS, Wyoming RE consumption would be the outer limi t of achievable MWh consistent with an RPS theory.

Commenters added to derive a number for renewable e nergy sold at retail in Wyoming, Commission staff reviewed the same EIA dat a used by EPA; for 2012, the format of this data was entries listing Plant ID number, Plan t Name, Operator Name, Operator ID number, State, and Net Generation in Megawatts. The comment ers said Commission staff verified the EIA totals for Wyoming wind plants, and readily fou nd internet information to link listed facilities to their ownership and to the location w here each facility's generation was consumed.

Commenters added PacifiCorp facilities accounted fo r 3,753,653 MWh of the 2012 total (about 86%); the Commission confirmed its understanding th at PacifiCorp treats this renewable production as a system asset for the utility's six- state system; as such, retail customers in all six
states receive an allocated share of the electricit y from the Wyoming wind generators connected to PacifiCorp's system. The commenters said Commiss ion staff determined the Wyoming share of wind production using a factor which four of the six PacifiCorp states used in 2012 to allocate system costs among themselves. (The 2012 allocation factor for Wyoming was 15.5220%; for Utah, 42.8146%; for Oregon, 25.9294%; for Washingto n, 7.9620%; for Idaho, 5.7832%; for California, 1.6015%. Less than 0.4% was allocated t o another entity.) The commenters said the factor reflects energy use and system demand, i.e., the system infrastructure required to meet peak demands in each state. The commenters provided a table showing when wind generation is used in state or is exported.

Commenters added in these calculations, an Exchange refers to an agreement to purchase 100% of the power of a wind facility; however, if Pacifi Corp does not need all the power being produced, it may give some power back to its counte r-party in a different period. The commenters said for example, when the facility is n ot running, the counter-party may give power back to PacifiCorp; the Exchange MWhs are a balance which accounts for these gives and takes; PacifiCorp also receives Network Resource de signation for such generation, and as such sinks 100% of the output into Network Load.

Commenters concluded the base for calculated growth of Wyoming renewables should be retail sales of 666,212 MWh, not total renewable generatio n of 4,369,107 MWh; using EPA's annual growth factor of 6.095%, the 4,369,107 MWh grows by 5,058,889 MWh to reach the total of 9,427,996 MWh in 2029. The commenters said this num ber comprises the single largest component of EPA's goal for Wyoming, and is large e nough to frustrate any conceivable state effort to comply with that goal.

Comment 29: The EPA incorrectly accounts for baseline renewabl es in its goal-setting
calculation.30

Response 29: The EPA agrees with the commenters that the final r ule should rely on incremental RE instead of including existing RE. S ee section V.E of the final rule preamble of the CPP for a description of the other changes to b uilding block 3. This change obviates many of
the commenters’ concerns about baseline RE levels i ncluding biomass. It also obviates the concern regarding ownership-based versus location-b ased assignment of existing RE

.
A discussion regarding the use of some biomass feed stocks for compliance purposes can be found in Section VIII of the preamble.

The following are summaries of the specific public comments under this comment:

Commenters stated the proposed rule creates a disco nnect in the accounting of renewable energy between goal-setting and compliance; for the purpos e of determining state goals. The commenters said EPA assigned existing renewables to the state in which they are physically located, rather than the state whose utilities own or purchase the output from these facilities; however, for compliance purposes, EPA proposes that "consistent with existing state RPS policies, a state could take into account all of th e CO2 emission reductions from renewable energy measures implemented by the state, whether t hey occur in the state or in other states." The commenters said as a result, some existing rene wable facilities will be applied to one state for goal-setting purposes, but to another state for compliance purposes.

Commenters stated it is not clear whether Wisconsin utilities will be able to take credit for
behind-the-meter facilities. The commenters said a significant portion of the renewable energy in
Wisconsin's baseline is from behind-the- meter faci lities owned by industrial customers - primarily black liquor recovery and woodwaste- fire d boilers owned by paper mills. The commenters said Wisconsin utilities typically do no t purchase renewable energy credits ("RECs") from these facilities; if those RECs are s old to entities in other states, those states, rather than Wisconsin, would be able to take credit for these behind-the- meter facilities for compliance purposes, although the RECs are counted against Wisconsin in setting the baseline.

Commenters were concerned about how EPA will treat biomass facilities. The commenters said over half of the renewable energy in Wisconsin's ba seline is from biomass facilities; while EPA
considered these facilities to be carbon-free for t he purpose of setting the state's goal, EPA has not yet determined in the proposed rule how to trea t these facilities for compliance purposes. The commenters said EPA's November 19, 2014 guidance me morandum on biogenic CO2 emissions appears to support the treatment of certain biomass feedstocks as being carbon neutral, implying that CO2 emissions may be assigned to biomass facil ities utilizing other feedstocks, contrary to the assumption in the goal-setting calculation. The commenters added the revised Framework for Assessing Biogenic CO2 Emissions from Stationary So urces, on which the guidance memorandum is based, remains a draft document subje ct to revision.

Commenters noted that there are currently, and will continue to be, certain percentages of renewable generation purchased under green pricing programs. The commenters said in these programs, customers choose to pay a premium above t heir retail rate for electricity from
renewable resources. The commenters did not believe that this renewable generation should be included in the baseline as existing renewables or assumed to be available for compliance, since31

it is being purchased by customers with the intent that it be in excess of what is required to meet regulatory requirements.

Commenters realized that it will be difficult for E PA to resolve all of these issues with existing renewables as part of its calculation of state goal s for the final rule. The commenters said a better approach that EPA should adopt is to exclude existi ng renewables from the goal-setting calculation and recalculate state goals based on th e appropriate level of incremental renewables to be added by each state; thus, while state goals would be higher (and seemingly less stringent) than under the method in the proposed rule due to t he exclusion of existing renewables from the goal-setting formula, existing renewables would not be eligible to be used for compliance purposes. The commenters said as a result, the stri ngency of the target would not actually be affected; in effect, existing non-hydro renewables would be treated the same way as existing hydro and the non-at-risk portion of existing nucle ar facilities. The commenters said while these existing facilities would be expected to continue o perating and providing carbon-free generation, only new renewable and nuclear facilities could be credited for compliance purposes.

Commenters stated in conjunction with the exclusion of existing renewables from the goal setting calculation, a method to provide states wit h partial credit for early action would be to allow states to take credit for a portion of their existing renewables for compliance purposes in achieving the state's goal; states could be allowed to take credit for generation from renewable
facilities that are in excess of the state's renewa ble portfolio standard requirements.

Commenters stated for the purpose of determining st ates' goals, EPA assigned existing renewables to the state in which they are physicall y located, rather than the state whose utilities own or purchase the output from those facilities; h owever for compliance purpose the EPA is proposing that "... consistent with existing state RPS policies, a state could take into account all of the CO2 emission reductions from renewable energ y measures implemented by the state, whether they occur in the state or in other states. " The commenters said this will result in the output from some existing renewable facilities bein g applied to one state for goal-setting purposes, and to another state for compliance purpo ses.

Commenters stated EPA's methodology fails to suffic iently recognize early action for states that have already supported renewables independently or through Renewable Energy Standards (RES) or Renewable Portfolio Standards (RPS) progra ms.

Commenters stated EPA's determination of regions fo r renewable energy goal setting was arbitrary, using Regional Transmission Organization (RTO) and North American Electric Reliability Corporation (NERC) regions as a general guide. The commenters said EPA used the average RPS requirement of the five states with an RPS requirement in their nine-state "North Central Region" to arrive at a 15 percent "Effectiv e RE level". The commenters said EPA concludes that states in the same region have simil ar renewable energy potential, as measured by existing renewable energy standards adopted by some states in the region.

Commenters stated in its October 28, 2014 Notice of Data Availability (NODA), EPA states: "some stakeholders have highlighted that the state physically hosting the RE generation in question approved its siting, issued its permits, a nd may make other claims as to having supported its development and operation and, thus, has a stake in such renewable resources". The32

commenters said while it is true, that a host state issued permits and supported development, it is doubtful they have any legal claim to the resulting energy production and related environmental attributes. The commenters said they also neglect t o recognize that the host state benefits from economic activities such as direct/indirect jobs al ong with local sourcing of materials related to both initial project development (local economic im pacts of RE are touted in DOE & NREL studies of RE development), as well as the ongoing economic benefits of landowner lease payments, labor related to project operations and m aintenance, and payment of annual property taxes on generators and related facilities.

Commenters stated for example, WPS owns the 99 Mega watt Crane Creek wind farm located in Riceville Iowa; the project is located on agricultu ral land owned by 42 participating property owners. The commenters said in 2014, WPS paid a tot al of $391,000 in compensation to property owners in the form of lease payments; over the expected 30 life of the project, WPS will pay just short of $17 million in lease payments to property owners; WPS paid $768,000 property taxes to local units of government in 2014.

Commenters stated over the next 20 years WPS estima tes it will pay $25-$30 million in local property taxes. The commenters said the truth of th e matter is that $42-$47 million of direct payments into the local economy will be paid by WPS Wisconsin and Michigan electric ratepayers over the next twenty years; those same e lectric ratepayers will have to fund the replacement RE under the proposed regulations which credits Crane Creek's 315,656 MWh of annual generation to Iowa's baseline rather than Wi sconsin's baseline.

Commenters stated EPA has expressed concern with th e interstate transfer of RE and the potential for double counting, and appears to propo se that such transfers could only occur under a multi-state plan. The commenters asserted existin g regional tracking systems which are in widespread use around the country can be adapted to keep track of MWhs, and prevent double counting of RE used for compliance as part of a sta te's 111(d) SIP.

Commenters stated that if an electric customer pays for renewable generation, they should receive credit for both state and federal complianc e purposes and the EPA should correct the accounting for out of state renewable resources in the state goal calculation during the development of the final rule.

Commenters stated there are numerous problems with the baseline renewables used by the EPA in its goal-setting calculation. The commenters sai d one specific issue for Wisconsin is that a significant portion of the renewable energy in Wisc onsin's baseline is from behind-the-meter facilities owned by industrial customers (primarily black liquor recovery and wood-waste-fired boilers owned by paper mills). The commenters said Wisconsin utilities generally do not purchase renewable energy credits (RECs) from these facilities, so it isn't clear that they would
be able to take credit for these facilities for com pliance purposes. The commenters
recommended EPA should exclude from the 2012 baseli ne used for setting state goals any renewables not eligible for state Renewable Energy Standards (RES) or Renewable Portfolio Standards (RPS) compliance, such as industrial behi nd-the meter sources.33

Comment 30: Calculating Renewable Energy Generation

Response 30: See section V.E of the final rule preamble of the CPP for a discussion on building block 3 and RE potential assumed in quantifying BSE R

.
The following are summaries of the specific public comments under this comment:

Commenters concurred with EPA's suggested floor fo r a renewable energy generation baseline, using 2012 figures. The commenters said there is a clear public policy imperative to generate increased levels of renewable energy, consistent wi th the Administration's Climate Action Plan, and broader policies in place both at the Federal a nd State levels. The commenters said a state's reported 2012 fossil fuel generation should not be treated as a ceiling for its renewable energy generation target as the relative economics of many technologies are changing rapidly. The commenters said careful attention must be paid to a dhere to a policy and accounting standards that ensure renewable energy generation increases u sing highly transparent, accurate and recent baseline levels as well as levels of new generation . The commenters said due to wide variations in performance, nameplate capacity alone is not a s ufficient basis on which to account for emissions reductions from renewable energy generati on. The commenters recommend that certified annual energy estimates be used to ensure emission reductions.

Comment 31: Errors using electric output and net energy output for coal plants.

Response 31: In this final rule, the EPA relies on net electric output. At proposal, the EPA was folding useful thermal output into the goal and the use of net energy output. Based on comments, the EPA no longer folds useful thermal ou tput into its BSER quantification, but states are still permitted to use it when demonstrating co mpliance. As a consequence, the EPA is relying on net electric output in the denominator p er the commenters’ suggestion

.
The following are summaries of the specific public comments under this comment:

EPA appears to have made an error calculating Unad justed (baseline) CO2 emission rate for coal EGUs. According to TSD -Goal Computation:

CO2 Emission Rate = ((coal gen. * coal emission rat e) + (NGCC gen * NGCC emission rate) +...)/ (coal gen. + NGCC gen + ...)

The commenters said in Appendix 7, EPA assigned coa l generation to equal "electric output"; however, the coal emission rate is based on "net en ergy output" (total CO2 emissions divided by net generation) instead of "electric output" (total CO2 emissions divided by electric output). The commenters asserted that EPA has interchanged the e lectric and net generation in the goal computation for coal; the commenters asserted the c orrect method is to use a coal rate based on "electric output."

The commenters said in North Carolina's case, EPA u sed a coal rate of 2,0441b/MWh (104,197,978,000 tons CO2 divided by 50,970,369 MWh net energy output); instead, EPA should have used 2.0591b/MWh (104,197,978,000 tons CO2 divided by 50,607,838 MWh34

electric output). The commenters said this error co rrection applies nationally to all coal plants with CHP capability, where generation is reported i n terms of "electric output" and "net energy output."

Comment 32: Errors in baseline "Sales" data used in setting EE target under Building Block 4

Response 32: See section V of the final rule preamble of the CPP for an explanation of why BB4 demand-side energy efficiency is not included i n the final rule. This comment-driven change between proposal and final makes the above B B4 concern obsolete

.
The following are summaries of the specific public comments under this comment:

Commenters stated Building Block Four goals were se t by using 2012 utility sales; EPA
calculated the total sales of "bundled" and "delive red" from "regulated" and "unregulated"
utilities. The commenters said included in the sale s was a "utility" named "Adjustment 2012" which reported 40,368 MWh. The commenters said thes e sales, however, are a summation of the total sales from "unregulated" utilities already re ported and used in the baseline determination. The commenters said the data attributed to "Adjustm ent 2012" does not represent actual sales of electricity; accordingly, "Adjustment 2012" represe nts a double counting and should be removed from Connecticut's 2012 baseline utility sales. The commenters realized that this data correction will likely not impact Connecticut's final state go al significantly.

Commenters identified several problems with the EE data reported to EIA that have a small impact on the size of Wisconsin's EE goal. The comm enters said the Focus on Energy program slightly underreported savings from the program and several utilities over-reported their EE savings (i.e., reported savings that had already be en reported by the Focus on Energy program. The commenters provided Table 10, which shows diffe rences between Wisconsin's energy efficiency savings reported to EIA and best estimat es from the Public Service Commission of Wisconsin for 2012. The commenters said these repor ting issues have been addressed and will not occur in future years, but Wisconsin encourages EPA to work with EIA to clarify reporting instructions to utilities and co-ops to ensure that similar errors do not occur in the future. The commenters said when the reported values are correc ted, Wisconsin's overall goal becomes slightly less stringent. Commenters provided Table 9, which shows corrections to Wisconsin's goals from correcting energy efficiency data.

Commenters stated in the TSD spreadsheet, "20140602 tsd-state-goal-data-computation", EPA uses a value of 83.97% for Wisconsin's state genera tion as a percent of sales; however, when attempting to reproduce this value using data from EIA, calculated 86.15%. The commenters have not found an explanation of how EPA calculated this value. Commenters provided Table 11, which shows calculation of state generation as % of sales for Wisconsin. The
commenters said EPA should either use the value det ermined by Wisconsin or explain how they calculated their value and justify why this value i s more appropriate than the one calculated by
the state.35

Comment 33: Artificially high electricity consumption baseline s will generate false credit for
emission reductions under the Clean Power Plan.

Response 33: The EPA does not agree with the commenters that th e baseline will generate false credit for emission reductions. Moreover, it has ch anges the way it applies building block three (as described in preamble section VI that address t he commenters concern. Please see the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the final CPP for more information about the goals and sectio n VIII of the final rule preamble of the CPP for more information about state plans and complian ce.

The following are summaries of the specific public comments under this comment:

Commenters stated artificially high electricity con sumption baselines will generate false credit for emission reductions under the Clean Power Plan; the EPA's Clean Power Plan relies on the AEO2013 reference case forecast in two key places. The commenters said if states are allowed to use the EPA's basic approach to calculating energy efficiency in state plans, then they will measure actual electricity sales against an artific ially high baseline; thus, they would receive credit for efficiency improvements that would have occurred in the absence of the Clean Power Plan, in addition to those caused by the state plan . The commenters said for the same reasons, a state that adopts an equivalent mass-based standard for new and existing sources that is based on
the AEO2013 reference case will face an artificiall y lenient target. The commenters said because the projected electricity sales are biased upwards, such a state will face an overly generous target; as a result, theses states would receive cr edit for efficiency improvements that would have occurred in the absence of the Clean Power Plan, in addition to those required by the state plan.

4.6 RATE-TO-MASS CONVERSION

Section 4.6 covers public comments related to the r ate to mass conversion of the final and interim goals.

Commenters have raised a number of issues related t o this subsection which are organized by topics (comments) below. Responses are provided for these topics.

Comment 1: Support for mass based goals.

Response 1: The EPA agrees with commenters and has provided bot h rate-based and massbased goals in the final rule to allow states to ch oose the approach that is most appropriate for
affected EGUs in their state

.
The following are summaries of the specific public comments under this comment:

Commenters supported EPA's effort to make it easier for states to use a mass-based goal instead of an emission rate-based goal, if that is their pr eference. The commenters said mass-based goals36

may make it easier for states to maximize the use o f cost effective demand reduction strategies such as programs to deploy more energy efficiency, CHP and direct use - particularly if states enter into multi-state regional plans that allow cr editing programs that reduce demand from customers located in one state for electric grid po wer served by EGUs in another state; this better recognizes the regional nature of the electricity m arkets and dispatch.

Commenters stated as a theoretical matter, the comm enters supported the concept of a massbased emissions target; such an option would provid e States with additional flexibility in developing their implementation plans. The commente rs said a mass-based approach may facilitate the use of offsets and other compliance options that may prove helpful in lowering the
overall cost of the rule.

Commenters added in the Preamble, the EPA states th at it would allow a state to convert its ratebased goal to a mass-based goal. The commenters str ongly supported the ability for states to convert to a mass-based goal. The commenters said a mass-based goal may facilitate consistency with California's existing, multi-sector, mass-base d GHG reduction program.

Commenters noted that EPA may set rate-based goals and allow for conversion to mass-based goals. The commenters noted that in the Proposed Ru le, the EPA expresses each state's emission guideline, or required level of emission performanc e, as an emission rate, namely pounds of CO2 per net megawatt hour (lbs/MWh). The commenters not ed that the Proposed Rule expressly permits, but does not require, states to translate their "rate-based" goals to equivalent "massbased" goals (for example, tons/year), 79 Fed. Reg. at 34893-94, giving states flexibility to accommodate and account for a wide variety of emiss ion reduction strategies. The commenters stated that the appropriateness of issuing state-sp ecific emissions guidelines as rate-based goals is fairly standard and uncontroversial, as should b e the option for states to translate "rate-based" goals to equivalent "mass-based" goals. The comment ers interpreted that section 111(d) condones use of either metric as the "standard of p erformance." The commenters stated that nothing in the statute's language restricts the age ncy to use of any one measure, neither runs afoul of case law, and the EPA has used both standa rds in the past. The commenters stated that giving states flexibility to convert rate-based goa ls to mass-based goals accommodates a wide variety of emission reduction strategies, allowing states to fulfill their role under section 111(d) to develop effective implementation plans. The comm enters explained that mass-based emissions are the currency of existing multi-state trading pr ograms. Without that currency, the commenters
stated that it would be difficult for states to det ermine how to integrate their various standards of performance into a unified portfolio, for purposes of allotting emissions shares to states and to
entities within those states. The commenters stated that use of a common currency will make it easier to expand the scope of any regional trading program, whether to include a new state participant or another sector of carbon-emitting so urces. Even where a state does not participate in a regional trading program, the commenters state d that use of a mass-based standard may allow it greater flexibility to incorporate demand- side efficiency measures and increased reliance on low- and zero-emitting sources into its plan. In other words, the commenters noted that it creates opportunities for a state to diversify its portfolio of plan components, regardless of whether a particular component is itself federally enforceable. At bottom, the commenters argued
that states should be allowed to choose the currenc y that will best suit their needs, including those that enable coordination with neighboring sta tes and participation in regional emissions control programs. The commenters noted that EPA req uests comment on whether it should37

provide a "presumptive translation" from rate-based to mass-based goals, or whether the agency should instead provide "guidance" for states to fol low in making the switch. The commenters noted that EPA also recently issued a Notice and ac companying technical support document containing information regarding two possible metho dologies that states can use to translate emission rate-based goals to mass-based equivalent goals. The commenters stated that with respect to the translation issue (and disregarding the technical merits of the EPA's specific proposals), the commenters saw no legal issues with the range of translation options the EPA has proposed-from providing a "conversion table" of sor ts, to allowing states to determine their own translations -- so long as the result is subject to the agency's review and approval, and so long as that approval is contingent on a determination that the state's mass-based goal would achieve the equivalent in stringency, including compliance timi ng, to the state-specific rate-based goal set by
the EPA.

Commenters stated EPA itself recognizes the consist ent success of mass-based programs in reducing emissions efficiently, citing to Title IV of the CAA, the NOX SIP Call, CSAPR, RGGI, and the California Cap-and-Trade Program. The comme nters said beyond their track record at delivering reductions at least cost to ratepayers, mass-based programs are far easier to implement than programs designed to achieve rate-based goals because they avoid the need to "credit" the reductions achieved at the affected EGUs through RE and EE programs.

Commenters stated accounting for compliance with a mass-based goal poses no such risks of incorrect crediting: The methods for measurement of emissions from affected EGUs are well
established under both 40 CFR Parts 75 and 98 and t hereby provide a much greater degree of accuracy and consistency among states in monitoring achievement of their respective goals; in other words, a ton of emissions emitted by one affe cted EGU is equivalent to a ton that is not emitted from another EGU. The commenters said despi te the rigorous evaluation, measurement and verification ("EM&V") methods described by EPA as evolving throughout the country in recent years, EM&V methods are subject to significa nt variation and inaccuracy; as EPA notes with respect to EE measures, "all energy savings va lues are estimates of savings and not directly measured." The commenters said in contrast, the emi ssions reported under 40 CFR Parts 75 and 98 are direct measurements and are not subject to t he same degree of variation or inaccuracy as the adjustments that need to be quantified to demon strate compliance with a rate-based goal through reliance on RE/EE measures.

Commenters stated a mass-based approach avoids regu lating parties other than the affected EGUs; because the emission reductions resulting fro m re-dispatch of existing NGCC, RE, and EE measure are reflected directly in the mass CO2 e missions of affected EGUs, no explicit crediting of these measures is necessary; nor would the entities implementing such measures need to be subject to potential liability under the CAA if the state's affected EGUs fail to achieve the mass-based goal. The commenters said therefore, a mass-based goal approach provides the opportunity for a more limited role for EPA in stat e energy policy.

Commenters strongly supported states' endeavoring t o implement mass-based goals to achieve
the Clean Power Plan.

In a subsequent comment submitted, the commenters applauded EPA's November 6, 2014 release of the Rate-to-Mass Notice and supporting T SD. The commenters viewed this TSD as an38

illustrative methodology and had no comment on the particular assumptions underlying the calculation of the mass-based goals given in the do cument. The commenters commended the Agency's provision of additional clarity to states at this early stage as they begin to consider possible approaches for individual and multi-state plans.

Comment 2: Support for rate based goals, clarifications neede d.

Response 2: The EPA has given careful consideration to all of t he comments in designing the methodology to calculate the mass-based goal for th e final rule. The EPA provides the calculation of a mass-based goal directly in the ru le in response to comments that includes the following considerations . See section VII of the preamble for further discu ssion.

The following are summaries of the specific public comments under this comment:

Commenters supported the ability to convert the rat e-based goals into mass-based goals, but
stated there needs to be some clarifications.

Commenters urged EPA to provide clear and simple gu idance for states to use in translating a rate-based goal to a mass-based goal

Commenters stated EPA should allow a state the flex ibility to use a reasonable estimate of future generation from affected units, including utilizati on of the values the EPA assumed in its development of the target emission rates, to determ ine their mass cap.

Commenters stated EPA should allow a state to multi ply its baseline fossil generation by the final goal emission rate to establish emission caps ; if a state elects to utilize such a simplified an d conservative approach, EPA should expressly state t hat such an approach would be approved.

Commenters added if the state desires to take other factors into account, EPA's guidance should specify acceptable analytical methods and tools for making the projections, as well as default input assumptions for key parameters that will like ly influence projections, such as electricity load forecasts and projected fossil fuel prices; st ates should be allowed to deviate from these default methods and assumptions with justification.

Commenters added following the guidance would provi de a streamlined path for the EPA approval of emissions projections, but would still allow states the flexibility to use other approaches, subject to EPA review; this guidance sh ould ensure that all actions that reduce CO2 emissions are counted under a mass-based program, a nd should clarify how to measure and include avoided CO2 emissions from RE, EE and other similar measures in a mass-based

program.

Commenters added EPA should allow states to rely on unit retirements occurring after the baseline year(s) to meet Section 111(d) goals; EPA must acknowledge that any EGU that a company or state has agreed to retire may be includ ed in a state's "reference case." The commenters stated the generation from the reference case would then be used to determine the mass-based goal; if the retirement is not built int o the reference case, then the lower generation39

and emissions rate would result in a lower mass-bas ed target. The commenters said this would help ensure that utilities and states that have vol untarily planned retirements of existing coal plants are not penalized by that action.

Commenters added clear guidance from EPA would prom ote faster action on multi-state compacts; cooperating states will be required to cr eate new trading programs, and a clear methodology for conducting the conversion of an emi ssion rate goal to a mass-based goal will facilitate this process.

Commenters added EPA guidance also would help reduc e litigation over state plans; if EPA does not clearly outline a methodology for states to tra nslate a rate-based goal to a mass-based goal, there will be litigation over the conversion on a s tate-by-state basis. The commenters stated such litigation will cut into the short time in which st ates are required to submit and implement their compliance plans, greatly hindering efforts to impl ement CO2 emission reduction measures.

Commenters added the November 6th guidance does not seem to provide clarity as to how a state is to make the rate to mass conversion; the guidanc e on its face appears to result in emissions rates and mass target that are not consistent with the Proposed Rule. The commenters stated these different mass-targets and implied emissions rates result in very different "glidepaths" for State Plans to achieve compliance with the Proposed Rule. The commenters asked for clarity, consistency, and simplicity from EPA in its final g uidance on rate to mass conversions to allow states, as they are formulating their State Plans, to fully understand their choice in rate-based or mass-based glide paths so they, and entities respon sible for reliability can better gauge the possible reliability effects. The commenters stated states should not be left guessing as to what constitutes an acceptable rate to mass conversion o nly to find their assumptions later questioned during EPA review of a submitted State Plan; moreov er, as noted previously, given the disparate impacts on a regional dispatch and siting of new ge neration of use of different rate and mass targets and different methodologies for the convers ion of one to another, clarity in this area is especially important as states and regions analyze their compliance options.

Commenters added EPA should provide a clear process for states to propose alternative mass budgets that states can demonstrate are comparable to the prescribed rate-based goals.

Commenters added EPA should recognize that mass bud gets provide a level of environmental certainty that rate-based goals do not provide and EPA should make it as easy as possible for states to convert rate-based goals to mass-based bu dgets.

Commenters added EPA should provide greater guidanc e on how EPA will ensure that the rateto- mass conversion does not weaken targets.

Commenters added New Units should be Included in Ra te-to-Mass Conversion; if states choose to include new units in their compliance plans, the n those units should be included in calculations converting rate-based targets to mass- based targets. The commenters stated unless EPA incorporates new plants in the rate-to- mass co nversion, RGGI's mandatory emission reduction targets will be difficult to compare with EPA requirements. The commenters added new plants meeting EPA's 111(b) requirements may provide emission reduction40

opportunities under non-RGGI approaches, and this p otential should be reflected in mass-based targets.

Commenters added because the rule includes obligati ons that extend to 2030 and beyond, it is critical both to develop a reasonable estimate of g rowth in electricity demand and a process for recalibrating the mass-based standard over time if projections about demand growth prove to be incorrect; projections of future demand growth are further complicated by their overlap with EPA's expectations regarding demand-side energy eff iciency, which will also affect future growth.

Commenters added a straightforward conversion from rate to mass is not possible here because
the denominator in EPA's calculation of the rate-ba sed limit includes several components that reflect avoided emissions rather than electricity g eneration.

Commenters added for some categories such as nuclea r generation, only a portion of electricity generation is included, complicating the conversion process.

Commenters added in the first rate-to-mass conversi on approach - a mass-based target applicable only to existing power plants-is a viable option on ly if EPA requires mechanisms to ensure that the mass-based emissions limit is not achieved simp ly by reducing generation from covered sources and increasing generation at new plants bui lt in the state, an outcome through which the targets could ostensibly be met without achieving a ctual emission reductions equivalent to those that would be achieved under a rate-based system.

Commenters added in the second rate-to-mass approac h - a mass-based target that is "inclusive of new fossil fuel-fired sources"- is a preferable option and should be the default approach. The commenters said this approach avoids the complicati on of tracking excess new fossil generation; and the critically important aspect of this approac h is the determination of the level of demand growth. The commenters said this determination must be subject to a uniform methodology established by EPA. The commenters said an excessiv e projection of demand growth will weaken the target and void the required equivalency between the rate-based and mass-based targets; even states that are not attempting to wea ken their target will inevitably face pressure to adopt an overly optimistic demand growth projection consistent with the state's aspirations for future economic development. The commenters added E PA must adopt a consistent and unbiased demand growth projection and we suggest th at EPA use of the EIA projection.

Commenters added EPA performed modeling using the I ntegrated Planning Model to project future generation and CO2 emissions for the complia nce period and provided unit-specific "parsed files" for the years 2020 and 2025. The com menters asked if EPA has considered whether the parsed files for each year of the compl iance period (i.e. 2020-2029) would be helpful or necessary to determine CO2 emissions from 111(d) affected units during the compliance period, and whether states could use these files as a proxy to determine a mass-based goal comparable to the rate-based goal set by EPA.

Commenters stated the new TSD for conversion of rat e-based goals to mass-based goals is helpful, but does not lay out the criteria for appr ovability by the USEPA when submitted as part of a state plan. Commenters stated this guidance is still lacking.41

Commenters asked if EPA could choose a specific sta te and walk through their methodology for the two approaches to translating rate targets to m ass targets, including identifying alternative inputs or data sources that states could use.

Commenters asked if EPA would look to translate a s tate's rate-based target to a mass-based target in the event that the Agency imposes a feder al implementation plan.

Commenters stated the proposed regulatory language for the 111(d) rule describes the process for converting a rate-based goal to a mass-based go al at 40 C.F.R. 60.5770. The commenters asked if a state plan incorporates exactly one of t he methodologies and mass-based targets from EPA's goal translation TSD, is the state's mass-bas ed goal presumptively "equivalent" to the ratebased goal, as the regulations require; if not, wha t else would a state need to do to show it has an approvable mass-based goal.

Commenters appreciated EPA responding favorably to the request to release a more simplified methodology for the states to convert to a mass-bas ed goal if they believe it will provide more flexibility for development of their SIP. The comme nters said a mass-based approach has many advantages including providing certainty that reduc tions actually occur; it also gives an advantage to non-emitting resources. The commenters said for states and utilities with significant hydro power resources, the ability to approach carb on reduction with a massed-based approach provides a great opportunity for leveraging the val ue of excess hydro that might be available at certain times of the year. The commenters added the mass-based goal will better capture the wider range of energy efficiency strategies availab le, particular those outside the utility sector, such as building codes and appliance standards. The commenters said given the advantages of this approach, the commenters are concerned that th e current methodology results in overly stringent targets and may discourage states from ch oosing it as a compliance approach. The commenters said EPA should ensure there is no penal ty for using this approach, economic growth should be accounted for and states should be able to adjust their goal based on a significant change in circumstance such as a severe drought.

Commenters stated exogenous drivers are highly unce rtain over the timeframe of the Proposed Rule (i.e., 15+ years), the commenters suggested th at the EPA clarify how and when states can revise their mass-based goals if expectations regar ding key exogenous factors turn out to be meaningfully different. The commenters said such re visions can help ensure that equivalent stringency between rate- and mass-based goals is ma intained, as intended, and make it easier for states to seriously consider opting for mass-based approaches by reducing some of the risk associated with mass-based goals.

Commenters stated the EPA has proposed that the rat e-based CO2 emission performance goals may be converted to mass-based emission performance goals; the EPA provides an explanation in the "Projecting EGU CO2 Emission Performance in State Plan Technical Support
Document" of how such a translation would be made. The commenters said while the explanation in the TSD is a less than clear explana tion of how the translation should be performed, based on comments made by EPA staff on t his matter it would appear that what the EPA contemplates is that states wishing to make a r ate-to-mass translation would employ a model such as IPM or other similar type model to pr oject a state's compliance with its rate-based limits and pull from the model output for each year from 2020 to 2029 the total projected CO242

emissions for the universe of affected sources, wit h the result being the state's equivalent massbased cap. The commenters said assuming this is gen erally correct, the procedure in Section 60.5770317 of the proposal would appear to contradi ct this approach. It states that "(3) The conversion must represent the tons of CO2 emissions that are projected to be emitted by affected EGUs, in the absence of emission standards containe d in the plan, if the affected EGUs were to perform at an average lb. CO2/MWh rate equal to the rate-based goal for the state identified in Table 1 of this Subpart." The commenters said while it may not be what the EPA intended, this language could be interpreted as directing a state to multiply the MWh generation projected by a model by the state's emission rate goals for each y ear and that would be the equivalent massbased cap, which would yield a very low cap number. The commenters did not believe this is the EPA's intent, but given the lack of clarity in the Technical Support Document it is not possible to know with certainty what the EPA intends.

Commenters stated given the tremendous interest in understanding what the proposed rate-based goals might translate into on a mass basis, especia lly given the significant barriers to implementing the proposed program on a rate basis a nd the likelihood that many states may default to a mass-based approach, the EPA needs to do a much better job of communicating precisely how it is proposing the translation be pe rformed. The commenters said the EPA must also ensure that the regulatory language in any fin al guidelines is completely aligned with the approach the EPA envisions, or at least does not lo ck states into a single approach. The commenters said any translation procedure must prov ide for the capturing of the emission
reduction benefits of coal units retired after the baseline period; in other words, emissions from
coal units that were in the baseline and factored i nto state goal calculations and are either actually retired after the baseline period or retir ed by a model being used to project emissions for the purpose of developing a mass caps, must be capt ured in the mass limits. The commenters said failing to include emissions from the coal uni ts that were included in the baseline and state goal calculations but whose operation and emissions were not captured in the rate-to-mass translation procedure would mean that coal units re tired after the baseline period would not contribute a single ton toward a state's compliance under a mass-based approach; in other words, the procedure must reflect an assumption that all c oal units included in the baseline are assumed to continue to operate when performing a rate-to-ma ss translation.

Commenters stated the TSD issued by the EPA in Nove mber 2014 appears to be an attempt to address the rate-to-mass translation issue, but is less than helpful guidance regarding what the EPA might consider to be an acceptable rate-to-mass translation procedure; for example, it is
unclear how the EPA's reference to the calculation- based approaches described in the TSD as "illustrative" should be interpreted. The commenter s said the EPA fails to state that EPA would accept the described translation approaches and the resulting mass-based caps if states were to use them as the basis for establishing a mass-based plan; in addition, if states are not bound to use either of the described approaches to establish a mass-based plan, it is uncertain if the cap
numbers that result from the illustrative calculati ons would be binding on a state. The commenters said additional guidance from EPA is nec essary; assuming that EPA would approve
a conversion based on the illustrative calculations put forth in the TSD, it is unclear what happens if a state wants to develop a mass-based pl an but does not want to do so based on the use of the approaches described in the Agency's Nov ember TSD, because they result in cap levels that are believed to be too stringent. The c ommenters said the EPA fails to identify available options for states; since the EPA omitted mention in the November 2014 TSD of the43

modeling-based translation approach it attempted to describe in the Projecting EGU CO2 Emission Performance in State Plan TSD, it is uncle ar if EPA is still considering such an approach as a viable option. The commenters said if this original approach is no longer being considered by the EPA, a justification for this dec ision needs to be communicated to stakeholders; the EPA needs to provide a much fulle r discussion of the modeling approach or approaches it envisions that would allow states to adequately evaluate their use as an option for establishing a mass- based plan.

Commenters stated EPA allows the states to use eith er mass-based or rate-based goals; but there is lack of direction and guidance from EPA on how m ass-based goals should be calculated. The
commenters said more details are needed so that the states and utilities can determine which method is more advantageous and flexible to achieve the final CO2 emission reductions. The commenters said on November 6, 2014, EPA released a dditional information on mass and rate based goals; the commenters are evaluating and may make additional comments.

Commenters stated EPA's current TSD does not adequa tely consider demand growth; the existing source mass cap is developed relative to 2 012 generation levels and fails to consider demand growth at all. The commenters said the mass cap that factors in new units is generically based on the Energy Information Administration's (E IA's) 2013 Annual Energy Outlook (AEO2013) where EPA assigns an annual average growt h rate based on regional demand projections in order to calculate projections of fu ture demand. The commenters said in practice, electric utilities would not apply a generic approa ch in the development of integrated resource plans; this approach also fails to consider the int erconnected nature of the bulk power system by assuming all increased demand growth would be provi ded solely by new NGCCs. The
commenters recommended that EPA consider these addi tional factors when it issues its final guidelines and provide revised estimates of state-s pecific presumptive mass caps from those
issued in the TSD.

Commenters supported the EPA's proposal in the prea mble to the rule to establish a mechanism for converting the rate-based goal into a mass-base d goal; in so doing, EPA is proposing to apply a "proxy emission limit" to a reference case scenar io, which projects the total mass of CO2
emissions for affected EGUs if those EGUs were to i mplement the entire applicable state CO2 emission rate goal in the absence of any other enfo rceable measures or requirements. The commenters said EPA's initial proposal does not pro vide enough specificity to allow states to
determine how the rate-to-mass conversion would be implemented. The commenters are still reviewing EPA's November 6, 2014 information on rat e-to-mass conversion, and reserve the right to comment at a future date on the proposed m ethodology. The commenters urged EPA to clarify and simplify the proposed rate-to-mass conv ersion process, and to do so in a manner that ensures full credit is provided for retirement of e xisting fossil generation and reduced utilization of existing coal-fired generation. The commenters s aid specifically, EPA should consider a "safe harbor" rate-to-mass conversion methodology under w hich (1) the state projects the average business-as-usual output (in GWh) from affected uni ts in the state for the interim ten-year compliance period and for the first final goal comp liance year, multiplied by (2) the state's interim goal (over a ten-year period) or final goal , as those goals are adjusted to reflect any building block changes.44

Commenters stated EPA has proposed that each state may convert its rate-based CO2 emission performance goal to a mass-based emission performan ce goal; EPA should preserve this option in the final rule, and should also allow states to switch between rate-based and mass-based emission performance goals as desired. The commente rs said EPA provides two TSDs regarding
how such translations could be made. The commenters said while the TSDs are less than clear, in one TSD EPA appears to be contemplating that states wishing to make a rate-to-mass translation would employ IPM or a similar type of model to proj ect a state's compliance with its rate-based limits and pull from the model output for each year from 2020 to 2029 the total projected CO2
emissions for the universe of affected sources. The commenters said these projected CO2 emissions would be the state's equivalent mass-base d cap. The commenters said in the other TSD, EPA simply appears to use historic generation for existing sources and also offers an alternate method that includes a single average ann ual growth rate if new fossil fuel-fired sources are included. The commenters said that generation i s multiplied by the state's rate-based goal to determine the equivalent mass-based goal. The comme nters said the conversion from a ratebased emission performance goal to a mass-based emi ssion performance goal is a desirable option that should be retained for the states, and each state should be permitted to determine exactly how such a conversion is made; however, EPA should also provide clearer guidance on the criteria for acceptable conversion options. The commenters said a helpful step would be for EPA to provide examples of the necessary modeling a nalysis for each state and provide detailed guidance for public review and comment.

Commenters recommended that EPA augment the current guidance it has offered on mass-based conversion to at a minimum include the following: 1 ) in-depth discussion of the attributes of mass-based vs. rate-based approaches to implementin g carbon emissions standards, including side-by-side comparison as supported by the economi c literature; 2) a regulatory impact analysis including detailed, realistic modeling of scenarios for the of mass-based vs. rate-based approaches given the actual configuration of power markets faced with state-by-state implementation 111(d); 3) A simplified step-by-step re-calculation for a sample jurisdiction [replicating the step-by-step approach EPA took for Ohio in its Goal Computation technical support document] for different types [including EP A's simplified calculation-based approaches for (1) "existing sources" and (2) "existing and ne w sources."] Of mass based budgets, with further explanation for how projections from electr ic sector models may be used in place of inputs from the goal computation calculation.

Commenters strongly supported EPA's guidance on how to convert emission-based standards to mass-based standards, as this provides stakeholders with a clear and more environmentally certain goal. EPA should provide clear guidance to states with how a mass-based standard affects compliance options, particularly with respect to an y interstate impacts on emission reductions, if

any.

Commenters stated EPA has proposed the Clean Power Plan based on a rate-based CO2 limit, with the option available to convert that limit to a mass-based one. The commenters said it is essential that clear and concise direction be provi ded by EPA; even after the release of its Rate to Mass Technical Support Document and related data fi les, the calculations are still confusing, and raise questions as to whether the mass-based goal i s more stringent than the rate-based goal. The
commenters said the release of this information has been welcomed, but it was so long in coming that state agencies and the regulated community hav e had little time to fully analyze the45

information to evaluate the potential alternative m echanisms to implement and measure compliance.

Commenters stated EPA needs to provide clearer guid ance on how the state can establish and comply with a mass emissions cap. The commenters ha ve made large investments to reduce CO2 emissions, and plans to do still more by retiring e xisting coal units, increasing its reliance on renewable energy, and investing more in energy effi ciency. The commenters asserted that it could meet a reasonable mass based emissions cap; h owever, the proposed rule provides insufficient guidance on how states are to establis h a mass based cap and whether an individual company or political subdivision could separately e stablish and comply with a mass based cap.

Commenters stated EPA does not factor in the abilit y for increased utilization of existing sources in calculation of the mass equivalent; the commente rs requested that EPA clarifies that when
states choose to do a mass-based translation the st ates will have the option to include reasonable demand growth generation from existing affected EGU s.

Commenters stated viewed from the perspective of us ing RGGI as a compliance mechanism, a number of improvements should be made to the propos ed rule, including:

a) EPA should ensure that the methodology for trans lating rate-based targets to mass-based targets is clear and EPA should work with states to help set these targets; states in the RGGI region have years of experience using extensive mod eling to help set reasonable emissions caps and this experience should be brought to bear in se tting the final mass-based targets; states should also be able to bring their own credible inf ormation to bear during the translation process.

b) EPA should give states the option for including new EGUs in CPP compliance plans; and if the new EGUs are included, then their emissions sho uld be factored in the calculations converting rate to mass-based targets.

c) EPA should recognize that RGGI's "program review " has allowed for much needed adjustments to the mass-based cap; during the RGGI design process, NEMA stakeholders encouraged these reviews to help regulators respond to unforeseen circumstances; a similar mechanism should be adopted in the CPP final rule t o allow for periodic adjustments to the mass-based cap and further input from the states.

Commenters asserted that an equivalent mass-based t arget can simplify compliance calculations and should be available as an option. The commenter s supported the inclusion of a mass-based option, the methodology to calculate that target an d to determine compliance must be clear and unambiguous. The commenters said without clear stan dards, there will be overwhelming pressure for each state to interpret the guidance i n the most advantageous manner; this will result in a patchwork of programs with varying stringency. The commenters said as inconsistent methodologies within a given market or trading regi on could influence costs and impact dispatch order, it is particularly important to be consisten t on this level if not nationwide.

Commenters stated EPA has recently issued guidance on conversion of the rate-based goals to mass-based goals, but additional questions remain; for example, demand growth calculation methodology should not rely on national defaults wh en better data is available nor should states be able to adjust their assumptions to t the desire d outcomes. The commenters said the46

methodology selected should consider the current be st practices in demand modeling, reflect the latest data available from transmission organizatio ns, and be developed after a collaborative process involving the EPA, other states, and other stakeholders. The commenters said should EPA determine that sufficient data is available, es tablishing a presumptive mass-based goal along with more detailed guidance would be reasonab le; however, the
commenters recommended EPA conduct additional outre ach to stakeholders and consider a supplemental comment period limited to this issue.

Commenters stated that if the EPA is to accept mass -based conversions from the final rate established by the EPA, the EPA must provide modeli ng, data sources, default input assumptions, and guidance to the states on what wou ld be acceptable methods and data sources to convert the state's rate to an equivalent mass o f CO2. In addition, the commenters stated that
the EPA must describe to states under what circumst ances the EPA would approve a change in a mass-based plan. The commenters asserted that state s should have the flexibility to allocate as they choose the amount of emissions to each year du ring the 2020-2029 compliance period from the 10-year interim mass total

.

The commenters stated that requesting a presumptive translation of the rate-based goal to a massbased goal should not be seen as a commitment to a mass-based plan or to EPA's presumptive mass caps. Instead, the commenters stated that the provision of presumptive translated goals by the EPA would help inform a state's decision-making process in developing its plan. Should a state choose to adopt the EPA's presumptive values, the commenters stated that these values should be acceptable to the EPA when a state submit s its plan. The commenters requested that the final EPA rule should provide a presumptive tra nslation of its final and interim rate-based goals to mass-based goals

.

The commenters suggested that the EPA also provide guidance on acceptable analytical methods and tools for translating rate-based goals to mass- based goals and provide guidance on appropriate default input assumptions and key param eters. The commenters suggested that states that submit a mass-based plan should be allowed to revise annual mass caps, if needed based on changes in load demand, so long as the overall emis sion rate for affected facilities meets the emissions targets proposed by the EPA.

Commenters stated EPA should clarify methodologies for translating the rate-based targets to mass-based targets and simplify the use of regional programs like RGGI for compliance. The commenters said as part of the rate-to-mass convers ion process, EPA should allow states to consider the potential impact of the electrificatio n of the transportation sector on emissions from
affected sources under the CPP.

Commenters requested that guidance be provided to t he regional EPA offices to ensure that approved mass based targets achieve at least an equ ivalent reduction from 2005 emissions from affected sources as modeling indicates would be ach ieved by the proposed rates.

Commenters recommended EPA develop rate-to-mass tra nslation approaches that maintain flexibility on the methodology and data used to det ermine the translation, recognize the complexity and geographic connectedness of the elec tric grid, and provide enough oversight to ensure a meaningful equivalency of stringency betwe en the rate-based and mass-based47

approaches. The commenters added the RGGI states fi rmly believe that a mass-based approach represents the most cost-effective method to demons trate compliance with the CPP, and a simple translation methodology could facilitate this outco me by lessening administrative costs and uncertainties associated with the conversion proces s. The commenters suggested that EPA continue to analyze options for developing a simple translation approach, or at least streamlining aspects of the process.

Commenters added if EPA wants to define a specific approach to make this conversion, it should do so in rule, not guidance; this section would be the appropriate location to specify a conversion approach. The commenters stated if EPA wants to con tinue to allow states to utilize only an outline of an approach to the conversion, EPA needs to make it clear to the EPA Regional office reviewers that the method proposed in the TSD is no t a requirement or a preferred approach.

Commenters added EPA still has not provided adequat e and definitive guidance on how a state would translate emission guidelines into mass emiss ion caps under the proposed rule; therefore, states are forced into evaluating overly complex ca lculations and compliance scenarios. The commenters said States and utilities are already st ruggling with this complexity and need a simple, uniform framework that would allow for leas t-cost compliance; a holistic design approach should be used that can more easily accoun t for reductions associated with RE, EE, and unit efficiency actions. The commenters supported E PA's intention to grant states flexibility on methods to allow multi-state electrical systems to demonstrate compliance; this should include a broad suite of options including bi-lateral agreeme nts, trading of clean energy, renewable energy and avoided CO2 tons from EE, however, more time ne eds to be provided to do this.

Commenters added a mass-based standard may have ben efits over rate-based, including ease of compliance determinations and facilitating trading programs; the TSD will help Colorado in weighing the merits of rate- versus mass-based stan dards. The commenters stated the presumptive goal approach allows states to include a different goal in their plans with a demonstration on why their goal is more appropriate than EPA's. The commenters stated Colorado appreciates EPA's ongoing effort to provid e supporting information and options to states, and requests that the final rule continue t o provide states with broad flexibility to develop mass-based standard conversion methodologies that c onsider state-specific needs.

Commenters added a mass-based option would limit ov erall carbon emissions, consistent with California's larger climate goals, and would likely be easier to monitor and enforce given many of our existing climate programs are mass-based. Th e commenters said mass-based systems may also help better support regional planning, since t on-based accounting is a relatively straightforward way of addressing effects on emissi ons from power transfers across state lines. The commenters stated mass-based accounting may als o, as a result, help reduce the need for standardized monitoring and verification systems in regional planning. The commenters added a careful analysis will be needed to determine the be st approach for California; U.S. EPA provided some guidance on converting rate-based targets to m ass-based, however, the language, as proposed, leaves room for multiple interpretations CARB staff has requested U.S. EPA to provide some specific examples of how they would pe rform this conversion.

Commenters recommended that in establishing methodo logies for rate-to-mass based conversions, the EPA work with those mass-based sta tes with substantial experience in modeling48

and analyzing CO2 emissions, such as the RGGI state s, and that EPA be guided by a set of principles aimed at achieving the best outcome; the se principles should include:

• Collaboration in working with states, including suf ficient stakeholder input, and a process that takes into account state recommendations, rath er than EPA simply specifying massbased targets for each state.

• Flexibility for how states may include energy effic iency in their compliance plans, acknowledging that different states have different levels of experience with evaluation,
measurement and verification.

• Fair, consistent and equitable treatment among and between states.

• Transparency and clarity in what is required and do cumented.

• Simplicity in what is required of states to not ove r-burden them.

• Credibility of the process and the results by, as c ited by the RGGI states, not arriving at a final rule that is "too open-ended," and which woul d allow states to "game the system."

Commenters added EPA should provide for a mass-base d emission budget compliance option, either by articulating the standard as a mass-based emission budget, or providing a mechanism for translating from a rate-based standard to a mas s-based emission budget. The commenters said such a methodology could apply an emission rate to the projected or historic generation from covered power plants in a state; for example, under a projected generation approach, modeling would be used to project how a state's generation f rom covered sources would change over a period of time, and then the EPA emission rate woul d be applied to that projected quantity of electricity generated; using such an approach would take into account changes in demand, and would therefore be more comparable to using a rate- based standard, where the emissions are proportionate to demand. The commenters said EPA co uld require states to reduce or offset the projected demand growth with readily available ener gy efficiency improvements (e.g., one percent annually); this approach could potentially involve a "true-up" as well - a review of whether actual changes in demand and related factor s are consistent with projected changes, and a potential adjustment to the budget to reflect tho se changes. The commenters said under such an approach, it would be appropriate to require new so urces to be subject to the new source standard as part of their New Source Performance Standard co mpliance obligation, as using projected generation to compute a state's emission budget wou ld inherently reflect any new generation required to meet changes in load; such an approach was proposed by EPA in the Clean Air Mercury Rule. 70 Fed. Reg. 28622 (May 18, 2005). T he commenters said a system-wide approach to reducing emissions includes reducing el ectricity demand through energy efficiency or displacing demand for fossil fuel-fired generati on through additional zero-carbon energy; therefore any projection of demand change or "true- up" should reflect those anticipated electricity savings or displacement. The commenters said if a historic generation approach is used, a state's emission budget would be based on t he amount of emissions that would have occurred in a baseline year if the state's power pl ants had generated the same amount of electricity as they did during the baseline year, b ut had emitted at a target emission rate. The commenters noted that under these approaches, the e mission budget would represent an49

aggregate budget for all covered sources in a state ; states choosing to use the emission budget would be required to meet the standard in the aggre gate, could use all cost-effective measures - such as efficiency, renewables, end-use controls, c arbon capture and sequestration - to obtain the necessary reductions, and could allow averaging of emissions or trading of emissions allowances; or a state could join a regional market -based program, and could demonstrate compliance if the group of states collectively met the states' aggregate mass-based standard. The
commenters said if EPA articulates the standard as a rate-based standard, and if EPA's methodology for translating from a rate-based stand ard to a mass-based standard involves accounting for projected changes in generation from covered sources, the methodology should be transparent and consistent; the methodology should start with reliable, existing federal data sources, including the Clean Air Markets Division e missions database and the EIA Annual Energy Outlook. The commenters said EPA should also allow states to seek to use their own data, but EPA should require states to rigorously s ubstantiate any changes to projections based on other, non-federal data sources. The commenters said for a simplified example, assume that the standard is 1100 lbs/MWh (the proposed rate for new coal plants), and that state "X" has one gas plant and one coal plant, each of 500 MW; in th e hypothetical base year of 2013, the gas and coal plant together generate 7 million MWh of elect ricity and emit 5.2 million tons of CO2, at an average 2013 rate of 1500 lbs/MWh; the state's cap in 2025 would assume the same generation - 7 million MWh - and multiply that by the 2025 rate- based standard - 1100 lbs/MWh. The commenters said this yields a cap of 3.8 million to n per year, 27 percent less than actual emissions in 2013; note that this method could be a dapted to accommodate different rates for different fuels or plant types, such as those propo sed in the new plant standard. The commenters said EPA should consider providing guidance for how a state can provide a rigorous demonstration of changes from specific factors, for example if a state is projecting significant increases in electricity demand due to increased el ectric vehicle deployment as a result of state policies that are not reflected in federal projecti ons.

Comment 3: The EPA should consider commenters’ recommendation s to the conversion of rate based goals to mass based goals.

Response 3: The EPA has given careful consideration to all of t he comments above in designing the methodology to calculate the mass-based goal fo r the final rule. The EPA provides the calculation of a mass-based goal directly in the ru le in response to comments that includes the following considerations . See section VII of the preamble for further discu ssion.

The following are summaries of the specific public comments under this comment:

Commenters stated we would urge EPA to take two add itional steps in the final rule: 1) provide a step-by-step re-calculation for a sample jurisdicti on for different types of mass-based budgets, and 2) offer further explanation for how projection s from electric sector models may be used in place of inputs from the goal computation calculati on. The commenters saluted the EPA's inclusion of a complete dataset to support the two examples of conversion to a mass-based budget for the rate-based standards included in the proposed Section 111(d) guidelines. The commenters urged that in the final rule EPA (as it did in the original goal computation technical support document for the state of Ohio) provide a w ritten step-by-step deconstruction of the50

conversion process, culminating in the state mass-b ased budgets. The commenters said such a
demonstration would eliminate the need to trace dev elopment of the components of the building blocks through the formulas in each cell of the acc ompanying spreadsheet. The commenters said EPA elected to use a "calculation-based" approach t o mass-based conversion in the revised TSD which relies on the data used in computing the buil ding blocks components of the final state goals. The commenters sympathized with EPA's concer n not to tie the hands of the states in planning for mass-based programs by being overly pr escriptive here; however, the commenters asserted that EPA should provide general guidance as to how forecast information could be used to generate mass-based budgets. The c ommenters said as one plausible guideline which could improve the reliability and consistency of CO2 budgets generated using forecast information, EPA should recommend that the states c hoose to rely on forecast models which are most commonly relied upon to produce planning studi es in their region.

Commenters stated to be a viable option, the rate t o mass conversion must be redesigned; the Clean Power Plan proposed for Wisconsin results in CO2 emission reductions which exceed the national goal of a 30 percent reduction from the 20 05 CO2 emission level. The commenters said in November 2014 the EPA provided a technical suppo rt document on how to translate the Clean Power Plan emission rate-based CO2 goal to a mass-b ased equivalent; for Wisconsin the "Final Mass Equivalent - Existing Affected Sources" limit was reported as 25,275 thousand metric tons and the "Final Mass Equivalent - Existing Affected and New Sources" limit was reported as 28,102 thousand metric tons.

Commenters stated in 2005 the Clean Power Plan unit s included in Wisconsin utilities' reports to the Acid Rain Program had total CO2 mass emissions of 45,299 thousand metric tons; based on the 2005 Wisconsin CO2 emissions, the "Final Mass E quivalent - Existing Affected Sources" limit of 25,275 thousand metric tons represents a 4 4 percent reduction from the 2005 CO2 emissions and the "Final Mass Equivalent - Existing Affected and New Sources" limit of 28,102 thousand metric tons represents a 38 percent reduct ion from the 2005 CO2 emissions. The commenters said both reductions are greater than th e objective to reduce 2005 emission by 30 percent; this demonstrates the complexity of first developing a CO2 rate goal and then developing a rate to mass conversion methodology th at results in a reduction in the state's CO2 mass emissions that meets the design target.

Commenters stated in order to have a viable option for a compliance goal that more accurately tracks the CO2 mass emission reduction objective, t he EPA should develop the CO2 mass reduction goal based on the stated goal of reducing the 2005 CO2 emissions from affected units by 30 percent in 2030; therefore the sum of the sta tes CO2 mass limits should sum to 70 percent
of the states' 2005 CO2 mass emissions. The comment ers said the only potential area of disagreement would be the allocation between states , since each state's share of the total United States emissions was likely different for 2005 comp ared to 2012, which is the year EPA used to apportion state-by-state emission reductions. The c ommenters said to address this concern, a mass limit for each state could be developed by com paring a 3-year average ratio of the
individual state's CO2 mass emissions to the nation al total; this ratio could then be applied to the
national 2005 CO2 mass emissions and then reduced b y 30 percent.

Commenters stated this will result in a CO2 mass li mit for each state whose sum will equal the CO2 mass emission reduction objective; this approac h to establishing a viable mass-based CO251

reduction removes the uncertainty associated with c onverting from a CO2 rate goal to a CO2 mass limit which is inherent in the current EPA pro posal. The commenters said even if the EPA were to clarify exactly how to convert a state's CO 2 rate to a CO2 mass limit, to the degree the conversion depends on a forecast of energy usage th e conversion would be froth with uncertainty making it difficult for states to develop their imp lementation plans.

Commenters added for instance, in its current emiss ion rate form the rule relies on modeling of long term Mwh generation from the state's generatin g units; long term forecasts are uncertain and are dependent on a number of factors such as lo ad growth, market prices, unit availability, and the particular model selected for the forecast. The commenters said this uncertainty would result in the state not knowing whether or not the EPA will approve the state's conversion of the
CO2 rate to a mass limit until after the state has filed its implementation plan; also, since the state specific CO2 rate is a function of the assume d state specific renewable energy and energy efficiency targets, there is the potential for argu ments being made about the equity of the assumed levels of renewable and energy efficiency t argets. The commenters said states with more aggressive renewable and energy efficiency tar gets could raise the issue of whether or not their target CO2 rate is "fair"" compared to those states which have less aggressive renewable and energy efficiency targets.

Commenters supported EPA developing as a compliance option, presumptive mass caps because it would reduce uncertainty surrounding the initial development of mass caps by states. The commenters said EPA should clearly articulate how t he mass caps were developed and provide an opportunity for public notice and comment before the final rule is released; in addition, states should have the opportunity to develop their own ma ss caps to replace the presumptive EPA mass caps if they have reasonable justification to do so. The commenters said the state should be the entity to determine how new units are accounted for in the state's plan. The commenters said the final rule should include off ramps which could take the form of relaxed CO2 mass limits; these off ramps could be utilized in the event of e ither a reliability issue or economic hardship.

Commenters supported the state's ability to convert the rate based goals to mass based goals; however the commenters are concerned that the propo sal would ignore - in fact punish - states' clean energy leadership. The commenters said EPA do es this by using a 2012 baseline and setting more stringent targets for states that have retired coal plants, invested in renewable energy, and implemented customer energy efficiency programs than for states that have done less in these areas; this sends exactly the wrong messag e to states who acted early and customers who have paid for these clean energy investments, askin g them to pay relatively more for future reductions. The commenters said with regard to the period between now and 2020, the proposal creates perverse incentives to delay further action until 2020; fortunately, there are several simple, targeted changes to the rule that can impro ve the proposal's treatment of early action. The
commenters recommended that EPA in the final rule:

• Recognize the retirement of coal plants occurring p rior to 2012 by exempting from Building Block 2 the capacity of coal retired and r eplaced with natural gas combined cycle (NGCC) units on the same site;52

• Account for the effect of renewable energy on the d ispatch of NGCC plants, by recalculating NGCC capacity factors to what they wo uld have been without renewable energy leadership before applying Block 2;

• Allow leading renewable states to bank renewable en ergy prior to 2020 for use in meeting their 2030 compliance obligations, and in g eneral creating stronger incentives to continue renewable energy and energy efficiency lea dership before 2020.

Commenters stated EPA offers a general approach to making the conversion from a rate goal to a mass-based goal, but does not specify methods and a ssumptions required to ensure consistency across states, including preventing states from cho osing assumptions that would result in a more favorable mass-based goal. The commenters said many states are also looking for more clarity and guidance on their mass-based goal so that they can begin to think about whether a massbased approach would offer a viable compliance path way and whether or not to coordinate with other states; in some cases, if the decision is lef t to states, this will trigger internal "due proces s" procedures.

Commenters stated Bruce Phillips, a Director of the Northbridge Group, identified some issues to consider in defining the methodology for transla ting the rate standard to a mass-based goal and described several alternatives; in particular, EPA can facilitate adoption of a mass-based goal by translating the standard for states and ensuring the resulting state emissions limits are neutral (or attractive) relative to rate goals. The comment ers said other considerations include maintaining the environmental integrity of the rule (achieving a 30 percent overall reduction in emissions) and administrative feasibility; options for converting from a rate to mass standard
include:

• EPA defines the mass-based standard using Integrate d Planning Model (IPM); EPA uses IPM to estimate future generation and determines st ate mass-based goals by plugging in the applicable assigned state emissions rates for c overed units; States would have the option to challenge and refine the assumptions, lik ely requiring EPA to rerun the model; this approach is rigorous but could lead to a probl ematic federal-state process; while some states (e.g., RGGI) are familiar with IPM, oth ers may find the model less transparent than other alternatives.

• EPA computes the mass-based standard based on forec asted or historic data; either would be less rigorous than IPM but would provide greater transparency and still foster consistency across states.

• EPA computes the mass-based standard based on forec asted data; for states expecting load growth, a forecast methodology would result in a more generous mass-based standard; according to EIA's business-as-usual proj ections (not including a carbon price), on average, coal and natural gas generation is expe cted to grow by 12 and 23 percent respectively between 2012 and 2020 due to a 17 perc ent increase in electric load (If a carbon price were included in the load forecast, lo ad might increase more slowly, so the advantage of using a forecast methodology would be less.)53

• EPA computes the mass-based standard based on histo ric data; this method is more objective than forecasted data, but unless adjustme nts are made, would result in a stricter limit than a standard based on forecasts; in a sepa rate presentation, Tom Curry, a Vice President with M.J. Bradley & Associates, presented a series of options to define a massbased standard using calculations based on historic rates of generation (MWh); specifically, he adjusted the mass calculation [sta te goal * historic fossil MWh] by adding in elements of EPA's building blocks (in MWh); each addition would essentially increase the effective mass based standard; using this appro ach, it is possible to approximate the overall compliance emissions limit that would resul t from multiplying the state emission rate goals by projected electric generation from af fected units based on an IPM model forecast; however, the impacts at the state level w ould differ depending on the relative importance of the different building blocks in sett ing state level goals; this approach would tend to disadvantage states expected to exper ience higher levels of business-asusual growth in fossil generation.

• EPA issues analytic guidance to states and the stat es estimate the mass-based standard using a growth model such as ERTAC; EPA reviews the analysis and either approves or disapproves the goal; both the process of EPA devel oping guidance and states undertaking modeling can be slow; use of different forecasting tools would result in inconsistency across states.

• States choose their approach without specific guida nce; EPA reviews the analysis and either approves or disapproves the goal; this would also be slow as states navigate through the options and would result in inconsisten cy across states.

The commenters said one additional option that was suggested would involve having EPA simply indicate that states adopting a mass-based s tandard would need to achieve a set reduction in emissions (e.g., 30-40 percent).

Commenters recommended that any mass-based goal con version process account for key uncertainties with periodic updates of key factors, notably:

• the extent to which power sector emissions and emis sion rates may increase from the use of electricity as a transportation fuel.

• Economic and demographic growth through 2030;

• The relative level of imported and exported power, which affects in-state emissions.

Comment 4: The EPA's Method for Converting Rate-Based Goals t o Mass-Based Goals Is Unjustified and Arbitrary

Response 4: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based goals.54

The following are summaries of the specific public comments under this comment:

Commenters stated the notice is unclear as to wheth er in EPA's view the proposed methodologies would be mandatory or optional if fin alized. The commenters said on one hand
the notice states that the two methods are "illustr ations of two potential options" that States may choose; on the other hand, the notice also states t hat methodologies employed in translating a rate into a mass goal must achieve "...the equivale nt in stringency." The commenters said the proposal's requirement that a State's rate-to-mass conversion must result in tonnage limits "equivalent in stringency" to that determined under the proposed methodologies indicates that, in EPA's view, methods a State employs cannot diverge from the methods described in the referenced technical support document (TSD), becaus e otherwise the calculated tonnage goal would be inconsistent with the calculations require d by the TSD and possibly not as "stringent." The commenters stated regarding EPA's authorities u nder Section 111(d), the methodologies proposed here can only serve as guidelines for Stat es and cannot be binding on States. The commenters said EPA cannot displace authorities gra nted States under section 111(d) to establish performance standards; the establishment of a tonna ge goal based on EPA-selected methodology would thus unlawfully usurp state authority and dis cretion; EPA's proposed methods can only serve as guidance to states and not requirements.

Commenters added EPA cannot regulate new sources as existing sources under Section 111(d); thus, to mandate tonnage limits on for new fossil fuel sources as part of a Section 111(d) plan, as EPA proposes in its new source rate to mas s-based methodology, is plainly unlawful.

Commenters stated very recently, in November 2014, EPA issued a Technical Support
Document that sets forth two "illustrative calculat ion-based approaches for translating the Clean Power Plan (CPP) emission rate-based goals to a mas s-based equivalent." The commenters said in the first approach, EPA derives the mass-based e quivalent that would apply to existing sources, while in the second it derives the mass-ba sed equivalent that would apply to new and existing sources. The commenters said EPA bases its "illustrative" calculations on several concepts, the first of which is that the "deploymen t of BSER measures will reduce generation
from affected fossil fuel-fired sources." The comme nters said no justification or basis is provided for this conclusory statement, however. The comment ers said EPA uses that conclusion to justify omitting the generation from EE, incremental RE (th at above 2012) and under construction nuclear in its [mass = CO2 emissions rate * generat ion] calculation. The commenters said as EPA notes in the Translation TSD, this approach is directly contrary to the approach taken in the goal calculation for the June 2014 Proposal.

Commenters stated addressing the two approaches in reverse order, EPA has no authority under this Proposal - meant to establish guidelines for e xisting EGUs - to impose limits (here an emissions cap), on new EGUs; thus, the second appro ach cannot be justified under current law and should not be proposed or pursued further by EP A. The commenters said the first approach suffers a similar fate, albeit for different reason s; first, EPA provides absolutely no basis for concluding that EE, incremental RE or under constru ction nuclear will replace - on a 1-for-1 basis - historical fossil fuel-fired generation; no r has EPA provided any analysis that would justify this approach - completely contrary to that taken in the Proposal - as part of the BSER for
fossil-fuel fired EGUs. The commenters said failure to provide the basis for a determination of BSER renders this approach completely arbitrary and unjustified. The commenters said EPA's55

approach in the Translation TSD makes the CO2 ton c ap significantly more restrictive than the rate-based goal in the Proposal; if a state were to use this approach, it would clearly result in reduced operations of fossil fuel-fired EGUs relati ve to the Proposal, exacerbating concerns of stranded investments and system reliability that ar e already acute under the existing Proposal. The commenters asked where are the Agency's analyse s of the costs associated with this new approach, or the potential effects this increased s tringency could have on electrical system reliability. The commenters added other obvious pro blems exist with the Translation TSD; for example, EPA has no authority to include within its emissions guidelines any of the measures in Building Blocks 2, 3 or 4. The commenters said EPA' s approach unfairly penalizes those entities (states, utilities and state citizens) that have nu clear units under construction, EPA's Translation TSD fails to comply with existing law. The commente rs said EPA must undertake the proper analyses, as part of a formally proposed rule - whi ch the Translation TSD is not - that evaluates, and justifies, within the context and bounds of CAA section 111, a cap on CO2 emissions for the source categories to be regulated under CAA section 111; until that happens, EPA has failed to comply with CAA sections 111 and 307(d); it should either withdraw the Translation TSD or undertake the proper analyses to support a formal p roposal that reflects its contents.

Comment 5: General criticism/questions of conversion.

Response 5: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based goals.

The following are summaries of the specific public comments under this comment:

Commenters stated because of the complexity of this nation's interdependent electricity grids and the dynamic nature of our energy markets, we are un certain whether historically-based generation and capacity data can serve as the most reliable basis for building projections necessary to complete the translation process. The commenters added a simple conversion process could yield results that do not account for the dynamics that result directly from the complexity and interconnectedness of the electric g rid.

Commenters stated electricity system modeling offer s crucial insights pertaining to how the system will respond to changes in policy or market forces, especially related to the type and location of generation among states. The commenters said while a modeling-based approach would add cost and complexity to the translation pr ocess, EPA could address these issues by leveraging the large body of modeling experience an d expertise that exists within EPA and the various state and regional organizations that routi nely model the electric sector to support planning efforts, and by providing resources and te chnical assistance to states completing the rate-to-mass conversion process.

Commenters added supplementing the June proposed ru le, EPA issued a technical document in November that provides two possible options for tra nslating rate-based goals to a mass-based equivalents, including tables of two of these appro aches. The commenters added they support EPA's effort to provide a more straightforward tran slation method based on the rate-based targets56

and historic data, however, requiring multiple mode l runs to derive a mass-based goal adds significant complexity to the state planning proces s, and they believe would discourage the adoption mass-based targets.

Commenters added rate targets may have some advanta ges over mass based targets. The commenters stated California is unique in that poli cies are being implemented to greatly increase the deployment of electric vehicles and the infrast ructure necessary to support them; in addition, some local air districts are looking at greater ele ctrification of residential, commercial, and
industrial sectors to minimize fuel combustion and its associated emissions. The commenters stated these policies are likely to result in the n eed for more generation capacity; although some of this capacity will likely be served by new facil ities not subject to section 111(d), some may come from existing facilities. The commenters state d a rate-based metric addresses this situation by providing some flexibility, allowing for growth in output while limiting carbon intensity.

Commenters stated EPA has not provided a transparen t, replicable method to allow translation of the proposed rate-based goal to a mass-based goal

Commenters added the rate to mass conversion is a v ital consideration in the development of a state or regional plan to comply with the proposed regulation; EPA's failure to timely provide a methodology by which to make this conversion preven ts states, industry, and the public from adequately reviewing and commenting on the proposal

.
Commenters added EPA has failed to propose any meth odology, only provide "two illustrative calculation-based approaches" for translating the r ate-based goals to mass-based goals.

Commenters added the agency displays the mass as me tric tons rather than conventional short

tons.

Commenters added the "illustrative" rate-to-mass tr anslation approaches that EPA provided in the TSD do not follow the original proposal.

Commenters added EPA has essentially set conflictin g goals for the states: rate-based goals in the original proposal and significantly more string ent mass-based goals later published in the November 6, 2014 TSD.

Commenters added the agency sets forth the former g oals with an iron hand, admonishing states that any variance will be met with harsh skepticism ; then, with but little reference to comments already received, the agency does an about-face and publishes an illustrative approach to calculating mass-based goals that varies significan tly from its original proposal.

Commenters added for consistency with the original proposal, EPA cannot set a mass-based goal that would be lower than the base year fossil fuel emissions (after the application of Building Block 1).

Commenters added the EPA cannot tinker around the e dges of an unsound proposal to make it more to its liking.57

Commenters added the entire original proposal shoul d be set aside permanently, or at least until the EPA can come up with proposed guidelines that a re consistent with its legal authority and that are feasible through real "achievable" and "ad equately demonstrated" BSER rather than wishful thinking.

Commenters added the proposal should have been an A dvance Notice of Proposed Rulemaking rather than a Notice of Proposed Rulemaking. States , industry, and the public have been deprived of an opportunity to comment on whatever rate to ma ss methodology EPA decides to finalize.

Commenters stated EPA's proposed translation of emi ssion rate-based CO2 goals to mass-based equivalents are inconsistent with methods utilized to determine state rate-based goals. The commenters stated for the denominator, the rate goa l computation essentially incorporates the projected future sum total of all the MWhs of all t he sources in Building Blocks 1-3, as well as the MWhs associated with energy efficiency measures , while backing out the MWhs associated with future projected loss of coal-fired dispatch i n the numerator; the result is a maximization of goal MWhs and a minimization of CO2-based MWhs resu lting in a stringent rate-based goal. The commenters said however, the proposed method to convert a rate-based to mass-based goal employs presumptions that are opposite of those emp loyed in the goal computation. The commenters said here, EPA's proposed method backs o ut non-CO2 based MWhs that are included in the rate-based goal computation, yieldi ng a mass-based computation process that would always result in fewer tons in a rate to mass conversion than if the MWhs in the rate-based goal computation were utilized instead. The comment ers said the most straightforward approach that is consistent with the method used in the goal calculation for a rate to mass conversion is to use the product of the goal-computed MWHs (the deno minator) and the goal-calculated CO2
rate/ MWh.

Commenters added the 60.5770(a) (3) provision of th e 111(d) proposal states "The conversion must represent the tons of CO2 emissions that are p rojected to be emitted, in the absence of emissions standards contained in the plan, if the a ffected EGUs were to perform at an average lb CO2 /MWh rate equal to the rate-based goal for the state identified in Table 1 of this Subpart." The commenters said it does not make sense to apply the average lb CO2 /MWh rate equal to the rate-based goal for the state identified in Table 1 of this Subpart to "affected EGUs" when calculating the mass based goal since the rate-base d goal was calculated based on the generation from "affected entities", not "affected EGUs". The commenters said that "affected entities" should replace "affected EGUs" in the provision cit ed. The commenters asked if EPA intended to set a mass based goal by having "affected EGUs" per form at an average lb CO2 /MWh rate equal to the rate-based goal for the state identified in Table 1 of this Subpart. The commenters said if this was EPA's intention, it should be noted that G eorgia's rate-based goal is 834 while our coal emissions rate (after HR improvement) and NGCC emis sions rate are 2157 and 841 lbs/MWh, respectively; even if we dropped coal generation to 0, we would be left with an equivalent emissions rate of 841; this would fail the equivale ncy test in paragraph (a) (3). The commenters
said there are a number of other states in this sam e circumstance. The commenters asked what
does "in the absence of emission standards containe d in the plan" mean; is EPA saying that, for purposes of the calculation, all predicted electric al demand (i.e., generation) would be assumed
to be from affected EGUs.58

Commenters added there have been reports that EPA s taff has endorsed a method for calculating the mass-based goal that involves taking the EPA/IP M Option 1 CPP modeling results and adding up the emissions from the affected units. Th e commenters asked if EPA could elaborate on how this method relates to the method specified in proposed 60.5770(a) (3) - taking the projected generation of affected units and multiply ing it by the rate-based goal.

Commenters stated in the NODA, EPA has provided add itional guidance on two possible approaches to converting rate-based goals to mass-b ased goals; because state agencies are in the best position to evaluate and direct the future cou rse of their electricity sector and their economy,
EPA should allow states to convert their rate-based goals into mass-based equivalents. The
commenters said states should be authorized to init ially identify appropriate factors, assumptions, and inputs for this conversion and to calculate interim and final mass-based goals that match the emission performance that would be e xpected under a rate-based approach; EPA should not calculate mass-based equivalents for the states.

Commenters stated the two optional approaches for c onverting rate-based goals to mass-based goals that EPA outlines in the Rate-to-Mass Technic al Support Document (TSD) are flawed for at least three reasons. The commenters said both ap proaches reflect unreasonable assumptions about the effect that incremental RE, EE, and nucle ar generation will have on affected EGUs' generation and emissions. The commenters said both of the TSD approaches would adjust 2012 affected unit generation below baseline by assuming that the addition of incremental sources of zero-carbon generation will reduce the utilization of affected fossil EGUs. The commenters said however, it is incorrect to assume that the additio n of a MWh of incremental RE, EE, or nuclear generation will reduce the output of existing fossi l units by the same amount. The commenters said numerous factors - including future demand gro wth, the attributes of the electric system, and the interconnected nature of the electric grid - af fect the extent to which addition of new generation can displace existing fossil generation.

Commenters added the approaches outlined in the TSD are inconsistent with the rate-based goal computation approach in the Proposed Rule; under EP A's initial proposal, the addition of incremental RE, EE, and under-construction nuclear generation would not be assumed to displace existing fossil generation. The commenters said under the alternate approaches discussed in the Rate-to-Mass TSD, by contrast, the addition of this incremental generation is assumed to reduce generation from existing fossil E GUs. The commenters said because these two methods are inconsistent, it would be unreasona ble for EPA to convert state goals from rates to masses using the methodology in the Rate-to-Mass TSD.

Commenters added both approaches fail to adequately consider the impact of future demand growth on affected units' abilities to reduce emiss ions; the TSD's first proposal for calculating mass-based equivalents would not incorporate any fu ture load growth into the projection of a mass-based equivalent; this result is clearly arbit rary. The commenters said by failing to incorporate any assumptions about how electricity d emand may increase in future years, EPA would effectively prohibit states from meeting new electricity demand with additional generation from existing units, which are some of the most rel iable, proven, and low-cost generation sources available. The commenters said EPA's second option under the Rate-to-Mass TSD incorporates one basic assumption about increased electricity de mand, based on EIA regional projections; however, this load growth assumption may be unreaso nably low in many parts of the country, if59

economic growth increases substantially beyond curr ent expectations. The commenters said therefore, this option, too, could lead to severe i mplementation and reliability difficulties if load growth is greater than a state or EPA projects in c alculating the mass-based equivalent.

Commenters added rather than effectively prohibitin g states from increasing generation from cost-effective, reliable existing units to meet new demand, EPA should defer to states' reasonable projections of future demand in calculating mass-ba sed goals. The commenters added EPA should revise its guidance to align with its assump tion in the Proposed Rule that the addition of incremental RE, EE, and nuclear generation does not displace historic fossil generation. The commenters said because states' initial load growth projections could underestimate the amount of load growth that the state will experience durin g a compliance period, EPA should provide a mechanism for a state to revise its mass-based goal based upon a showing that these and other assumptions the state may have used to convert goal s from rates to masses were incorrect.

Commenters stated a state should be able to use EPA 's IPM base case for 2020 and 2030 to convert its rate into a mass-based standard; howeve r, a state would need the "parsed" files to do so. The commenters asked why did the EPA not run al l the parsed files necessary for States to
estimate their mass-based standards.

Commenters stated the premise for the translation i s made clear by EPA. "The conversion must represent the tons of CO2 emissions that are projec ted to be emitted by affected EGUs, in the absence of emission standards contained in the plan , if the affected EGUs [electric generating units] were to perform at an average lb CO2/MWh rat e equal to the rate-based goal." (Federal Register, Vol. 79[117]; 34953) The commenters state d the "In the absence of emissions standards" implies that we need a business-as-usual (BAU) projection of generation by affected EGUs. The commenters said EPA already has deployed Integrated Planning Model (IPM) version 5.13 to project a Base Case for the power s ector through 2030. The commenters said the
confusion arises from whom are the affected EGUs EP A's formulation of the rate-based goals partly resolves the confusion; it is located on pag e 18 of the Goal Computation Technical Support Document.

• rate goal [lbs/MWh] = emissions from existing fossi l [lbs] / ( generation from existing
fossil +

• generation from at-risk nuclear +

• generation from projected renewables +

• projected demand savings from energy efficiency) [M Wh]

The commenters said a little algebra translates a r ate goal to a mass goal; the denominator in the formula is projected generation from affected EGUs under BAU conditions plus projected energy efficiency; the product of the rate goal and the denominator is the mass goal.

The commenters said the rate goal comes from EPA, b ut generation by affected EGUs must be produced by a model; different models produce diffe rent projections, so allowing states to choose a model effectively invites them to manipula te the stringency of the rule. The60

commenters said if they choose a model that project s a high level of generation then emissions will be higher and costs lower than if they choose one that projects less generation. The commenters said EPA can simultaneously obviate this potential for manipulation and the burden they place on themselves to accept or reject the mo dels chosen by the states if they employ a model themselves to project generation and make the rate-to-mass conversion.

Commenters stated the principal concern is that the two alternatives discussed in the Rate-toMass TSD are inconsistent with the rate-based goal computation approach in the Proposed Rule. The commenters said under EPA's initial proposal fo r calculating rate-based goals, the addition of incremental RE, EE, and under-construction nucle ar generation would not be assumed to displace existing fossil generation; by contrast, t he approaches discussed in the Rate-to-Mass TSD would reduce the expected level of generation d uring a given compliance year by the amount of incremental zero-carbon generation EPA pr ojects a state could obtain under building blocks three and four. The commenters said these ap proaches are inconsistent with each other; as a consequence, the interim and final goals computed using these approaches would not be equivalent with each other.

Commenters added the assumption that the addition o f each MWh of incremental RE, EE, or nuclear generation will reduce the output of an exi sting fossil unit in the same state by the same
amount is incorrect for a number of reasons. The co mmenters said the two approaches discussed in the Mass-to-Rate TSD both rely on this incorrect assumption. The commenters said were EPA to issue a final rule that relies on such an assump tion in calculating mass-based emission budgets or in dictating guidelines for states to follow in calculating their own budgets, this approach would effectively make unworkable any mass-based pr ogram that a state may wish to develop for achieving its applicable emission goal under th e Clean Power Plan. The commenters said given the many administrative and flexibility benef its of a mass-based program, the loss of this implementation option would have the unfortunate ef fect of increasing the administrative challenges and burdens states will face in implemen ting their applicable state goals.

Commenters added both of the proposed rate-to-mass conversion methodologies discussed in the TSD fail to adequately take into account the impact s that future demand growth could have on
affected units' abilities to reduce emissions. The commenters said the first proposed methodology discussed in the Rate-to-Mass TSD would not incorpo rate any future load growth into the projection of a mass-based equivalent limits impose d states; the consequence of this oversight is that EPA would effectively prohibit states from mee ting new electricity demand with additional generation from existing affected power plants. The commenters said in many cases, these existing generating units are likely to be the most reliable, low-cost generation sources available; moreover, as EPA recognizes, application of the bui lding blocks-particularly building block twowill lead to significant spare capacity at coal-fir ed EGUs. The commenters said under a ratebased approach, this excess capacity could still be used to meet future demand as long as states deploy additional low-carbon generation to balance out the higher emissions from these units; however, under the first mass-based conversion meth odology discussed in the TSD, states would
be unable to increase these units' utilization rate to meet new electric demand, because the level of the cap would be set under the unrealistic assum ption that demand growth will either be zero or will be met entirely by other sources of generat ion that are not regulated under the applicable state plan (e.g., peaking-cycle simple cycle combus tion turbines, imported generation from neighboring states, or new fossil or zero-carbon ge neration). The commenters said the net effect61

of this approach would likely be to increase the co st of meeting new electrical demand, reduce economic growth, and potentially increase the numbe r of stranded assets due to the premature shutdown of the nation's coal-fired generation flee t; moreover, if new demand is met by other fossil resources (such as new fossil-fueled facilit ies or electricity from fossil generators in neighboring states) rather than lower-carbon resour ce (which are typically more expensive), the emissions effect of capping state emissions could b e completely negated.

Commenters added the second option for converting r ate-based goals to mass equivalents discussed in the Rate-to-Mass TSD does incorporate some assumptions about increased electricity demand; however, the commenters are con cerned that the proposed load growth assumptions could be unreasonably low in many parts of the country if economic growth increases substantially beyond current expectations (as our members and their families hope it will), or if future technologies such as electric v ehicles increase electricity demand significantly. The commenters said without further changes, both a pproaches would artificially constrain economic growth, lead to more stranded assets, and raise electricity costs while potentially having no effect on emissions. The commenters added this second option requires state to include new power plants as affected units in a reg ulatory program that is limited to the regulation of existing sources; the approach theref ore is contrary to the requirements of the Clean Air Act, which expressly excludes "new sources" fro m the statutory definition of "existing source" for purposes of regulation under section 11 1.68.

Commenters have reviewed EPA's Translation of the C lean Power Plan Emission Rate-Based CO2 Goals to Mass-Based Equivalents TSD (November 2 014) and supporting documents, and disagrees with its methodology and calculations. Th e commenters said this methodology severely underestimates the allowable amount of CO2 emissions based on each state's emission rate in the proposed Clean Power Plan. The commente rs said for example, in the TSD's supporting Rate to Mass Translation Data File, in s heet "Mass Equivalents - States, Opt1," column CB, the sum of all states' emissions is equa l to approximately 1.34 billion metric tons, or
1.48 billion tons. The commenters said the correct tonnage for each state can be easily calculated from the emission rates as shown in the Goal Comput ation TSD supporting document, Goal Computation - Appendix 1 and 2. The commenters said the emission rate calculation is simply the emissions (in pounds), divided by the energy (i n MWh). The commenters said using column AZ of sheet "Appendix 1 - Proposed Goals," and remo ving the denominator results in the appropriate pounds of CO2 for each state based on t he proposed emission rates. The commenters said one can then convert pounds to tons by dividin g by 2,000. The commenters said the sum of all states' emissions is equal to approximately 1.8 2 billion tons, or approximately 23% higher than what EPA uses when doing the translation. The commenters said because EPA's method of converting the emission rate to a mass value as pro posed in EPA's November 2014 Translation
of the CPP Emission Rate-Based CO2 Goals to Mass-Ba sed Equivalents TSD underestimates the mass emissions tonnage by almost 20%, the commenter s supported setting the mass-based equivalent limits on the CO2 values used in the num erator of the state goal calculations as found in the document Goal Computation - Appendix 1 and 2 spreadsheet.

Commenters stated has the following comments and qu estions:

1. The commenters recommended that EPA check its sprea dsheets62

2. The commenters recommended developing this approach without the spreadsheets in mind; make this approach clear to someone trying to duplicate the method outside of the rulemaking proposal.

3. The commenters recommended making it very clear how EPA intends existing and incremental RE and EE to be treated when converting the BSER goal from rate to mass for both approaches, exiting only and existing plus new generation.

4. The commenters did not have sufficient time to comm ent on the many other methods proposed in the TSD.

5. The commenters noted that more sophisticated method s for the conversion will take extensive analysis and complicated modeling tools w hich a) the commenters may not have access to and b) may not have sufficient time to perform, given that EPA has given states one year to make this decision and present i ts methodology for inclusion in the initial state plan submittal.

6. EPA estimates the incremental generation in 2029 to be 18,323,738 MWh; it adds this value to the existing generation in 2012; it then a pplies the BSER rate to all generation. The commenters asked does this approach assume all the added generation, 167,369 GWh, is generated by the existing fleet plus some a dditional renewables; or does EPA assume that new sources subject to 111b will be req uired to meet this projected demand; if 111(b) sources are required to meet the demand, the commenters recommended that EPA modify this approac h.

Commenters stated this rate-based approach would im permissibly force the retirement of a significant portion of West Virginia's coal-fired u nits, which currently provide 97 percent of West Virginia's electric generation. The commenters said in order to comply with the rate-based proposal by 2020, West Virginia would have to repla ce 43.5 percent of its generation through fuel switching to lower CO2 emitting fuels (that em it at the same rate as NGCC units), or replace 20.4 percent of its generation with renewables (zer o-emitting sources), or some combination thereof. The commenters said such an approach is no t realistic, nor is it feasible to assume that companies would be in a position to cost-effectivel y replace anywhere from 20 to 44 percent of their generation within less than 6 years. The comm enters said to put this in perspective, the required level of reduction would require the insta llation of 15 - 500 Megawatt (MW) NGCC units by 2020, or the installation of nearly 2,500 - 2 MW windmills, or some combination
thereof.

Commenters noted that the proposal would allow stat es to adopt either the rate-based goal as determined by EPA or an "equivalent" mass-based tar get. However, the commenters indicated that the proposal discussion of this topic is vague and does not provide clear guidance as to how to translate the proposed rate-based goals into mas s-based goals

. The commenters argued that translating from a rate-based to mass-based target appears to require complex and resource intensive modeling that may be beyond the capabilit y of many states to undertake and complete
in the timeframe that will be needed to inform the state plan development.63

Commenters stated whatever method for converting ra te to mass EPA approves must be able to
account for reductions of emissions in one state ma y drive emissions up in another state within the same RTO. The commenters said for example, if a coal plant in one state is retired, an existing natural gas EGU may replace that generatio n; this effect is encouraged by Building Block Two of the CPP, but if the states are not in a multi-state plan such a result would be discouraged by the state in which the existing natu ral gas generation facility resides.

EPA has made assumptions in the rate to mass conver sion that may or may not hold true.

Commenters stated EPA uses the proposed rate-based goal which incorporates numerous assumptions to calculate a mass-based goal that inc ludes even more assumptions; so the question must be asked, "Who is penalized if all of the assu mptions are not realized." The commenters said unfortunately, it will be the states and the i ndividual utility companies that will be forced to offset EPA's assumptions because ultimately the bur den of compliance lies with the company. The commenters said other assumptions included in t his mass-based conversion that may or may
not hold true are:

• The continuing operation of existing resources unde r building block three (RE and at-risk nuclear) is not assumed to affect historical genera tion levels.

• Inclusion of existing and incremental non-fossil ge neration connected to building blocks three and four is necessary to fully define the mas s equivalent generation level.

• To quantify a sales level for all future years, the annual average growth rate is applied to each jurisdiction's historical 2012 power sector sa les.

• Transmission losses are assumed to be 7.5%

• Under construction NGCC EGUs are assumed to operate at a 55% capacity factor to satisfy future demand requirements.

The commenters said the mass-based goal calculation is based on so many assumptions that it is inevitable some or all of these assumptions will no t hold true; the inherent uncertainty is something that EPA should carefully consider. The c ommenters said if the overall purpose is to reduce carbon emissions by 30% from 2005, then this objective should be applied uniformly
across all states.

Commenters stated that EPA's initial guidance was v ague as to the methodology for converting rate-based goals to mass-based goals. The commenter s interpreted EPA's methodology to require
a state to model a reference case scenario that doe s not include EPA's proposed guidelines and any existing state requirement or future state requ irements that could include measures that might otherwise count towards compliance in a state plan (e.g., incremental measures from an existing energy efficiency standard or RPS are not included in the reference case scenario). The
commenters stated that results from the reference c ase scenario include generation levels (MWh) from affected sources. The commenters stated that g eneration from affected sources is totaled for the appropriate compliance year, and EPA's state em ission rate goal is applied to the total generation from affected sources to produce a mass- based number.64

Commenters noted that in an attempt to provide clar ity, EPA published additional information on November 13, 2014, regarding the conversion of emis sion rate-based CO2 goals to mass-based equivalents and EPA provided two additional methodo logies for potential use in making rate-tomass conversions. The commenters noted that the fir st methodology adjusts the historical (2012) generation from affected sources based on the appli cation of EPA's Building Blocks to develop a mass equivalent generation level. Specifically, the commenters stated that EPA reduces generation from affected sources due to the assumed levels of incremental renewable energy and under construction nuclear (Building Block 3) and i ncremental DSEE (Building Block 4). The commenters noted that the adjusted generation from affected sources is then added to the total generation from Building Blocks 3 and 4 and multipl ied by EPA's proposed emission rate-based goals to produce mass-based equivalent goals. The c ommenters noted that EPA's second methodology follows a similar approach but incorpor ates incremental demand levels from new generation in developing a mass equivalent generati on level.

Commenters expressed numerous concerns with EPA's i llustrative conversion methodologies including: (1) the inappropriateness of using a sin gle baseline year (2012); (2) the presumption that incremental renewable energy, under constructi on nuclear, and incremental DSEE will displace generation from affected sources; (3) the inherent uncertainty of future demand; and (4) the economic consequences of unpredictable and vola tile fuel prices

.

Regarding their first concern, the commenters state d that any single-year baseline is not representative of historical and future operations of affected sources. Specifically, the commenters stated that generation from affected sou rces in 2012 was atypical due to historically low natural gas prices and diminished demand. The c ommenters stated that using 2012 as a
baseline to establish an emission rate- or mass-bas ed program results in overly stringent goals.

Regarding their second concern, the commenters stat ed that EPA is incorrect to assume Building Blocks 3 and 4 will displace generation from affect ed sources. The commenters explained that while new generation may, at times, be built to rep lace existing generation, more often it is built
for other reasons. The commenters stated that one o f the primary purposes of building new generation facilities is to meet increasing electri city demand. The commenters provided that Georgia Power's Plant Vogtle Units 3 and 4 are prim e examples of constructing new units to meet load growth. The commenters stated that Georgi a's under construction nuclear, Plant Vogtle Units 3 and 4, were explicitly approved by t he Georgia PSC and the NRC to serve future demand in Georgia, which flatly contradicts EPA's a ttempt to replace existing generation with the generation from these units.

According to commenters, as discussed in the NRC's final environmental impact assessment for the Construction and Operating License for Plant Vo gtle Units 3 and 4, "[a] certification for construction of the proposed Units 3 & 4 was approv ed by GPSC . . . [and] specifically found that: [t]here will be a need for new base-load gene ration in Georgia during the 2016 to 2017 timeframe . . . [and] [d]emand side management prog rams do not eliminate the need for new base-load generation." As a result, the commenters stated that the NRC and the Georgia PSC explicitly have determined that Plant Vogtle Units 3 and 4 were needed to meet future demand. The commenters asserted that to repurpose these uni ts into replacements for existing fossil fuelfired generation by making Georgia's goal more stri ngent would severely risk the provision of reliable and cost-effective power to Georgia's elec tricity customers.65

Regarding their third concern, the commenters state d that DSEE (Building Block 4) is dependent on customer behavior and is not guaranteed. As a re sult, the commenters stated that it serves a different purpose than existing fossil fuel-fired g eneration, which is capable of being called upon to meet customer demand. Moreover, the commenters s tated that this overall approach contradicts the Agency's proposed emission rate-bas ed goal computation when it assumes displacing generation from Blocks 3 and 4 and does not reflect real world demand increases
when it locks in a baseline.

Regarding their fourth concern, the commenters stat ed that EPA is not capable of making accurate state-level assumptions for electricity de mand growth and fuel prices both of which have significant ramifications in establishing emis sion reduction goals. The commenters noted that the Agency itself notes the "central importanc e" of these assumptions while highlighting the "uncertainties about future demand, inventory of EG Us and the relative amounts of generation among EGUs in light of, for example, fuel costs..."

For these reasons, commenters argued that EPA canno t and should not provide states with binding rate to mass conversion methodologies and m ass-based goals (or rate-based goals for that matter). The commenters contended that states are best equipped at developing goals that appropriately reflect the historical and future ope rations of affected sources within their
boundaries. The commenters stated that based on the face of section 111(d), EPA must uphold the authority and flexibility already provided to s tates to establish standards of performance and compliance options.

Commenters stated the mass-based goal should be cal culated as the product of the affected entity emissions rate (from Blocks 1 - 4 of the Goal Compu tation TSD) and the projected 2030 affected entity generation; the final year generation used f or the mass-based goal should be based upon nationally recognized demand projection data such a s EIA's Annual Energy Outlook (AEO).

Commenters stated EPA did not assume any reduction in affected unit generation due to the deployment of building blocks three and four; howev er, in both approaches in the "Rate-toMass" TSD, EPA does reduce affected unit generation in the goal setting methodology due to building blocks three and four. The commenters stat ed this is not a valid approach; these resources do not directly displace existing fossil generation, and this change would significantly change the stringency of the proposed rule invalida ting EPA's cost and impact analysis. The commenters stated EPA should not adjust affected un it generation in the goal-setting methodology for building blocks three and four.

Commenters stated in both approaches in the "Rate-t o-Mass" TSD, EPA assumes generation from existing affected units is not adjusted for de mand growth for future compliance periods, and that all demand growth is accommodated by gener ation from new generating sources. The
commenters stated this is inconsistent with the rat e-based approach in the proposed rule and not reflective of how power systems are operated. The c ommenters said under a rate-based standard, higher levels of generation with no change in unit efficiency do not impact unit emission rates; fossil-fueled generating units are primarily dispatched based on cost with no bias due to unit age. The commenters said assuming generation f rom existing units does not increase due to demand growth is not equivalent to the rate-based g oals, but results in a much more stringent approach than the rate-based approach in the propos ed rule. The commenters said mass66

equivalent methodologies should be based on project ed future emissions from affected units that include increased generation due to demand growth f or generation from those units.

Commenters said, specifically in the rate-to-mass c onversion context, states should have the flexibility to include generation from new fossil u nits if they choose, EPA should afford this flexibility whether a state chooses to comply with a rate or mass equivalent standard.

Commenters stated that EPA's illustrative rate-to-m ass translation in its November 2014 TSD failed to account for the complexity of regional el ectricity resource changes expected between 2012 and 2030. The commenters offered that, in cond ucting the translation between the ratebased targets and a mass-based emissions cap, there may be some apparent value of providing a simple calculation-based methodology, such as the a pproach illustrated by the recently released RTM TSD. However, the commenters contended that the approach outlined by the proposed CPP is not especially conducive to a simplified cal culation-based translation methodology. The commenters noted specific concern regarding the com plexity of this nation's interdependent electricity grids as well as the dynamic nature of our energy markets, which both contribute to the resulting inability of historically-based gener ation and capacity data to provide reliable analyses of projected fuel mixes for individual sta tes that participate in larger market structures. The commenters asserted that electricity system mod eling offers crucial insights pertaining to how that system will respond to changes in policy o r market forces. The commenters added that the accuracy of modeling results are only as reliab le as the underlying assumptions, and therefore they recommended that EPA prescribe rebuttable pres umptions for input source data, such as
reliance on the ISO/RTO load forecasts and intercon nection queues to determine firm retirements and firm builds, as well as Annual Energy Outlook p rojections for fuel prices.

Commenters suggested that EPA clarify that, for pur poses of the rate-to-mass translation, underlying renewable energy and energy efficiency s tate policies should not be included in the baseline. The commenters added that, to require sta te renewable energy and energy efficiency policies to be modelled in the baselines essentiall y takes away the benefits of those programs during the compliance period for states that implem ent these very programs which EPA hopes to encourage states to undertake.

Commenters stated that, while a modeling-based appr oach for the rate-to-mass translation is most appropriate due to the system-wide structure o f the CPP, a calculation-based methodology for the rate-to-mass translation could be appropria te if EPA corrects for the apparent doublecounting of fossil fuel displacement. They further explained that fossil fuel displacement may be already accounted for in the calculation of a state 's rate and then EPA would potentially count that displacement again in the rate-to-mass transla tion.

Comment 6: The EPA should clarify that the examples presented in the TSD are not the only methods to convert the rate based goals to mass bas ed goals.

Response 6: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based goals.

The following are summaries of the specific public comments under this comment:67

Commenters stated in its final rule, EPA should sta te explicitly that these examples are not the only ways in which the conversion may be performed; the TSD states: "The concepts and considerations presented in this section should not be viewed as prescriptive; rather, these concepts represent one particular way of constructi ng an approach that is capable of translating the form of the rate-based goal to a mass-based equ ivalent." The commenters said while this conveys the intention to allow states to use other methods to translate rate-based goals to a massbased equivalent, the commenters requested that EPA state clearly in the final rule that the examples included in the TSD are not the sole optio ns for mass-based emission limits, should not be interpreted as a cap on emissions if a state ado pts a mass-based approach, and that states retain the authority to adopt other methods to tran slate their rate-based goals into mass-based
limits.

Commenters stated the Proposed Rule did not establi sh presumptive mass-based goals for states; EPA has since released the Mass Conversion TSD with two [potential] methodologies for making rate-to-mass translations that could be cons idered equivalent to the proposed rate-based goals. The commenters said EPA made clear upon publ ication of the Mass Conversion TSD that the published mass-based equivalents are merely ill ustrative. The commenters said EPA should
reiterate in the Final Clean Power Plan that states have the option, upon submission of their plans, to propose adjustments to the methodology us ed by EPA in establishing the example mass-based goals to account for circumstances where the underlying assumptions are inaccurate or fail to account for particular circumstances, e. g., the unexpected retirement of a nuclear generating unit or increases in generation necessit ated by initiatives to expand the electrification of the transportation sector as a means of attainin g the ozone NAAQS. The commenters said to encourage states to proceed with the development of mass-based programs and so as not to limit the creativity of states in designing the best prog rams for their states, EPA should make clear that, if it should find a state plan deficient in s ome respect, including in a state's translation of its rate-based goal into a mass-based goal, the immedia te remedy would not be wholesale rejection of the state plan and imposition of a federal imple mentation plan ("FIP"), but a more measured process that provides the state the opportunity to correct any deficiencies, while proceeding with implementation of plan. The commenters said this pr ocess has worked well for several decades in EPA's review and approval of SIPs submitted unde r Section 110 of the CAA. The commenters said given Section 111(d)'s requirement that EPA fo llow its long-established practice for reviewing SIPs under Section 110, EPA should make c lear in the final rule that it will similarly provide for limited approval and disapproval of pla ns where deficiencies are correctable and specifically where a state's translation of its rat e-based goal to a mass-based goal is deficient due to some methodological flaw.

Commenters agreed with EPA that a mass-based target should be equivalent to a rate-based target, and should not in any way penalize or rewar d states that choose one approach over the other; it will be crucial for owners of affected un its to ascertain with certainty whether or not the existing RGGI mass caps will match the interim rate targets or the final rate targets. The commenters appreciated the additional clarification provided in its November 6th Technical Support Document (TSD), but believes that the analy sis presented by EPA in the end may penalize states that convert to a mass-based target , as states may wish to do to adopt RGGI as a compliance mechanism. The commenters recognized EPA intended that the example mass-based equivalents in the Technical Support Document are n ot required emissions limits nor should they be interpreted as a cap on emissions; they are only two of many ways to translate from a rate-68

based goal to a mass-based equivalent, and urges th e EPA to accept a more accurate rate-to-mass translation from states as they file implementation plans. The commenters also requested that the EPA specify that its mass-based target as part of t he November 6th TSD would not preclude the EPA's ability to recalibrate New York's adjusted em ission rate target, as such an adjustment will be necessary as EPA responds to comments on the pro posed rule. The commenters said regardless of how EPA proceeds with respect to the rate-to-mass conversion calculation, all targets should be recalculated to address changes m ade to the rate-based targets as a result of this comment process and upon adoption of the final rule

.
Commenters stated EPA should make the computation o f the mass-based targets as simple as possible to reduce uncertainty for states taking th e preferred compliance path; for example, as an alternative to the multiple scenarios suggested in the proposed rule, the EPA might allow states to adopt a mass emissions reduction at the percenta ge reduction required under the rate-based formula, so that Arkansas could opt to reduce avera ge emissions in 2020-2029 by 41% from 2012, and reduce emissions by 44% for 2030 and beyo nd.

Commenters have carefully reviewed the Technical Su pport Documents describing the requirements for state compliance plans and convert ing rate-to-mass; and agree with EPA that a mass-based target should be equivalent to a rate-ba sed target, and should not in any way penalize or reward states that choose one approach over the other. The commenters said it will be crucial for owners of affected units and grid operators to ascertain with certainty whether or not the existing RGGI mass caps are comparable to the inter im rate targets or the final rate targets. The commenters appreciated the additional clarification provided in its November 6th Technical Support Document ("TSD"), but believes that the ana lysis presented by EPA in the end may penalize states that convert to a mass-based target , as states may wish to do to adopt RGGI as a compliance mechanism. The commenters recognized EPA intended that the "example massbased equivalents in the Technical Support Document are not required emissions limits nor should they be interpreted as a cap on emissions. T hey are only two of many ways to translate from a rate-based goal to a mass-based equivalent," and urges the EPA to accept a more accurate rate-to-mass translation from states as they file i mplementation plans. The commenters also requested that the EPA specify that its mass-based target as part of the November 6th TSD would not preclude the EPA's ability to recalibrate New Y ork's adjusted emission rate target, as such an adjustment will be necessary as EPA responds to com ments on the proposed rule. The commenters said regardless of how EPA proceeds with respect to the rate-to-mass conversion calculation, all targets should be recalculated to address changes made to the rate-based targets as a result of this comment process and upon adopti on of the final rule.

Commenters appreciated the release of EPA's TSD ent itled "Translation of the Clean Power Plan Emission Rate-Based CO2 Goals to Mass-Based Equival ents," which provides examples of the ways in which a state may translate its rate-based standard into a mass-based standard; however, EPA should state explicitly in its Final Rule that these examples are not the only ways in which the conversion may be performed. The commenters sai d the TSD states, "The concepts and considerations presented in this section should not be viewed as prescriptive; rather, these concepts represent one particular way of constructi ng an approach that is capable of translating the form of the rate-based goal to a mass-based equ ivalent." The commenters said while this conveys EPA's intent that states may use other meth ods to translate its rate-based standard to a mass-based equivalent, the commenters requested tha t EPA state clearly in the Final Rule that69

the examples included in the TSD are not the sole o ptions for mass-based emission limits, should not be interpreted as a cap on emissions if a state adopts a mass-based approach, and that states retain the authority to adopt other methods to tran slate their rate-based standards into mass-based
limits.

Commenters asserted that the conversion guidelines are inadequate. Commenters argued that the guidelines do not indicate what modeling assumption s are acceptable. Although the EPA described how rate-to-mass based goal conversions c ould be made in the Technical Support Document, this commenters asserted the EPA should p rovide further guidance on what could be a workable system outside of the approach provided in the Technical Support Document.
Commenters felt the EPA had not allowed sufficient time for stakeholders to review the guidance released on November 6, 2014.

Commenters appreciated the release of EPA's TSD ent itled "Translation of the Clean Power Plan Emission Rate-Based CO2 Goals to Mass-Based Equival ents," which provides examples of the ways in which a state may translate its rate-based goal into a mass-based goal; however, EPA should clarify in its final rulemaking that these e xamples are not the only ways in which the conversion may be performed. The commenters said th e TSD states, "The concepts and considerations presented in this section should not be viewed as prescriptive; rather, these concepts represent one particular way of constructi ng an approach that is capable of translating the form of the rate-based goal to a mass-based equ ivalent." The commenters said while this conveys EPA's intent that states may use other meth ods to translate its rate-based goal to a massbased equivalent, the commenters requested that EPA explain clearly in the final rule that the examples included in the TSD are not the sole optio ns for mass-based emission limits, should not be interpreted as a cap on emissions if a state ado pts a mass-based approach, and that states retain the authority to adopt other methods to tran slate their rate-based goals into mass-based
limits.

Comment 7: The EPA should provide an equivalent mass emission s rate goal conversion.

Response 7: The EPA has carefully considered the comments and h as provided a calculation of the mass-based goal directly in the final rule . See section VII of the preamble for further
discussion.

The following are summaries of the specific public comments under this comment:

Commenters stated plans based on converted mass emi ssion rate goals may provide states and regulated entities a more straightforward and enfor ceable implementation option. The commenters were concerned that the proposed rule do es not provide state goals as both a lb/MWh emission rate and as a ton/year mass rate, a nd remains concerned despite the recent release of further technical support document (TSD) guidance from the EPA. The commenters said without EPA providing clear unambiguous conver sion guidance, or preferably providing presumptive equivalent mass emission goals, states and affected entities cannot adequately evaluate planning options. The commenters advocated for a straightforward equivalent emission rate to mass conversion procedure.70

Commenters added EPA should also provide detailed c alculations of an equivalent mass
emission standard.

Commenters stated the proposed rule requires a stat e that elects to use mass-based goals rather than rate-based goals to produce a "reference case" forecast of generation by affected EGUs through 2030; this forecast would be done at the ti me a state's plan is prepared, and would determine the state's mass-based compliance goals f or all compliance periods. The commenters said preparing an accurate forecast this far in adv ance would be extremely problematic. The commenters recommended that the EPA should provide "presumptive" translations of rate-based goals to mass-based goals for each state, because i t would reduce uncertainty surrounding the initial development of mass caps by states. The com menters said along with these mass cap values, the EPA should also provide detailed guidan ce, including examples, on their proposed method for developing these using a reference case scenario. The commenters said based on their review, states should be allowed to either adopt th e presumptive translation, or propose an alternative mass-based goal as part of the state pl an process based on unique circumstances and local resource plans. The commenters said in order to make a mass-based approach an attractive alternative to a rate-based approach, EPA should pr ovide a process that allows states to adjust their mass-based goals factoring changes that occur after the generation projection is originally made with appropriate supporting justification.

Commenters recommended that any rate-to-mass transl ation approach accepted or adopted by EPA must reflect the complexity and geographic inte rconnectedness of the electric grid, while also providing sufficient oversight to ensure equiv alent stringency between the rate-based and mass-based approaches.

Commenters stated the EPA has proposed allowing the use of a mass-based approach; EPA should provide the presumptive translations using i ts techniques for each state in the final rule. The commenters added, it should offer to provide th e aggregated multi-state intensity and massbased values for the states considering a multi-sta te agreement.

Commenters urged EPA to further define the methodol ogy for establishing mass-based goals and provide specific examples on how the mass-based goa l might be calculated for a particular state. The commenters said providing additional guidance w ill ensure that there is consistency in development of mass-based budgets amongst the state s. The commenters added it will be important for the states and stakeholders to have m ore certainty regarding the approvability of a calculated mass-based goal and, in the first instan ce, evaluating whether it is appropriate for any particular state to establish a mass-based goal.

Commenters stated as written EPA's proposed methodo logy for converting rate-based targets to mass-based targets is vague, and could lead to mass -based goals that are more stringent than ratebased goals. The commenters said in the rule EPA st ates generally that a mass-based CO2 emission performance goal is calculated by projecti ng the tons of CO2 that would be emitted during a state plan performance period by affected EGUs in the state if they hypothetically were meeting the state rate-based CO2 emission performan ce goal for affected EGUs. The commenters said EPA next explains that when demonst rating projected emission performance under a mass-based plan, a state would project the CO2 emissions outcome that would be achieved under the suite of requirements, programs and measures in its state compliance plan.71

The commenters said EPA needs to provide more clari ty on how the rate to mass-based conversion works and provide specific mass targets. The commenters said otherwise the state should be given broad flexibility to determine this factoring in reliability and cost issues. The commenters said it is important, that when converti ng between emission rates and mass, there must be logical consistency. The commenters said po licy desires cannot overlook valid logic in
the mathematical conversion between the emission ra te and mass, and this may be seen as an arbitrary distinction by the courts.

Commenters requested the agency's guidance on how t he states convert the pounds per megawatt rate from the proposed guidelines to an annual tonn age rate.

Commenters requested the EPA to provide a mass-base d formula and calculations for CO2 for
all the states.

Commenters recommended the EPA should develop direc tions for states to follow when setting a mass-based limit, including periodic adjustments to correct for imperfect load-growth
forecasts. Commenters asserted that mass-based limi ts must be based on consistent and transparent assumptions and that mass-based targets must be comparable to the rate-based targets.

Commenters asserted the method used to set the mass -based limits should not penalize early
action and should minimize the likelihood that stat es will define business-as-usual assumptions that will result in a higher mass-based standard.

Commenters requested EPA provide mass-based standar d calculations so that states can better evaluate the impact of the rule and to get a better sense of what methodologies for calculating the mass-based state goals would be acceptable to EPA.

Commenters felt the material released by EPA on Jun e 2nd provides insufficient information for states. Commenters recommended EPA provide non-bind ing, illustrative examples of how states could convert their rate-based goals to mass, inclu ding the underlying calculations and assumptions.

Commenters recommended these directions include des ignation of factors (e.g., rate of economic growth) and consistent data sources that would allo w for conversion of an emission rate target into an emission budget.

Commenters agreed with the EPA's description of wha t is required under "Identification of Affected Entities and Plan Inclusion," with the exc eption of the mass-based conversion elements. The commenters stated that to ensure consistency an d acceptance of a state plan by the EPA regional offices, it is incumbent upon the EPA to p rovide the proper tools to translate from ratebased to mass-based goals. The commenters opposed r equiring the state to use a proprietary
model to make such a translation. The commenters stated t hat use of a proprietary model obfuscates the translation process, is not a transp arent process as part of the rulemaking, and would make it impossible for some states to make th is translation because of existing laws governing such transparency. The commenters support ed a simplified method for this translation of rate-based to mass-based goals.72

Commenters stated the discussion in the Proposed Em ission Guidelines on converting state emission rate goals into a mass emissions "cap" is vague and overly complicated; in addition, this guidance appears to require complex and resour ce intensive modeling that may be beyond the capability of many states to undertake or compl ete in a timely manner to inform the plan development process. The commenters said at the sam e time, such a conversion is vital to assessing the potential viability of existing and/o r future interstate emissions trading programs that EPA acknowledges may be a more cost effective method of compliance for some states. Commenters recommended that EPA develop a simple an d straightforward presumptive method for performing the rate-to-mass conversion that uti lizes existing data and tools. The commenters said a number of readily available sources of data on demand growth and emissions projections are currently available to the states such as the E nergy Information Administration (EIA) and the state emissions projection tool developed by ERTAC. The commenters recommended, however, that EPA allow states to apply equivalent methods o f rate-to-mass conversion upon an appropriate demonstration in their state plans.

Commenters recognized that EPA provides some guidan ce on how to convert a state-specific rate-based goal to an equivalent mass-based goal in section III.B of EPA's "Projecting EGU CO2 Emission Performance in State Plans" Technical Supp ort Document; however, additional guidance is needed. The commenters said one of the first questions a state must answer when developing its implementation plan is whether the s tate wishes to comply with a rate-based or mass-based emission goal; any conversion from a rat e-based to mass-based emission goal is critical and must be done with accuracy and transpa rency. The commenters said it is imperative that states have this guidance as soon as possible, and definitely before the rule is finalized.

Commenters stated at a minimum, EPA should provide states with detailed directions, equations, and examples explaining how states can convert EPA' s proposed state goals to mass-based goals; it would also be extremely helpful if EPA provided this guidance via some type of electronic
calculation tool. The commenters said this would al so provide more consistency among the
states' rate-to-mass conversion.

Commenters stated EPA should perform a presumptive translation of the state-specific ratebased CO2 emission performance goal to an equivalen t mass-based goal for all states and for multi-state regions; this should include default mo deling assumptions and the results of modeling
runs for a Reference Case Scenario and an EPA Mass- Based CO2 Emission Goal Policy Scenario, as described in section III.B of EPA's "P rojecting EGU CO2 Emission Performance in State Plans" Technical Support Document. The commen ters said EPA's translation should include a clear description of how the conversion w as done so that states may easily replicate EPA's work. The commenters said State plans should be allowed to include a mechanism to recalculate the mass-based goal during the complian ce plan based on demand growth and other
factors.

Commenters requested that EPA clearly outline the s teps for translating an emission-rate goal into a mass-based goal. The commenters said these c hanges would result in state goals that more accurately reflect real-world operations, properly reward early actors and incentivize early actions in the future, and facilitate faster compli ance by states electing to employ a mass-based

program.73

Comment 8: The EPA should provide a single translation method ology of rate-based to massbased goals for all states to follow.

Response 8: The EPA has carefully considered the comments and r ather than providing a methodology that each individual state would have t o employ to translate the rate-based goals to mass-based goals, the EPA provides the calculated m ass-based goals directly in the final rule. The methodology and date for the calculation are de scribed in detail in section VII of the final rule preamble of the CPP and the CO2 Emission Perfo rmance Rate and Goal Computation TSD
for CPP Final Rule.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA provides a general discussion of how states might convert a rate-based goal to a mass-based goal, but does not propose a s pecific methodology. The commenters said failure to provide a specific methodology for all s tates to follow creates the potential for inequity among states that choose to translate their rate go als to mass-emission goals using difference methodologies.

Commenters added EPA's suggested approaches to sett ing a mass-based standard specified in the technical support document "Translation of the Clea n Power Plan Emission Rate-Based CO2 Goals to Mass-Based Equivalents" both prevent the c oncern about states gaming their businessas-usual forecast and also avoid having business-as -usual forecasts lock in planned mitigation measures into the baseline; however, the second app roach, the "Final CPP Mass-Based Equivalent for Affected and New Sources" that facto rs in projected growth in regional electric generation may be closer to achieving equivalency w ith the rate-based methodology, which allows for growth in electric generation so long as the emission rate is achieved. The commenters said to support consistency in how states set their mass-based standards, we urge EPA to specify a preferred methodology such as the "Final CPP Mass -Based Equivalent for Affected and New Sources." The commenters said this methodology calc ulates the mass-based standard through a series of calculations that are based on historic ( 2012) generation levels. The commenters said by specifying a single method based on a fixed set of parameters and not using state-generated modeling, this approach prevents gaming and also av oids the issue of whether to assume planned clean energy capacity in the forecast; moreover, us ing a methodology such as this one that accounts for growth in electric generation to meet growth in demand will help avoid a situation where states opt for a rate-based goal in lieu of a mass-based standard only because the goal
itself is seen as easier to achieve.

Commenters stated EPA should provide an acceptable method for translating the rate-based goals within the rule to a mass-based goal; this wi ll prevent misinterpretation and miscalculation between and among states that discuss entering into a multi-state or regional plan. The commenters said it would also allow for a comparabl e standard between different states and ensure that multiple entities involved will arrive at the same goal after conversion. The74

commenters said EPA should not allow different meth odologies for conversion when the goal calculation methodology is consistent for all state s.

Commenters stated EPA should translate its rate-bas ed goals into mass-based goals; it has already described, in broad terms, methods for stat es to make the translation, but the incentive for states to inflate their mass goals when transla ting is unavoidable. The commenters said a single standardized method for translation written by EPA would clear up confusion and remove the inevitability of goal inflation if states do th e translations themselves.

Commenters stated EPA provides a general discussion of how states might convert a rate-based goal to a mass-based goal, but does not propose a s pecific methodology; failure to provide a specific methodology for all states to follow creat es the potential for inequity among states that choose to translate their rate goals to mass emissi on goals.

Commenters stated EPA should develop a mass-based c alculation and formula for states to use; Minnesota's regulators, like those in many oth er states, will be working on developing a
mass-based formula. The commenters said EPA should develop a mass-based calculation and formula for all 50 states to use, to ensure uniform ity and fairness among the states.

Comment 9: The EPA should provide guidance to states; provide examples; work with states

Response 9: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based goals.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA should develop a collaborativ e process with states and regions to develop mass-based targets

Commenters added EPA should work together with stat es and regions in order to make the rateto-mass translation based on assumptions and policy decisions as recommended by the individual

state.

Commenters added while the EPA must include clear m ethodologies in the final rule to ensure the credibility of each state's rate-to-mass transl ation, the states should retain a substantial role in the process.

Commenters added the EPA should endeavor to provide as much support to the states as possible, including providing resources to states i n the form of both technical and analytical resources and modeling costs; moreover, the analyti cal support the EPA provides should cover both the process for converting rate-based targets to mass-based targets, as well as subsequent modeling and other efforts used by states or region s to demonstrate compliance equivalency.

Commenters added EPA must ensure the integrity and credibility of each state's rate-to-mass translation; if the process outlined in the final r ule is too open-ended, then it could create75

opportunities for states to "game the system" by, f or example, building unreasonable assumptions into their projections. The commenters added this could have the effect of reducing the level of stringency for a state, in terms of th e required level of emission reductions.

Commenters added States will need to have input on factors such as growth rate, as well as how the addition of incremental renewable energy and en ergy efficiency affect existing and new fossil generation and net imports based on the mark et dynamics of their individual electricity systems. The commenters said EPA should allow state s to justify reliable growth rates, based on projections such as those developed by ISOs for pla nning purposes.

Commenters added the EPA should also work with stat es to ensure that the growth factor accounts for an individual state's projected increa se in electricity use resulting from policies to reduce GHG emissions from other sectors through ele ctrification, such as electric vehicles and heat pumps.

Commenters added we encourage U.S. EPA to continue to assist states in determining the best calculation methodology when converting between the se two metrics, and take into account each state's unique circumstances. The commenters stated U.S. EPA should ensure that the resulting demonstration is fair and equitable, regardless of whether a state chooses to comply with the rule using a rate-based or mass-based metric. The commen ters said they believed that regardless of the metric used to demonstrate compliance, the rule 's rigor should be maintained, and ask U.S. EPA to ensure that any approvable calculation metho dology account for this rigor.

Commenters stated EPA offers the opportunity for st ates to adopt mass based plans and multistate plans as compliance vehicles. The commenters said single and multi-state mass based plans, like RGGI, can provide a means to mitigate the impa cts of the perceived ""cliff" in the Interim Compliance Period. The commenters suggested that EP A develop guidance and provide assistance to states seeking to create mass based p lans with a particular focus on preserving the stringency of Interim Targets and ensuring complian ce with them. The commenters said should the Clean Power Plan become subject to protracted l egal challenges that delay implementation, EPA should apply enforcement discretion with respec t to compliance with Interim Targets.

Commenters added if EPA is to accept mass-based con versions from the final rate established by EPA, EPA must provide modeling, data sources, defau lt input assumptions, and guidance to the states on what would be acceptable methods and data sources to convert the state's rate to an equivalent mass of CO2; in addition, EPA must descr ibe to states under what circumstances EPA would approve a change in a mass-based plan.

Commenters added EPA should provide as much support to the states as possible in terms of technical and analytical resources, including model ing.

Commenters added EPA has proposed that each state m ay convert its rate-based CO2 emission performance goal to a mass-based emission performan ce goal; EPA should preserve this option in the final rule, and should also allow states to switch between rate-based and mass-based emission performance goals as desired. The commente rs said EPA provides two TSDs regarding how such translations could be made; while the TSDs are less than clear, in one TSD EPA appears to be contemplating that states wishing to make a rate-to-mass translation would employ76

IPM or a similar type of model to project complianc e with their rate-based limits and pull from the model output for each year from 2020 to 2029 th e total projected CO2 emissions for the
universe of affected sources. The commenters said t hese projected CO2 emissions would be the state's equivalent mass-based cap. The commenters s aid in the other TSD, EPA simply appears to use historic generation for existing sources and also offers an alternate method that includes a single average annual growth rate if new fossil fue l-fired sources are included; that generation is multiplied by the state's rate-based goal to determ ine the equivalent mass-based goal. The
commenters said the conversion from a rate-based em ission performance goal to a mass-based emission performance goal is a desirable option tha t should be retained for the states, and each state should be permitted to determine exactly how such a conversion is made; however, EPA should also provide clearer guidance on the criteri a for acceptable conversion options. The commenters said a helpful step would be for EPA to provide examples of the necessary modeling analysis for each state and provide detailed guidan ce for public review and comment.

Commenters added many states have unique features ( transmission constraints, reliability requirements, etc.), and these unique features sugg est that a relatively simple EPA methodology for converting from a rate-based goal to a mass-bas ed goal is not likely to provide enough clarity to states that wish to avail themselves of employin g the option of a mass-based target. The commenters called for strong collaboration between EPA and each state that chooses to employ a mass-based emission rate; in developing this collab orative process, EPA should provide as much support to the states as possible in terms of techn ical and analytical resources and in terms of modeling.

Commenters supported EPA's proposal to allow states to convert their rate-based goals to massbased goals. The commenters said EPA issued a techn ical support document, Technical Support Document: Projecting EGU CO2 Emission Performance i n State Plans, which generally outlines a possible methodology for converting each State's CO2 emissions rate goal into a CO2 tonnage limitation. The commenters said EPA subsequently re leased a technical support document,
Translation of the Clean Power Plan Emission Rate-B ased CO2 Goals to Mass-Based Equivalents, which includes two proposed approaches for how states could convert from a ratebased to a mass-based goal. The commenters said the first approach describes the mass equivalent generation level developed for existing affected sources only and the second approach describes the mass equivalent generation level deve loped for both affected and new fossil fuelfired sources. While the commenters appreciated tha t EPA has provided this additional guidance, the commenters requested that EPA continue to work with states in the determination of their appropriate mass equivalents to EPA's rate goals.

Commenters stated States need clarity on a range of other issues before beginning work on compliance plans; as a preliminary matter, states n eed further guidance on how to translate the emission rate goals into mass-based goals as the fo rm of the goal could be the most important a
decision a state has to make. The commenters said t he recently released TSD by EPA regarding the translation for emission rate-based goals to ma ss-based equivalents did not provide sufficient clarity. The commenters said all other state plan c onsiderations will be affected by the form of the goal that the state is aiming to achieve.

Commenters requested that EPA publish an illustrati ve rate-to-mass conversion calculation which demonstrates serving increased load from exis ting resources. The commenters have a77

strong preference for a successful mass-based progr am under the Clean Power Plan. The commenters said on November 6, EPA released the sup plemental documents to illustrate translating emission rate goals to mass goals; the two examples are not suited to Colorado, because they do not provide for allocating mass to existing units to serve incremental growth. The commenters said this issue is of particular con cern in Colorado where incremental demand for new generation is second only to Arizona. The c ommenters recommended that states have the flexibility to calculate rate-to-mass conversion pe riodically, based on actual demand or population growth.

Commenters stated EPA's proposal reflects the reduc tions on a rate-based (carbon intensity) approach, but also provides that states can adopt t he rate-based form of the goal established by EPA or an equivalent mass-based approach. While the mass-based approach may not be a viable option for all states, the commenters anticipated t hat most states will utilize a mass-based approach due to the greater flexibility available u nder such an approach, as well as the ease in enforcement and implementation. The commenters said the Proposed Rule contemplates options for states to convert the rate-based emission goals into a mass number; in order to ensure that this option is meaningful and workable, more detailed gu idance to states is helpful on how the
conversation from rate-based to mass-based would be implemented. The commenters said in November TSD, EPA provided "two potential options t hat implementing authorities may choose to adopt if they elect to use a mass-based form of the emission rate-based goal. The commenters appreciated EPA's further clarity regard ing potential conversion options, as well as the agency's acknowledgment that the "mass-based eq uivalent metrics presented in the TSD are not required mass-based emission limits that implem enting authorities must meet." The commenters said the methodology employed by the sta tes needs to be uniform and consistent, and ensure comparability between the two approaches , and while the further guidance on this matter is helpful, it is incomplete in several resp ects. The commenters said the additional guidance in the alternate proposals do not adequate ly address the manner in which the final conversion methodology takes into account external factors such as how electrification of the transportation and industry sectors would impact EG Us; indeed, as currently drafted, the massbased approach would disadvantage states with aggre ssive transportation electrification goals, or in the alternative, disincentivize the adoption of zero-emission vehicle programs. The commenters said without further clarity on this iss ue and guidance on ways to account for such factors, states would be limited in their ability t o ascertain the best approach for their own needs, and further hampered in the development of regional or multi-state plans. The commenters said EPA should acknowledge the inclusion of these exter nal factors in each state's final calculations of a mass-based approach.

Commenters urged EPA to provide clear and simple gu idance for states to use in translating a rate-based goal to a mass-based goal; for example, EPA should expressly allow a state, in determining its mass cap, the flexibility to use a reasonable estimate of future generation from affected units including utilization of the values the EPA assumed in their development of the target emission rates. The commenters said EPA shou ld expressly confirm that such a simplified and conservative approach would be approved, if sel ected by a state; if the state desires to take other factors into account, EPA's guidance should s pecify acceptable analytical methods and tools, as well as default input assumptions for key parameters that will likely influence projections, such as electricity load forecasts and projected fossil fuel prices. The commenters
said States should be allowed to deviate from these default methods and assumptions as long as78

they provide a reasonable justification; following the guidance would provide a streamlined path for EPA approval of emissions projections, but woul d still allow states the flexibility to use other approaches, subject to EPA review. The commenters s aid this guidance should ensure that all
actions that reduce CO2 emissions are counted under a mass-based program. The commenters said importantly, EPA should expressly allow states to rely on unit retirements occurring after the baseline year(s) to meet Section 111(d) goals a nd allow the state to include emissions from those facilities in the "reference case" regardless of the reason for retirement of those units.

Commenters stated the proposed Clean Power Plan pro vides states with the flexibility to translate rate-based goals (lb CO2/ MWh) to mass-ba sed goals (lb CO2) and explicitly provides RGGI states the option to develop a multi-state pla n that establishes a regional mass-based emission performance level designed to meet the req uirements of the proposal. The commenters said because the RGGI program is already establishe d, approval for RGGI on a regional basis as complying with the Clean Power Plan will reduce the cost of achieving state goals and reduce the compliance burden for affected EGUs that are regula ted by RGGI and already making significant strides in reducing regional CO2 mass-based emissio ns. The commenters encouraged EPA to work with individual states and RGGI to develop mas s-based regional targets that ensure compliance with the state-specific rate-based goals proposed by the rule.

Commenters stated EPA must provide clear and rigoro us guidance to ensure that a state plan adopting a Mass-based approach is equivalent to the rate-based target.

Comment 10: The EPA should allow states to convert rate-based goals to mass-based equivalents.

Response 10: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO2 E mission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based goals.

The following are summaries of the specific public comments under this comment:

Commenters stated that EPA should allow states to c onvert rate-based goals to mass-based equivalents. The commenters noted that EPA proposes to allow states to select a mass-based goal in place of EPA's proposed rate-based emission targ ets. 79 FR 34892. The commenters noted that in addition, EPA has provided additional guida nce on two possible approaches to converting rate-based goals to mass-based goals.

The commenters noted that because state agencies ar e in the best position to evaluate and direct the future course of their electricity sector and t heir economy, EPA should allow states to convert their rate-based goals into mass-based equivalents. The commenters suggested that states should be authorized to initially identify appropriate fac tors, assumptions, and inputs for this conversion and to calculate interim and final mass-based goals that match the emission performance that would be expected under a rate-based approach. The commenters argued that EPA should not calculate mass-based equivalents in place of states

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The commenters stated that the two optional approac hes for converting rate-based goals to massbased goals that EPA outlines in the Rate-to-Mass T SD are flawed for at least three reasons. First and most importantly, the commenters stated that bo th approaches reflect unreasonable assumptions about the effect that incremental RE, E E, and nuclear generation will have on affected EGUs' generation and emissions. The commen ters noted that both of the Rate-to-Mass TSD approaches would adjust 2012 affected unit gene ration below baseline by assuming that the addition of incremental sources of zero-carbon gene ration will reduce the utilization of affected
fossil EGUs. The commenters contended that it is in correct to assume that the addition of an MWh of incremental RE, EE, or nuclear generation wi ll reduce the output of existing fossil units by the same amount. The commenters stated that nume rous factors - including future demand growth, the attributes of the electric system, and the interconnected nature of the electric grid - affect the extent to which addition of new generati on can displace existing fossil generation.

Second, the commenters stated that the approaches o utlined in the Rate-to-Mass TSD are inconsistent with the rate-based goal computation a pproach in the Proposed Rule. The commenters noted, under EPA's initial proposal, the addition of incremental RE, EE, and underconstruction nuclear generation would not be assume d to displace existing fossil generation. The commenters stated that under the approaches discuss ed in the Rate-to-Mass TSD, by contrast, the addition of this incremental generation is assumed to reduce generation from existing fossil EGUs. Because these two methods are inconsistent, t he commenters argued that it would be arbitrary and capricious for EPA to convert state g oals from rates to masses using the methodology in the Rate-to-Mass TSD.

Third, the commenters stated that both approaches f ail to adequately consider the impact of future demand growth on affected units' abilities t o reduce emissions. The commenters stated that the Rate-to-Mass TSD's first proposal for calc ulating mass-based equivalents would not incorporate any future load growth into the project ion of a mass-based equivalent. This result is clearly arbitrary according to the commenters. The commenters stated that by failing to incorporate any assumptions about how electricity d emand may increase in future years, EPA would effectively prohibit states from meeting new electricity demand with additional generation from existing units, which are some of the most rel iable, proven, and low-cost generation sources
available. The commenters stated that the EPA's sec ond option under the Rate-to-Mass TSD incorporates one basic assumption about increased e lectricity demand, based on EIA regional projections. [Rate-to-Mass TSD at 6.] However, the commenters stated that this load growth assumption may be unreasonably low in many parts of the country, including South Carolina, if economic growth increases substantially beyond curr ent expectations. According to the commenters, this option, too, could lead to severe implementation and reliability difficulties if load growth is greater than a state or EPA projects in calculating the mass-based equivalent.

Rather than effectively prohibiting states from inc reasing generation from cost-effective, reliable existing units to meet new demand, the commenters s uggested that EPA should defer to states' reasonable projections of future demand in calculat ing mass-based goals

. In addition, the commenters suggested that the EPA should revise its guidance to align with its assumption in the Proposed Rule that the addition of incremental RE, EE, and nuclear generation does not displace historic fossil generation

. Finally, because states' initial load growth proje ctions could underestimate the amount of load growth that the state w ill experience during a compliance period, the commenters suggested that EPA should provide a mech anism for a state to revise its mass-based80

goal based upon a showing that these and other assu mptions the state may have used to convert goals from rates to masses were incorrect

.

Commenters stated the methodologies shared in the N ovember 6, 2014 technical support document, "Translation of the Clean Power Plan Emis sion Rate-Based CO2 Goals to MassBased Equivalents," is illustrative and can serve a s a guide for considerations states should account for when converting between rate- and mass- based goals. The commenters said the first option is based solely on historical generation and does not account for increased demand; it also does not account for the consumption vs. production inconsistencies. The commenters said the second option does account for growth, but incomple tely accounts for those inconsistencies. The commenters said assuming this fundamental inconsist ency is addressed in the Final Rule, EPA should clarify that the options presented in all of the technical support documents are not exhaustive of the possibilities for appropriate and approvable plans regarding rate to mass translations. The commenters said rather, the rule should explicitly allow states to adopt a methodology that takes into account the various con siderations alluded to in those documents, as long as the derivation of the mass-based goals are at least as stringent as the rate-based goals and uses a methodology that is transparent and consiste nt with the goal setting methodology.

Commenters stated EPA's issuance of additional info rmation on November 13, 2014, also
contributes to the multitude of issues contained in EPA's Proposed Rule; for example, EPA identifies two methodologies that may be used when converting a rate-based goal to a massbased form. The commenters said EPA should not tie the States' hands with binding rate-to-mass conversion methods and mass-based goals. The commen ters said decisions regarding the development of goals that take into consideration t he historical and future operations of affected sources are best left to the States; EPA must provi de States the authority and flexibility, as required in Section 111(d), to make these determina tions.

Commenters stated states need the flexibility to be able to develop both a rate-based or massbased approach for the plants/utilities in their st ate; this allows states to take into account the
individual situations of the utilities and their re sources in that state. The commenters said it shouldn't matter whether different approaches are a pplied to utilities in the state as long as states can demonstrate that the emissions achieved by thei r state plans would be equal to or less than a rate-based or mass-based approach set at the state level. The commenters added in determining whether to pursue a multi-state approach and, if so , in developing that approach, it is important
for states to understand how the different rate-bas ed or mass-based approaches can be work in a common plan and, whether it will be workable to hav e both rate- and mass-based approaches in a multi-state plan.

Commenters stated EPA should provide "presumptive" translations of rate-based goals to massbased goals for each state; along with detailed gui dance, including examples, on their proposed method for developing these using a reference case scenario. The commenters said based on their review, states should be allowed to either adopt th e presumptive translation, or propose an alternative mass-based goal as part of the state pl an process.

Commenters stated EPA should confirm that states ca n implement EPA's proposed Clean Power Plan through mass-based goals developed based on a reasonable estimate of future generation81

levels to ensure the stringency of the mass-based g oals is equivalent to the proposed rate-based goals.

Commenters recognized and appreciated that the exam ples provided in EPA's rate-to-mass conversion guidance are merely "illustrations of tw o potential options that implementing authorities may choose," and encourages EPA to furt her confirm that important flexibility in its final rule preamble and response to comments. In pa rticular, the commenters asked EPA to expressly confirm that states seeking to apply a gr owth factor in their rate-to-mass conversion calculations need not regulate new sources under Se ction 111(d) because those sources will already be regulated under EPA's Section 111(b) sta ndards of performance. The commenters said EPA should also recognize that states are in the be st position to identify an appropriate growth factor to use in the conversion formula; moreover, EPA should allow states to re-calculate their mass-based goals in the event the assumptions under lying that growth factor change over time or allow states to index the mass-based goal to actual electricity demand to ensure the mass-based goal remains appropriate and consistent with reliab le electricity production and distribution. The commenters said only by allowing states to include an appropriate and flexible growth factor in
their rate-to-mass conversions will the mass-based goals truly be equivalent to the rate-based goals that EPA has proposed.

Commenters stated the proposed rule allows states t o convert their rate-based emission targets to mass-based targets (e.g. tons of CO2 per year), how ever the methods for converting to a massbased target are not clear in the proposed rule lan guage and the November 2014 EPA Technical Support Document (TSD) on the translation of CPP ra te-based state goals to mass-based does not clarify the uncertainty. The commenters said that t he proposal suggests three possible methods for converting from rate-based targets to mass-base d targets, and the November 2014 EPA TSD provides a fourth method; each method results in a different mass-based target with significant difference between the targets for each method. The commenters said despite EPA's attempt to clarify the rate to mass conversion, ambiguity in t he conversion methodology remains for states to clarify. The commenters said each state will hav e the responsibility to demonstrate equivalency between EPA's rate-based target and an equivalent mass-based target, and then choosing whether its compliance plan will be based on rate-based or mass-based targets. The commenters said states should be allowed to propose an approvable method to convert from rate to mass that is based on state-specific parameters (e.g. demand growth and incremental demand for new generation) that may impact the conversion calculation; in addition, the criteria for EPA approval of a state's rate to mass conversion shoul d be provided in the final rule, especially since the proposal suggests that economic modeling of fut ure generation scenarios may be required to establish mass based targets for a state. The comme nters said economic modeling opens up many questions in regards to the assumptions used in dev eloping the models, and states need to be assured of EPA's acceptability of these assumptions in developing mass based targets. The commenters said EPA must provide flexibility to the states to incorporate appropriate and realistic assumptions into the forecast growth mode l.

Commenters supported mass-based limits but recommen ded the EPA allow states to adjust their mass-based goals based on changes that occur after the demand and generation projections are made in order to make the mass-based approach an at tractive alternative to a rate-based approach. These commenters also noted that allowing adjustments to be made to mass-based limits would make mass-based limits comparable to t he rate-based limits.82

Commenters suggested that factors such as Gross Sta te Product, the relative price of natural gas versus coal, and the national average level of GHG emissions efficiency (CO2/GDP) could be used to stipulate how the state's overall cap would be adjust over time. The commenters noted that if GSP increases, then the mass-based limit wo uld also be increased. The commenters also noted that if gas prices increase significantly, th en it would be appropriate to increase the massbased limit but if gas prices stay low or decrease, it may be appropriate to reduce the mass-based limit. The commenters believed that any set of pred efined adjustments could be made, but recommended the adjustment variables should be outs ide the control of the state to avoid states from "gaming the system."

Commenters recommended mass-based goals be adjusted to allow for increased use of electric
vehicles. Commenters were concerned that without th e ability to adjust mass-based goals, the rule would discourage the adoption of electric vehi cles.

Comment 11: The EPA should provide specific mass-based goals f or each state.

Response 11: The EPA agrees with commenters and provides the mas s-based goal for each state in the final rule along with documentation of the methodology and data used for the setting the goal

.
The following are summaries of the specific public comments under this comment:

Commenters requested that EPA provide proposed spec ific mass-based emission goals similar to the rate-based goal. The commenters stated the proc ess of each state that wishes to use a massbased emission goal to formulate and submit its own goal calculations for analysis and approval by the EPA places additional burden on the states a nd puts them at risk of implementing a longterm compliance plan based on an emission goal that may ultimately be disapproved by EPA. The commenters stated different states may use diff erent methods for calculating mass-based goals, resulting in several different methodologies that would be difficult to compare, analyze, and verify. EPA has issued guidance on potential ap proaches that states may use to calculate mass-based goals, however, this guidance is not a s ubstitute for specific EPA-prescribed massbased goals, and does not address the aforementione d perils of relying on individual state methodologies or the burden that this places on the states. The commenters stated using EPAprescribed mass-based goals would ensure that a uni form approach is applied to each state; provide a more stable foundation for state complian ce plans; and allow for a straightforward comparison between mass-based goals and rate-based goals. The commenters said this will
enable each state to make a more informed decision as to which compliance option works best for them, provide better insight into EPA's assumpt ions for future generation and energy mix, and make the final Clean Power Plan more transparen t and less burdensome to the states.

Commenters asked if USEPA can provide states with C O2 reduction interim and final goals in terms of mass-based requirements, with detailed cal culations showing step by step how the goals were arrived at, all assumptions used, and include supporting information and data used. The commenters asked if EPA will identify a preferred r ate to mass conversion methodology and if USEPA is unable to provide states with more guid ance on mass-based goals, then why not.83

Commenters added EPA should provide states with the ir CO2 emission reduction goals in terms of mass-based requirements, with detailed calculati ons showing step by step how the goals were arrived at, including all assumptions used and all supporting information and data. The
commenters said this information will assist states in evaluating and comparing state compliance approaches and associated impacts. The commenters r equested that USEPA provide states with
the aforementioned data and information for its fin al rate-based goals; note that Illinois appreciates the recent USEPA guidance on rate-based to mass-based conversion.

Commenters stated the EPA is proposing to give stat es the option to convert its rate-based goal to a mass-based goal. The commenters said New York State, the other RGGI states, and other
affected states should collaborate with the EPA and have input and active participation in the calculation process to convert their emission rates to a mass-based approach, so that the EPA would accept the outcome of the calculation.

Commenters stated in order to facilitate such discu ssions amongst states interested in pursuing regional approaches, the commenters urged the EPA t o publish and release mass-based targets to accompany the rates-based targets included in the p roposed rule; doing so will reduce the uncertainty for state regulators, giving both the R GGI [Regional Greenhouse Gas Initiative] states and other state a clearer picture of their m ass-based obligations as they weigh compliance options and engage in regional conversations.

Commenters stated EPA should provide a comparison o f rate-based and mass-based carbon reduction numbers and see how those stack up and wh ich one would be better for a state to comply with.

Commenters stated that the EPA should include mass- based targets in the final rule and that any state plan using a rate-based approach should be ev aluated to determine whether rate-based limit is equivalent to the mass-based limits in the rule. Such a check is necessary, the commenters argued, to prevent potential gamesmanship that coul d occur if states are allowed to choose
between mass- and rate-based standards because of t he potential for states to manipulate its
calculated emissions rate. Commenters noted that t he EPA has published three different calculations of the mass-based limits that correspo nd to each state's rate-based limit. The
commenters were concerned that states would choose the least stringent emissions goal and as a result the 30% reduction target would not be achiev ed. The commenters recommended the EPA either incorporate mass-based limits in the rule or assess each state's plan against the mass-based limit calculated using the "existing plus new EGU" approach.

Commenters stated that EPA should either create req uirements for translating rate-based targets to mass-based targets, or should simply do the calc ulations itself. According to the commenters, many states may choose to take a mass-based approac h, so it is important to ensure that the
calculations are done in a fair and consistent mann er across the country. Although the "Projecting EGU CO2 Emission Performance in State P lans" Technical Support Document sketches out on a high level the procedure for tran slating the rate-based target to a mass-based goal, the commenters contended that the results of the calculation could still vary drastically based on the assumptions made in projecting the ref erence case and policy scenarios. The
commenters noted that the "Translation of the Clean Power Plan Emission Rate-Based CO2 Goals to Mass-Based Equivalents" technical support document provides two "potential" methods84

for making the calculations but note that they "sho uld not be viewed as prescriptive." p. 3, n. 5. The commenters suggested that EPA should go further and either calculate the mass-based targets for states that choose to take that approac h, or set out a clear and detailed mandatory process for making the calculations

.

Commenters stated EPA requested comment on whether it should provide a presumptive translation of rate-based goals to mass-based goals for all states, for those who request it, and/or for multi-state regions. The commenters said EPA sh ould provide a goal for each state, regardless of whether it is requested, and for mult i-state regions upon request. The commenters said further, in the process of setting mass-based goals, the calculations should account for projected increase in electrical demand, as a rate- based approach would similarly allow for
increase in demand. The commenters said EPA should rely on projected demand as determined by the agency closest to the electrical industry, w hich, for Kansas, would be the Kansas Corporation Commission. In addition to the NODA, th e commenters encouraged EPA to release additional rate versus mass calculations prior to t he release of the final rule so states would have the opportunity to comment on the calculation and E PA the opportunity to make adjustments in the process.

Commenters stated the guidance in both the Proposed Rule and Notice is not clear; in order for states to make decisions on which performance goals to use, EPA needs to provide in the Final Rule clear mass-based performance goals on a state by state basis that match the rate-based goals listed in the Proposed Rule.

Comment 12: The EPA should allow states to take either a rate- based or mass-based goal.

Response 12: The EPA agrees with commenters and provides states the flexibility to choose a rate-based or mass-based goal for purposes of demon strating compliance with the state plan. As is mentioned in section VII of the final rule pream ble of the CPP and the CO2 Emission Performance Rate and Goal Computation TSD for CPP F inal Rule supporting the final CPP, affected sources and regulating authorities will ha ve the option to use mass-based programs and measures to demonstrate compliance with a rate-base d goal, as well as rate-based programs and measures to meet a mass-based goal

.
The following are summaries of the specific public comments under this comment:

Commenters stated allow states to take either a rat e-based or mass-based approach to achieving state goals.

Commenters supported certain elements of the Propos ed Rule and would like to see the option of Rate-Based or Mass-Based Approach retained in the f inal rule. The commenters asserted that it is appropriate for states to have the option of a r ate-based or a mass-based approach; each state's situation is unique and it is appropriate to allow states to determine the best way to achieve their state goals.

Commenters stated EPA should acknowledge states' au thority to set each utility's CO2 goal based on the average emission rate of the utility's affected units in the state and the state goal,85

giving utilities the option of either a rate-based or mass-based approach. The commenters said under this approach, each state will assign to the individual utility that has (or utilities that have ) affected unit(s) in their state the CO2 emissions r eduction goal established by EPA. The commenters said that goal will be stated as both a rate-based goal and a mass-based goal, and the utility will have the option to choose which approa ch it will use for its system compliance in that state. The commenters said this goal will be impose d as a limit that must be achieved by the utility within the state, and may be accomplished b y averaging the goal across each of the affected EGUs a utility has located in the state (i ts utility portfolio within the state). The commenters said it also avoids an outcome requiring non-emitting utilities in the state to undertake expensive RE or other investments to bene fit emitting utilities at the expense of nonemitting utility rate-payers.

Comment 13: The EPA does not provide the flexibility needed to the states.

Response 13: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated under the Proposed Rule, states m ust select either a rate-based or mass-based emission goal; EPA claims that this mandate provide s flexibility to the states, however this is not the case given that EPA requires that any mass-base d goal must be equivalent to the rates the Agency would prescribe.

Commenters stated EPA is suggesting a basis for con version from emission rate to mass-based standards for state level compliance that, as prese nted, requires assignment of assumed future levels of renewables and energy efficiency (EE) dep loyment. The commenters said renewable energy and EE measures are already proposed under E PA's Best System of Emission Reductions proposed Blocks 3 and 4 for establishing state emis sion rate target stringency and compliance, so
substitution of renewables and customer EE when est ablishing Block 2 contributions to state target stringency negates the compliance flexibilit y that might otherwise be available. The commenters said different CPP-affected utility unit s will experience unique location and business structure impacts from conversion of compl iance targets between rate-based and massbased equivalent standards, depending on factors su ch as the nature and degree of state regulation or existence of merchant power markets f or electricity supply.

Commenters stated the emission rate to mass-based t ranslation proposed by EPA does not provide the level of flexibility that EPA touts or is needed by states, due to an overly restrictive translation that results in a lower cap than the co mparable rate-based runs analyzed by EPA.

Commenters stated the process for the rate-to-mass translation was originally laid out in the Projecting EGU CO2 TSD; this original rate-to-mass translation was confusing and even contradictory. The commenters said much of the conf usion originated from the fact that the BSER rate as determined by EPA is not a rate that c an be applied to fossil units alone, but that86

requires obtaining credits from energy efficiency a nd renewable energy measures; therefore, one could not simply take the BSER rate and multiply it by the amount of existing or forecast generation from affected (existing and under constr uction) fossil sources.

Commenters stated in its subsequent notice of addit ional information regarding translation of emission rate-based CO2 goals to mass-based equival ents, 79 Fed. Reg. 67,406 (Nov. 13, 2014) ("November 13 Notice"), EPA developed two methods f or potential use in making rate-to-mass translations; the first is based on historical data and applies to existing EGUs only; the second is
based on a combination of the first method to calcu late the cap for existing units and a second method that uses a projection of future forecast el ectric load to develop a mass-based equivalent for new sources, as certain states may want to incl ude new sources under the cap in their state plans as well.

Commenters stated in comparing the translated mass- based caps that EPA identified in its document "mass_equivalent_table_-_where_you_live_-_ nov_6_2014.xlsx" to the effective massbased emissions for existing EGU's coming out of th e tradable rate standard runs that were included in the Regulatory Impact Analysis accompan ying the CPP proposed rule, it is clear that the translated caps that EPA has now proposed are l ower than the emissions out of the BSER rate-based modeling runs by a factor of approximate ly 20%.

Commenters stated it is imperative that EPA reconsi der the methodologies outlined in the
November 13 Notice and continue to work with stakeh olders on a reasonable translation methodology; additional consideration is critical g iven the significance to any state that will employ a mass-based compliance approach and also gi ven that the November 13 Notice was published for comment only 10 business days before the close of the comment period.

Commenters welcomed the flexibility the draft guide lines give states to convert rate-based state goals to mass-based state goals. The commenters sai d in this context:

• EPA should recognize that a mass-based approach pro vides a level of environmental certainty that a rate-based standard does not.

• EPA should consider allowing states appropriate fle xibility when converting from rate to mass-based budget that reflects this environmental benefit over a rate-based approach.

• EPA should not discourage states from converting to a mass-based goal by requiring a rate-to-mass conversion that disadvantages states t hat choose to convert to a mass-based goal.

• States choosing a mass-based approach should be req uired to evaluate their emissions budgets at prescribed intervals and adjust, if nece ssary, enabling budgets to be increased or decreased when significant deviations occur from the assumptions used to create the projected budgets.

• States that choose to proceed with a mass-based app roach and make new natural gas plants subject to that mass-based approach should b e allowed to account for those new plants in their rate to mass conversion methodology

.87

• In the final guideline, in addition to the rate-bas ed goal, EPA should provide: "Presumptive" mass-based budgets for each state and then allow states to propose an alternative mass-based budget or to accept either t he required rate-based goal or EPA's presumptive mass-based budget; and A clearer, step- by-step explanation (including a sample calculation) of how a state could come up wi th a mass-based budget.

Comment 14: The EPA should provide states the flexibility to a pply equivalent methods of rateto-mass conversions so long as the annual mass-base d compliance "true-up" continues to demonstrate compliance with the state's rate-based target each year

Response 14: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters noted that EPA released a technical supp ort document on November 7, 2014, less than one month before the close of the public comme nt period for the proposed guidelines, through which it solicits comment on two approaches that states could use to convert rate-based targets to equivalent mass-based goals. The comment ers noted that the document included massbased tonnage targets for each of the states under each approach. The commenters reviewed this additional information and offered the following ob servations:

According to the commenters, EPA states in the docu ment that the mass-based emission targets calculated under each approach should not be interp reted as emission caps

. The commenters inquired, if this is the case, does that imply emis sions in the state could exceed, for example, the mass-based target calculated for 2030 in subsequent years as long as the 2030 rate-based target is met, or would a state be required to do such a conv ersion annually, or would the states actually be tied to the mass-based targets every year going forward (that is, the projected mass-based tonnage target based on the 2030 emission rate targ et and included in state plans submitted in the 2016-2018 time frame would in effect cap emissions beginning in 2030 and each year thereafter). The commenters requested EPA provide c lear guidance on this matter

.

According to the commenters, it appears that the "f uture growth" approach (the second approach) would capture new generation based on 2013 EIA proj ections. Under this approach, the commenters noted, emissions from new units, which a re already covered under section 111(b), would need to be accounted for in demonstrating com pliance with the mass-based target. The commenters argued that this approach will be proble matic and unworkable in states, such as Virginia, where the rate-based target is more strin gent than the NSPS established for new
sources. The commenters noted there would be no inc entive for a state like Virginia to set a mass-based equivalent goal that factored in future, new generation unless the Virginia rate-based target is modified to a level that is no more strin gent than the standard for new sources under section 111(b). For this reason and reasons previou sly noted in these comments, the commenters requested that EPA acknowledge the disadvantage the proposed methods the Agency proposes to88

use to set emission targets creates in states with emission rate targets below the standard set for new sources in 111(b) and to adjust state targets a ccordingly.

According to the commenters, the suggested "future generation" approach also appears to assume that future renewable generation and energy efficie ncy measures will displace a certain amount of existing generation. The commenters indicated th at this approach, in effect, appears to directly apply the methodology for using Building Blocks 3 a nd 4 to displace existing generation that was put forth in the recently-issued NODA. However, it was not clear to the commenters, from either the explanation or specific examples provide d in the TSD, how much of existing generation new renewable and energy efficiency meas ures are assumed to displace. The
commenters noted that some renewable resources are not dispatchable due to the intermittent nature of these resources and must be backed up wit h dispatchable capacity from fossil fuel-fired sources. The commenters further noted that, althoug h dispatchable, biomass (to the extent it
would still be considered a renewable resource unde r EPA guidelines) is a limited resource. The commenters noted that energy efficiency measures ha ve similar variability. According to the commenters, while they may be based on the installa tion of increasingly more efficient equipment, the use of such equipment by households, businesses and industries will be variable and driven by factors other than energy use alone. The commenters therefore requested EPA to abandon this approach.

The commenters stated that, since EPA's intent with establishing rate-based targets is to presumably factor in future expected growth, the co mmenters did not believe that mass-based targets calculated off of a growth projection to 20 30 (or 2025) under state plans developed in the
2016/2017 time frame should be treated as hard emis sion caps. The commenters requested that EPA provide the states flexibility to apply equival ent methods of rate-to-mass conversions so long as the annual mass-based compliance "true-up" continues to demonstrate compliance with the state's rate-based target each year

.

Comment 15: Regional capacity; mass rates for regions

Response 15: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated PJM's analysis of its original in terpretation of the rule found substantially a higher mass-based regional cap than that reflected in EPA's TSD. The commenters asked if EPA has reviewed that analysis, and can the Agency expl ain the difference in the approach.

Commenters stated under a regional implementation p lan, each state's rate-based carbon intensity goal will be converted to a mass-based goal based o n the state's projected future generation; the resulting mass-based emission caps for each state w ill be aggregated into a total emission cap for the region that will be auctioned to affected compl iance entities and third-parties. The commenters said under this approach, it is critical that a) each state's rate-based goal is a value89

that accurately represents the potential of that st ate to reduce carbon emissions, and b) each state's rate-to-mass conversion is based on a preci se projection of future generation within that

state.

Commenters stated the EPA issued a Technical Suppor t Document (TSD) to address the
Translation of the Clean Power Plan Emission Rate-B ased CO2 Goals to Mass-Based Equivalents in November 2014; this TSD provided sta tes with an example methodology for rateto-mass conversions and the resulting state-specifi c mass-based CO2 goals for 2030 using this methodology. The commenters said it is understood t hat a rate-based goal allows for future growth within a state or region, without additional upfront work to establish the projections of future growth. The commenters said it can be challe nging, however, to come up with a strategy to demonstrate compliance with rate-based goals in future years; conversely, mass-based goals are easy to comply with, but present challenges dur ing the planning phases in order to establish a goal that is first equivalent to the rate-based goa l, but that also accounts for future demand
increases.

Commenters agreed with the EPA's most basic explana tion of the rate-to-mass conversion, which indicates that a state's 2030 CO2 mass-based goal w ill be the result of the state's 2030 rate-based CO2 goal multiplied by the state's generation. The commenters said EPA's method for computing the state's generation level is based on historical (i.e., 2012) generation with no growth, assuming that future demand in years up to and beyond 2030 will be the same as the demand in 2012. The commenters asserted that this g eneration level should reflect a state's forward-projected generation up to and beyond 2030, to account for load growth during that period.

Commenters added the EPA manipulates the state's ge neration level by applying adjustments based on the CPP building blocks; the EPA is select ive in its inclusion of building blocks for the state's generation level adjustments, applying only a subset of building blocks to the generation level and doing so in a manner that is inconsistent with the core methodology used in the original rate-based goal-setting formula. The commenters sai d for example, adjustments based on the assumption that new incremental renewable resources and energy efficiency goals will be met are included, and they displace fossil generation a s opposed to being included in addition to fossil generation as they are in the rate-based goa l-setting formula. In general, the commenters considered the EPA's aggressive assumptions of gene ration levels to account for the building blocks to be incompatible with the rate-to-mass con version process, bearing in mind that this generation level will be multiplied by a CO2 rate t hat is already reduced to reflect the application of all of the building blocks.

Commenters anticipated that RGGI will opt to use a more sophisticated and accurate model to support the translation of rate- to mass-based goal s within the region; however, in lieu of a regional approach, it is evident that the mass-base d translation provided by the EPA is not a realistic or workable approach for use in New Engla nd or New Hampshire.

Commenters stated EPA should specifically clarify t hat, for purposes of the rate-to-mass translation, underlying RE and EE state policies sh ould not be included in the baseline given that any impact on regional dispatch attributable to the se complementary policies is not within the appropriate scope of the rate-to-mass translation.90

Comment 16: The Proposed Rule does not provide either clarity o r incentives for states to convert to mass-based standards or to engage in reg ional compliance

Response 16: The EPA has converted the rate-based goals to mass -based goals. See sections VII and VIII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the final CPP for the final mass-based equivalents and more information about compliance.

The following are summaries of the specific public comments under this comment:

Commenters stated conversion to a mass-based standa rd is an essential step toward regional planning and compliance; if states want to particip ate in a regional approach, or continue a regional approach that is already in place (such as the nine-state Regional Greenhouse Gas Initiative), they must be able to convert to a mass -based standard; to attempt regional compliance through an averaging of individual state rates is c omplex and likely infeasible. The commenters said the Proposed Rule is not clear on what mass-ba sed conversion protocol would be acceptable to EPA, and, importantly, how it can provide for lo ad growth. The commenters said when a ratebased standard is used, no explicit provision for l oad growth is needed; it can be accommodated within the rate-based formula; but load growth must be explicitly accounted for as part of a mass-based conversion formula, or else the mass-bas ed approach would be materially less attractive to pursue; however, the Proposed Rule is not clear on what provisions for load growth in a mass-based conversion would be acceptable to E PA, and it appears that the simple approach to a mass-based approach of multiplying a state's i nterim or final standard rate by the MWhs from existing generating units in the 2012 base yea r would make no provision at all for load growth. The commenters said this ambiguity disadvan tages the mass-based conversion option.

Commenters added without a clear provision for load -growth, the use of the mass-based conversion option becomes very problematic, and thi s will in turn discourage regional planning; EPA must remove this disincentive to regi onal compliance. The commenters said regional compliance offers many advantages and, as long as it is a voluntary option, it should be encouraged; in fact if the disincentives to regiona l compliance are not removed in the final rule, the results could be highly detrimental to the cont inued operation of organized electricity markets, which have been a proven source of great e fficiency and benefit to customers; that would be a major and unnecessary step backwards. Th e commenters said without mass-based regional compliance, generators that currently part icipate in regional (multi-state) economic dispatch will have to change their method of partic ipation, reducing dispatch efficiencies and possibly constraining the RTO's ability to redispat ch to maintain reliability; in contrast, under a regional mass-based approach, an RTO can factor env ironmental adders into the economic dispatch, ensuring that the most cost-effective way of meeting the mass-based standard is achieved while maintaining reliability. The comment ers said EPA's supplemental technical support document on rate-to-mass conversion, releas ed November 6, 2014, is not particularly helpful; it provides two examples of an approach to rate-based to mass-based conversion, both of which are complex and difficult to understand; more importantly, the proposed "opt-in" conversion approach appears to require greater emis sions reductions in some states than EPA's own IPM modeling indicates that the rate-based stan dard would require. The commenters said91

this inconsistency will likely pose a barrier to re gional compliance; for example, EPA's data suggests that the rate-based approach would be less stringent than the mass-based standard for seven of the fifteen MISO states, and the mass-base d approach would be less stringent for the remaining eight states. The commenters said gaining support for a regional compliance approach will be even more difficult with such conflicting i ncentives; such a disincentive for mass-based conversion, and hence for regional compliance, repr esents a huge flaw that must be remedied. The commenters said there is no basis for requiring more stringent reductions under a massbased approach than under a rate-based standard in any state; the mass-based approach should be transparent and of comparable stringency. The comme nters said if the mass-based conversion is disadvantaged, the result is likely to be not just lack of regional compliance, but significant disruptions in regional power markets.

Commenters supported EPA's commitment to encouragin g multi-state GHG reduction programs, such as RGGI, the Rule should build upon and reflec t the successes of RGGI and other similar programs; in particular, the commenters urged EPA t o adopt a formula to translate its rate-based goal to a mass-based goal to foster the creation of more regional carbon trading programs or other multi-state cooperative efforts.

Comment 17: The EPA should provide guidance to the regional th e EPA offices.

Response 17: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents. The EPA will provide guidance to the r egional the EPA offices as necessary.

The following are summaries of the specific public comments under this comment:

Commenters requested that guidance be provided to t he regional EPA offices to ensure that approved mass based targets are adequately protecti ve, equitable, reflect the realities of an integrated electric power grid.

Comment 18: The EPA should develop a method of conversion that is more comparable to the method for computing the existing rate-based goals.

Response 18: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters recommended that EPA develop a method of conversion that is more comparable to the method for computing the existing rate-based go als. The commenters stated Section III of EPA's Emission Performance TSD appears to be propos ing a method that is based on different92

assumptions than the rate-based goal and based on m ore extensive analysis than the rate-based goal; the degree of flexibility allowed in the meth od as proposed seems to allow for potential wide variability in the resulting mass-based goal d etermination, whereas EPD believes that determination of a compliance goal should be repeat able and uniform. The Goal Computation TSD does not "consider treatment of eligible 'on-th e-books' state requirements, programs and measures included in the state plan" as is discusse d in the Emissions Performance TSD for determining a mass-based goal; therefore, the Emiss ions Performance TSD seems to contemplate more extensive analysis for determining a mass-base d goal than was performed for the ratebased goal. The commenters said the inclusion of "o n-the-books state requirements, programs and measures" in formulating the "Reference Case Sc enario" and the "Goal Policy Scenario" of Section III.B of the Emission Performance TSD appea rs to make the underlying assumptions for the mass-based goal more restrictive on emissions t han the assumptions for the rate-based goal. The commenters added the contemplation of "programs and measures included in the state plan" to calculate the mass-based goal implies that the s tate will already have an approved state plan prior to calculating the mass-based goal; this seem s to confuse the establishment of a mass-based goal with the emissions performance projection (pro posed rule section 60.5740(4)) that is required to demonstrate that a state plan will meet its goal; obviously, states will need to have an established goal before they can put together the s tate plan programs and measures that will project compliance with the goal.

Commenters added the Translation TSD produces a gen eration level that is not equivalent to the generation used to set the rate-based goal or the g eneration projected using AEO's demand forecast, resulting in a significant under-calculat ion of Georgia's mass-based goal. The commenters stated the goal translation methodology should be corrected to produce a massbased goal that is equivalent to a state's rate-bas ed goal; to accomplish this equivalency, the two computations must use the same generation level for the final goal year.

Commenters added a mass-based goal appears to be ab le to simplify much of the compliance work associated with this rule - particularly if st ates were to choose to implement trading programs (single and/or multi state) for compliance ; however, we are concerned that the method identified by EPA in its November 13 notice seems t o increase the stringency of Minnesota's final target from the rate-based goal identified in the original proposal. The commenters stated they believed that the rate-based target would requ ire an approximately 40% reduction in CO2 emissions, while the mass-based method identified b y EPA would result in a 50% or greater reduction. The commenters said if approvability of mass-based targets in state plans is dependent upon some level of adherence to EPA's calculation m ethod, we believe that the mass-based approach could simply cease to be a viable option f or many states - thereby eliminating much of the flexibility upon which success of EPA's Clean P ower Plan is based. The commenters stated EPA should either be very flexible in considering s tate methodologies for rate-to-mass target calculations in its plan review process, or should simplify its methodology and ensure that it results in equivalent stringency between the two ap proaches.

Comment 19: The methods used in TSD are inconsistent with the rate-based calculation used in the proposed rule.93

Response 19: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters added many reviewers of the proposed rul e have asked how states could convert an
emissions rate to a mass based rate as an alternati ve goal; although the EPA recently released a notice of data availability (NODA) entitled Additio nal Information Regarding The Translation of Emissions Rate Based CO2 Goals To Mass Based Equiva lents on November 13, 2014, the commenters have not had adequate time to determine the usefulness of this information prior to the comment deadline. From the commenters' prelimin ary review, the proposed mass-based targets for South Carolina (two were provided) appe ar to be inconsistent with the very calculation that was used by EPA in setting the rat e-base goal. The commenters said the EPA should continue evaluating this approach since a ma ss based alternative compliance scenario may be very useful to states and possible regional compacts.

Commenters added the approaches outlined in the Rat e-to-Mass TSD are inconsistent with the rate-based goal computation approach in the Propose d Rule. The commenters said under EPA's initial proposal, the addition of incremental RE, E E, and under-construction nuclear generation would not be assumed to displace existing fossil ge neration. The commenters said under the approaches discussed in the Rate-to-Mass TSD, by co ntrast, the addition of this incremental generation is assumed to reduce generation from exi sting fossil EGUs. The commenters said because these two methods are inconsistent, it woul d be arbitrary and capricious for EPA to convert state goals from rates to masses using the methodology in the Rate-to-Mass TSD.

Comment 20: The proposed rate-to-mass conversion formula does not accurately translate a state's rate-based emissions goal to an equally-str ingent mass-based emissions goal; Maintain Equivalent Stringency and Account for Uncertainty w hen converting from a Rate-Based to a
Mass-Based Goal

Response 20: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated to set a mass-based emissions goa l, a state's projection of generation by
affected EGUs under a reference case scenario would be multiplied by the state's rate-based goal for the applicable compliance period; this method d oes not accurately translate the rate-based goal to an equally-stringent mass-based goal. Comme nters added for example a state's existing nuclear generation will already be fully accounted for in the reference case scenario. Commenters stated the nuclear plants will not be ab le to increase their output by 5.8 percent for compliance purposes, as would be presumed by the pr oposed formula. The commenters said94

similarly, since existing renewables will be includ ed in the reference case scenario, they would not be available to offset generation by affected E GUs for compliance purposes, as would also be presumed by the proposed calculation.

Commenters added EPA's Rate-to-Mass TSD proposes an alternative formula for converting rate-based goals to mass-based goals. The commenter s said in the formula provided in the TSD, a state's mass-based goal would be determined by mu ltiplying its rate-based goal by a quantity referred to as the "Mass Equivalent Generation Leve l." The commenters said the Mass Equivalent Generation Level, as defined in the TSD, includes at-risk nuclear generation and generation by existing renewables, as well as proje cted generation by affected EGUs. The commenters said the use of this formula appears to accurately translate a rate-based goal to an equally-stringent mass-based goal; however, since t he text of the proposed regulation itself specifies the use of the incorrect formula, the pro posed regulation must be revised to incorporate the corrected conversion formula. The commenters ap preciated the guidance provided in the Rate-to-Mass TSD, however is concerned that EPA is using this TSD to correct an apparent error in the original proposal without a clear indication to commenters and stakeholders that there was an error or that the TSD is substantively revising this aspect of the proposal.

Commenters stated that when converting a rate-based goal into a mass-based goal, the goal
should remain as achievable in its mass-based form as it was in its rate-based form. The commenters said from the analyses they have seen, t here are a wide variety of approaches to converting to a mass-based goal, which yield a wide variety of results. The commenters said specifically, the Proposed Rule should create an eq ual degree of stringency between rate- and mass-based approaches when accounting for Building Blocks 3 and 4.

Commenters stated the rate-to-mass conversion metho dology proposed by the EPA results in a mass-based target for New Hampshire that is more st ringent than the rate-based goal used to
derive it.

Commenters stated the EPA issued a Technical Suppor t Document (TSD) to address the
Translation of the Clean Power Plan Emission Rate-B ased CO2 Goals to Mass-Based Equivalents in November 2014; this TSD provided sta tes with an example methodology for rateto-mass conversions and the resulting state-specifi c mass-based CO2 goals for 2030 using this methodology. The commenters said it is understood t hat a rate-based goal allows for future growth within a state or region, without additional upfront work to establish the projections of future growth; it can be challenging, however, to c ome up with a strategy to demonstrate compliance with rate-based goals in future years. T he commenters said conversely, mass-based goals are easy to comply with, but present challeng es during the planning phases in order to establish a goal that is first equivalent to the ra te-based goal, but that also accounts for future
demand increases. Based on the commenters' review o f the methodology presented in the rate-tomass conversion TSD, the EPA established a mass-bas ed-goal for New Hampshire that was neither equivalent to the rate-based goal nor adjus ted to account for future demand increases.

Commenters supported that EPA's final guidelines ma intain either the emissions rate or massbased compliance options; however, additional clari fication is necessary beyond that provided in the TSD to better define the mass-based approach. T he commenters said of primary concern, the mass-based approach should not be more stringent th an an emission rate approach. The95

commenters said when comparing actual CO2 mass emis sions to the presumptive mass caps for existing units as listed in the TSD, this results i n a larger percentage reduction at the state-level
than what would be needed on an emissions rate basi s; in addition, the mass cap with new units is also more stringent for Iowa compared to the emi ssion rate final goal. The commenters provided Table 9 (titled: “EPA Proposed Clean Power Plan Emission Rate Goals”) and Table 10 (titled: “TSD Calculated Mass Cap Final Goals”).

Commenters supported EPA's decision to allow states to convert their rate-based goals into mass-based goals, but disagrees with the illustrati ve examples that EPA provided in its recently released guidance. So long as the option remains av ailable to states for use only in their sole discretion, the commenters supported EPA's decision to allow the conversion of its proposed rate-based goals into mass-based goals using an app ropriate conversion methodology. The commenters also generally supported EPA's decision to provide non-binding guidance to assist states in determining an appropriate and approvable means of converting the rate-based goals into mass-based goals' however, the commenters did not support the approach illustrated in EPA's conversion guidance because it uses a differe nt generation level than EPA assumed in its original rate-based proposal, which results in far more stringent goals that are not equivalent to EPA's original proposal. The commenters said EPA's original proposal relied on an equation that determined generation based on the sum of 2012 gene ration and all incremental renewable generation, nuclear generation, and energy efficien cy improvements required under the Proposal; in contrast, the primary option in EPA's guidance u tilizes 2012 generation alone - without any incremental changes - to calculate a mass-based goa l. The commenters said although EPA's guidance contains several complicated formulae, all of the variables in those formulae cancel each other out, leaving nothing but 2012 generation in the calculation (EPA allows states with
under construction nuclear and NGCC units to count that additional generation, but Louisiana is not one of those states). The commenters said by us ing a 2012 generation value that does not account for any incremental changes, the resulting mass-based goal is far lower than it should be to approximate EPA's originally proposed rate-based goals. The commenters did not support this illustration in EPA's guidance because it would ess entially prohibit any load growth and require all new incremental changes in the generation mix t o displace fossil generation, and is therefore inconsistent with the Proposal. The commenters said EPA's guidance does contain a second option that allows for the use of a more appropriat e generation level in determining mass-based goals by including a growth factor; however, that a pproach still is not equivalent to the generation level utilized in EPA's original proposa l, and therefore does not result in "equivalent" goals, which EPA claims are necessary for states to employ the mass-based option. The commenters added, EPA's guidance seems to suggest t hat a growth factor would only be appropriate if states require newly constructed uni ts to fall under the mass-based goal as well, something that the Clean Air Act clearly forbids, a s noted above; therefore, even the more reasonable second option of EPA's guidance fails to provide an appropriate illustration of how states can convert their proposed rate-based goals into mass-based goals. The commenters said EPA should withdraw its guidance on develop new gui dance that results in mass-based goals that are equivalent to EPA's proposed rate-based goals. The commenters asked EPA to confirm that the illustrations provided in its recently released rate-to-mass conversion guidance are just that - illustrations only - and do not represent the only means by which a state may take advantage of the flexibility provided by a mass-based approach.96

Commenters stated carbon trading systems like RGGI could greatly benefit states in their compliance with the CPP and allow for reinvestment in a cleaner, more efficient electricity system. The commenters said by establishing a stand ardized rate-to-mass conversion methodology, EPA will facilitate the formation of c ompliance systems like RGGI throughout the country by providing states with certainty and clar ity they need to create state-specific and regional caps on CO2 emissions. The commenters were encouraged by EPA's Notice of Data Availability ("NODA") released on November 6, 2014, which proposed guidance to states on rate-to-mass target conversion and urges EPA to inc lude these or similar mass-based targets in its
final rule.

Comment 21: November 6, 2014 Technical Support Document (TSD) titled "Translation of the
Clean Power Plan Emission Rate-Based CO2 Goals to M ass-Based Equivalents";
Comments/Concerns

Response 21: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated the TSD's first method, based on 2012 data, intended to produce a massbased equivalent metric that applies to existing af fected EGU's only. The commenters said for Colorado, this method produced a final mass equival ent rate of 25,335 metric tons. The commenters asserted, after evaluation, that in perf orming this calculation the EPA mistakenly multiplied the 2012 Adjusted Affected Fossil Genera tion total by the 2020-2029 lb/MWh goals to determine the mass rates for these compliance pe riods, rather than by the Blocks 1 and 2 adjusted lb/MWh rate for 2012.

Commenters stated the TSD's second method is based on a combination of the 2012 data and projections of future electric demand. The commente rs have a number of concerns with this method: First, it utilizes future electric demand a ssumptions that are different from those used in the lb/MWh goal determination; Second, the electric demand growth rate assumptions are just that - assumptions - from which absolute goals are produced; and, third, the administration of this second method will be needlessly controversial and complex.

Commenters added it was beneficial for the EPA to r elease the technical support document that translates rate-based goal to a mass-based equivale nt; the calculation is more straightforward
when the translation method based on the rate- base d targets and historic data is used rather than requiring multiple model runs to derive a mass-base d goal. The commenters were concerned that some of the numbers appear to be more stringent and encourage the Agency to ensure the final targets are reasonable. The commenters said mass-ba sed regulatory approaches have been shown to be highly effective in addressing conventional a ir pollutants emissions as well as under RGGI for carbon emissions, and we think such approaches should be encouraged. The commenters were in support of EPA offering mass-based equivale nts that allow for the inclusion of both new97

and existing sources; like the RGGI program, a more rational and cost-effective market response can result if both new and existing sources are sub ject to the same regulatory program and market signals.

Commenters added there were errors in U.S. EPA's No v. 6, 2014 addendum providing new guidance for converting target emissions rates to m ass emissions targets; specifically, in converting pounds to tons, US EPA relies upon a fig ure of 2204.62, whereas the original June 2 Notice of Proposed Rulemaking relied upon a figure of 2,000. The commenters said consequently, there is a large rounding differentia l by using a weighted average emission rate to re-dispatch NGCC plants in building block 2. The co mmenters said by applying a 70 percent capacity factor to each NGCC unit individually (as opposed to all generation units at once), there
is a difference of over 5 million tons of CO2 emiss ions. The commenters said the mass-based calculation also omits EE within the spreadsheet; a s a result of this omission, the formula US EPA relies upon adds and subtracts the same value f or EE in the same equation, i.e. Ohio Final Mass Equivalent Generation Level= Historical Effect ed Fossil Generation (plus) Incremental RE (minus) Under Construction Nuclear (minus) Incremen tal EE (plus) Incremental EE.

Commenters appreciated EPA providing an example of rate to mass conversion; it is useful to have an illustrative calculation, and we appreciate that EPA has noted this is not the only way states could create an approvable mass budget. The commenters supported allowing states the option to use a simple mass-based approach to devel oping their emission control plans. The commenters said in some circumstances, a mass-based approach may allow states to avoid some of the implementation issues described elsewhere in these comments, including our concerns related to EPA's role in state energy planning and EM&V under an energy efficiency program; however, it is challenging to digest a com plex TSD released only 15 business days
before comments are due. The commenters said EPA sh ould provide more time to review and comment on the proposed TSD. The commenters said as a preliminary matter, any mass conversion approach should provide full credit to t he same emission reduction initiatives that would help a state meet the rate-based target. The commenters supported EPA's approach of providing a pathway rate to mass conversion, while also providing states the ability to suggest
other reasonable methods to convert their rate-base d targets to mass targets. The commenters said the states may be able to develop and propose other reasonable, and possibly improved, methods to translate rate targets to mass targets; this option may alleviate preliminary concerns we have with the proposed translation method, such as the assumption that energy efficiency and renewables displace only existing generation, and t he assumption that new NGCCs ought to receive tons under a mass cap based on their state' s allowed emissions rate, regardless of whether
that rate is 500 lb/MWH or 1500 lb/MWH. The comment ers said as EPA correctly notes in the Projecting EGU CO2 Emission Performance in State Pl ans TSD, projecting generation and emissions over time requires reliance on often unce rtain projections of future energy and economic conditions, including energy consumption, fuel prices and economic growth. The commenters said in the mass conversion, EPA should provide states periodic opportunities to revise their generation forecasts and mass budgets in light of changed circumstances; furthermore, the method should allow states to empl oy the degree of modeling sophistication they choose based on local conditions and state res ources.

Commenters added states, throughout the comment per iod, have asked for clarity around the conversion of the rate-based state goal to a mass-b ased goal; on November 13th only 9 business98

days prior to the deadline for submitting comments on the proposed guidelines, EPA issued the long-requested additional information and required that any comments on the additional information be submitted on December 1, 2014. The c ommenters stated have not had the opportunity to evaluate the additional information such that it could provide sufficient comment; further, at this point, it is not clear as to how a state would set enforceable CO2 emission limits at affected EGU s to accurately reflect measures in bu ilding blocks 3 and 4 using a rate-based standard and EPA's formula application of BSER to s et state goals does not provide any guidance. The commenters added EPA indicates, throu ghout the state plan considerations section of the proposed guidelines, that a state could, the oretically, set the emission limits at the affected EGUs, but then "credit back" the value of emission reductions provided by other implementing measures in the state plan. While the commenters un derstood how this may be possible to do in a state plan for approvability, it is still unclear a s to what a state would be required to do, in the compliance period, if the other implementing measur es were delivering what was projected in the state plan, but the affected EGUs were still ex ceeding the emission limits. The commenters asserted this may very likely occur and recommends that EPA provide more detail and guidance as to what evaluations the state would be required to do to diagnose the problem, what corrective measures may be required and what will be expected of a state and/or utility and/or other entity should the state plan's "other implementing measure s" deliver as projected in the plan, but the
affected units emission limits still be exceeded. T he commenters also requested additional clarity with regard to what the "state commitment" option m ight look like in a state plan and what it would mean in terms of liability for the state. The commenters said EPA indicates that the state commitment may open states up to citizen suits, but the commenters asked what about federal enforcement from EPA; the commenters asked would EP A exercise this option.

Commenters stated the November 6, 2014 supplement i ncluded a Technical Support Document to explain how EPA devised the mass-based goals for each state; EPA introduces a complex calculation that is difficult to interpret. The com menters said the end result is a more stringent mass-based goal than what would be logically surmis ed from the calculation that was used to determine the rate-based goal. The commenters said in reaching Step 5 of EPA's calculation for South Carolina after applying the four Building Blo cks the equation for the final state goal is as follows: 30,352,595 tons CO2/78,661,778 MWh = 772 l b CO2/MWh South Carolina rate-based goal. The commenters said based on EPA's own formul a and calculation above, one would expect the mass rate of CO2 for South Carolina to b e 30,352,595 tons rather than the 17,433,977 tons (15,816,000 metric tons) to 24,266,032 tons (2 2,014,000 metric tons) listed in EPA's November 6, 2014 document.

Commenters added the two optional approaches for co nverting rate-based goals to mass-based goals that EPA outlines in the Rate-to-Mass TSD are flawed for at least three reasons. The commenters said first and most importantly, both ap proaches reflect unreasonable assumptions about the effect that incremental RE, EE, and nucle ar generation will have on affected EGUs' generation and emissions. The commenters said both of the Rate-to-Mass TSD approaches would adjust 2012 affected unit generation below ba seline by assuming that the addition of incremental sources of zero-carbon generation will reduce the utilization of affected fossil EGUs.
The commenters said it is incorrect to assume that the addition of an MWh of incremental RE, EE, or nuclear generation will reduce the output of existing fossil units by the same amount. The commenters said numerous factors - including future demand growth, the attributes of the99

electric system, and the interconnected nature of t he electric grid - affect the extent to which addition of new generation can displace existing fo ssil generation.

First Approach

Commenters added the first approach does not assume any growth in generation occurs at existing units, which is an important omission for states like California, whose existing low average capacity factor NGCC units may be deployed more in the future. The commenters said by failing to reflect potential growth in generatio n at existing NGCC units, this approach establishes mass goals that may not be equivalently stringent with rate goals. The commenters recommended that the EPA modify the firs t approach to assign some of the potential increased generation associated with expected load growth to existing units for states such as California with relatively low NGCC capacity factor s.

Commenters added the first approach does not factor in growth in the conversion process. The
commenters asserted that EPA should allow states to incorporate state-specific assumptions about future policy scenarios that would increase d emand in the calculation of their mass-based goals.

Commenters stated Option 1 of EPA's recently propos ed guidance appears to provide a complicated formula for converting a "rate-based" g oal into a "mass-based" goal; specifically, the guidance recommends that states begin with 2012 fossil generation, subtract incremental renewable energy and energy efficiency expected und er EPA's Clean Power Plan, and then add back all renewable energy and energy efficiency; ho wever, many of the variables included in
EPA's formula cancel each other out. The commenters said for instance, while one step subtracts incremental renewable energy and energy efficiency from 2012 fossil generation, that incremental generation is simply added right back i n the next step, as part of adding back all renewable energy and energy efficiency (including i ncremental); in addition, EPA's starting point for the analysis -2012 fossil generation- is little more than total generation minus existing renewable generation, but that existing renewable g eneration is also added right back in the later step that adds back all renewable and energy effici ency generation. The commenters said Table 1 of EPA's guidance confirms that EPA's analysis ends where it begins; in column 1, EPA identifies 2012 fossil generation, but that value i s nothing more than 2012 total generation minus 2012 renewable generation, which is found in column 3; thus, adding columns 1 and 3 results in total 2012 generation, but that also results in the same value found in column 5 that EPA refers to as "Final Mass Equivalent Generation Level" beca use the values in columns 2 and 4 - incremental renewable generation and energy efficie ncy- are subtracted in one step and added back in another, cancelling each other out.

Commenters stated because EPA's "Mass Equivalent Ge neration" is nothing more than 2012 total generation, the formula that EPA offers in it s guidance can be mathematically reduced to the following simple calculation for converting EPA 's proposed 2030 goal into a mass-based 2030 goal using option 1; 2012 total generation x 2 030 "rate-based" goal = 2030 mass-based goal. The commenters said in doing so, EPA's option 1 illustration fails to allow for any load growth -essentially assuming that 2030 generation w ill be equal to 2012 generation; not only is that assumption unrealistic, the practical effect o f that assumption is to force incremental renewable energy and energy efficiency improvements to displace fossil fuel-fired generation,100

which is inconsistent with the manner in which EPA developed the rate-based goals in its initial June 2014 proposal. The commenters said in its orig inal proposal, EPA did not assume that incremental renewable and energy efficiency increas es (building blocks 3 and 4) will displace fossil generation, but instead simply added that ge neration to the denominator of its goal calculation; but EPA's rate-to-mass guidance would require that incremental generation to displace fossil generation, and thus result in far more stringent goals than originally proposed. The commenters said as such, option 1 of EPA's rate -to-mass guidance does not result in an equivalent mass-based goal and is therefore inconsi stent with EPA's own requirement that massbased conversions are only authorized "as long as t he translated goal achieves the equivalent in stringency."

Second Approach

Commenters added the EPA's second proposed approach includes a projection of future generation based on regional annual average growth rates from the EIA's 2013 Annual Energy Outlook (AEO). The commenters said while this appro ach better captures some of the key exogenous factors, it does not address potential ch anges in the level of imports. The commenters suggested that the EPA explicitly addres s each of the key exogenous factors that will influence the mass goals, including economic g rowth, transportation electrification, and level of electricity imports and exports. The comme nters said each of these factors will have a meaningful influence on expected mass emissions and so should be incorporated into the analysis used to convert from a rate goal to a mass goal in order to maintain equivalent stringency. The commenters said for example, in Cal ifornia, and especially in the South Coast Air Basin, aggressive implementation of transportat ion electrification is a major strategy to meet federal criteria pollutant standards and Zero Emiss ion Vehicle goals; such expected electrification should be incorporated into the ana lysis used to convert from a rate- to a massbased goal.

Other

Commenters added the second approach factors in gro wth and includes existing affected and new sources. The commenters said the proposed secon d approach includes growth numbers per Energy Information Administration's Annual Energy O utlook 2013; however, the document does not incorporate California's transportation electri fication goals. The commenters said in the State of California, aggressive implementation of transpo rtation electrification is a major driver to meet federal criteria pollutant standards and meet the State's emission goals for CO2 and other
GHGs. The commenters asserted that EPA needs to all ow for adjustments be made to the massbased goal for any state to account for such major increases in demand growth - particularly
when the increased electric demand will result in a n overall net reduction in GHG emissions within the state. The commenters urged EPA to expli citly address efforts such as California's to reduce CO2 emissions (with co-benefits of criteria pollutant emissions reductions) through transportation electrification in its approval of s tate emissions projections.

Commenters stated EPA offers as a second option an alternative approach to converting ratebased goals to mass-based goals that would include a growth factor in the calculation, referred to as "incremental demand for new generation." The com menters said the growth factor provided for New Mexico of 1.31 percent annually appears app ropriate in light of recent growth estimates101

developed by the NMPRC; however, EPA's guidance sug gests that states wishing to include a growth factor in their mass-based goal conversions would also include any newly constructed units in determining compliance with the mass based goal. The commenters said EPA describes its option 2 illustration as appropriate for use "i n the event that an implementing authority may want to include new sources of generation units com pliance approach." While the commenters supported the use of a reasonable growth factor in converting a rate-based goal into an equivalent mass-based goal, EPA's suggestion that states may u tilize a growth factor "in the event" they choose to regulate new sources under Section 111(d) could be misread as a requirement to regulate new sources under any mass-based goal that accounts for growth; however, any such requirement would exceed EPA's authority under Sect ion 111(d). The commenters said Section 111(a) defines "new sources" and "existing sources" to be mutually exclusive, and Section 111(b) only applies to new sources, while Section 1 11(d) only applies to existing sources; as such, EPA cannot require an overlap between those p rograms that would regulate the same unit under both provisions at the same time.

EPA should provide more time for review and comment on 11/6/14 TSD.

Commenters stated the EPA provided additional infor mation on November 6, 2014 to give more insight and guidance on the Translation of the Emis sion Rate-based CO2 Goal to the Mass-based equivalents. The commenters said Arkansas and many other states had been requesting this information for months; the late addition of this i nformation left the states without sufficient time to fully evaluate this translation and try to deter mine which approach would be best for the state.
The commenters said this information and translatio n will impact our review of the rule and how it is implemented. The commenters requested additio nal time to review and comment on the translation and also for flexibility from EPA in co nverting the rate-based to mass-based goals.

Commenters recommended the EPA use its own "Goal Co mputation Data File Appendix 1 and 2" to calculate state by state mass emission caps. The commenters said the EPA released the carbon dioxide caps, in metric tons, for 2030, Nov. 6, and requested comments on the calculation methodology. The commenters said the EPA "translati on for existing affected and new sources" caps average 19% lower than the caps calculated fro m the detailed state data file, but range up to 35% lower. The commenters said just the total metri c ton caps were released with the comment they were calculated by multiplying emission rates by generation rates in megawatt-hours for
each state. The commenters said emission rates and generation rates were released in June in a technical document titled "Goal Computation Data Fi le Appendix 1 and 2"; it is a spreadsheet
with data and formulas for each state. The commente rs noted that the total carbon emission goal from existing power plants in the EPA proposed Clea n Power Plan, State Option 1 for 2030, in Table 10, page 548, is 1,701 million metric tons. T he commenters said caps calculated from the data file, which leaves out small exempt power plan ts, totaled 1,653 million metric tons, and is consistent with Table 10; however, the EPA translat ion totaled only 1,345 million metric tons.

Comment 22: Interpretations of rate to mass goal conversion.

Response 22: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal102

Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated the language on constructing mass -based greenhouse gas (GHG) emissions reduction targets is ambiguous.

Commenters added the proposed rule and supporting d ocuments contain language that leave open a variety of possible interpretations on how t o construct mass-based targets from the established rate-based targets. The commenters stat ed EPRI examined three possible interpretations resulting in three different mass t argets which can differ by as much as 30% from one another implying dramatically different CO2 mit igation paths.

Commenters added the first interpretation is based upon two paragraphs found in the "20140602tsd-projecting-eguco2emission- performance .pdf" Technical Support Document:

"A mass-based CO2 emission performance goal is calc ulated by projecting the tons of CO2 that would be emitted during a state pl an performance period (e.g., 2020-2029, 2030-2032) by affected EGUs in the state if they hypothetically were meeting the state rate-based CO2 emission performan ce goal for affected EGUs established in the emission guidelines. The transla tion of a rate-based goal (expressed in lb CO2/MWh of useful energy output fr om affected EGUs) to tons (expressed as total tons of CO2 emissions from affe cted EGUs over a specified time period) is based on a projection of affected E GU utilization and dispatch mix." (p13)

"A Mass-Based CO2 Emission Goal Policy Scenario. Th is projection scenario is used to translate a rate-based goal to a mass-based goal. The scenario applies a
rate-based CO2 emission limit to affected EGUs that is equivalent to the statespecific rate-based lb CO2/MWh emission goal in the EPA emission guidelines. The CO2 emissions from affected EGUs projected duri ng the specified plan performance period in this scenario represents the translated mass-based CO2 emission performance goal for the state plan. To co nstruct this scenario, this emission limit is added to the underlying reference case scenario described above." (P15-16)

The commenters stated it appears that the mass-base d target should be constructed by creating a model of the future which projects capacity and gen eration mix subject to the constraint that covered units meet the EPA rate-based target by sta te; from this model, the CO2 emissions from covered units can be calculated, and this would for m the mass-based target by state. The commenters said this first interpretation has the p roperty of 'equivalence of CO2 emissions from covered units', so that covered CO2 emissions (as m odeled) would be the same if the state were using rate-based compliance or mass-based complianc e. (This does not imply that total CO2 emissions, including emissions from new units, woul d be the same). The commenters said however, the language of the proposal itself seems to imply more support for a second, more stringent interpretation.103

Commenters added the second interpretation can be i nferred from section 60.5770(3) of the proposal itself:

"The conversion must represent the tons of CO2 emis sions that are projected to be emitted by affected EGUs, in the absence of emissio n standards contained in the plan, if the affected EGUs were to perform at an av erage lb CO2/MWh rate equal to the rate-based goal for the state identified in Table 1 of this Subpart." (Federal Register, Vol. 79(117) p34953)

Given this language, and from the example construct ed in page 16 of the '20140602tsdprojecting-eguco2emission- performance.pdf' Technic al Support Document, the construction of the mass-based target can be interpreted as constru cting a reference case, extracting generation from covered units, and simply multiplying that gen eration by the EPA target rate to get massbased target emissions for covered units. The comme nters said the second interpretation implies, for most states, a mass-based target that is strict ly lower than the first interpretation; this is because the second interpretation applies the EPA t arget rate (which is the average of emissions
from covered units + renewables + some nuclear + en ergy efficiency) only to generation from covered units (and not renewables, nuclear, or ener gy efficiency). The commenters stated the mathematics of this calculation imply that the resu lting emissions target must be lower than if the target were achieved by running a model with the ra te as a constraint (in which case capacity and dispatch from covered units and renewables and nucl ear and energy efficiency could be modified to meet the constraint). The commenters stated the only exceptions would be for states for whom the economics are such that they would not build ad ditional renewables or energy efficiency under a rate-based target. The commenters provided the following example:

"Consider the hypothetical example of State Z. Assu me State Z has been set a target of 334 lb/MWh by 2030. Now suppose that the state is projected in the reference case to generate 1,000MWh of NGCC generat ion at 500lb/MWh, and 500MWh of renewables in 2030, due to local RPS poli cies already on the books. The 2030 average emissions rate would then be: (100 0*500 / (1000 + 500)) = 333 lb/MWh which meets the target rate, so State Z is a lready in compliance with the
Clean Power Plan. Note that emissions from covered units are 500,000 lbs. Under the second interpretation, however, the mass-based target for this state would be 1,000MWh * 0.334 = 334,000 lbs. In other words, the state meets the rate-based target in the reference case but would have to do m ore to reach compliance with the 'equivalent' mass-based target."

The commenters said it is unlikely that any state w ith significant potential for renewables, nuclear, or energy efficiency would consider a mass -based target under this interpretation; the differences between mass-based and rate-based compl iance are such that EPA's use of the word "equivalent" seems incongruous. The commenters said it may be that the second interpretation is incorrect due to the definition of 'covered units', and a third interpretation is in order.

Commenters added the third interpretation is identi cal to the second, except that the term "covered units" includes both existing fossil and r enewables and covered nuclear and energy efficiency. The commenters said the mass-based targ et would be calculated by taking reference generation from covered existing fossil units, rene wables, covered nuclear, and energy104

efficiency, and multiplying that by the target rate ; this interpretation would resolve the paradox arising in the hypothetical example from interpreta tion 2, as State Z would now be compliant under both rate-based and mass-based targets. The c ommenters said this third interpretation would have a stronger claim to equivalence, as the target rate is applied to the same set of units as was used to calculate the target rate in the fir st place.

The commenters added these three interpretations le ad to very different mass-based targets by state; given the differences between these three se ts of mass-targets and given the uncertainty around the context and use of the word 'equivalence ' in the proposal, they stated EPRI recommends that EPA define a consistent way to calc ulate 'equivalence' of the rate-based target and mass-based target.

Commenters interpreted the proposed rule section 60 .5770 as describing the following calculation: Mass goal = (emiss. rate based on EGUs + nuclear + RE + EE) x (generation from EGUs) [Method 1] the resulting mass goal for Method 1 will be erroneously low.

Commenters added the calculation should be performe d as: Mass goal = (emiss. rate based on EGUs + nuclear + RE + EE) x (generation from EGUs + nuclear + RE + EE) [Method 2]

Commenters agreed with the EPA that a mass-based go al should be equivalent to a rate-based goal, and should not penalize or reward states that choose one approach over the other; by ensuring that rate- and mass-based goals are equiva lent, states will have greater flexibility to satisfy the objectives of the Clean Power Plan. The commenters said in its simplest form, a ratebased goal can be calculated as:

Mass / Generation Equivalents = CO2 Emissions Rate

Commenters stated in this form, "Generation Equival ents" includes electric generation output from affected EGUs, new renewables, new energy effi ciency, and at risk nuclear generation; in calculating an equivalent mass-based goal all "Gene ration Equivalents" should simply be moved to the other side of the equation as follows:

Mass = CO2 Emissions Rate * Generation Equivalents

Commenters stated if the values for the "CO2 Emissi ons Rate" and "Generation Equivalents" remain the same, then the mass that can be emitted should also remain the same, regardless of whether a rate-based or mass-based compliance metri c is used; however, the conversion method outlined in the EPA's Technical Support Document is sued in November 2014, would limit the amount of "Generation Equivalents" used to develop the state's rate-based goal, thereby lowering the amount of emissions that may be emitted by affe cted EGUs in the state. Commenters said the EPA incorrectly assumes that energy efficiency and renewable generation will reduce EGU output on a one-for-one basis. The commenters said for states like New York, where the sites most suitable for further development of renewables are geographically removed from the load centers, this is not the case; moreover, intermitte nt renewable resources must be backed up to a significant degree by units that can quickly replac e their generation output, which are most often fossil fuel units. The commenters said EGU output i s not replaceable on a one-for-one basis with renewables and energy efficiency. Commenters stated most of the existing renewable generation resources in New York are north and west of the maj or load centers in the state, and this is the105

region most suitable for further development of ren ewable resources; transmission capacity from this area to the area of greatest demand in the sou theast is limited, and a one-for one offset of renewable energy for downstate EGUs cannot be achie ved. Commenters added the dependence of renewable generation on variable natural forces does not allow it to meet demand all the time; its intermittency makes it an unsuitable replacemen t to the fossil fuel units that provide spinning reserves that are needed to maintain reliability ac ross the state and especially in New York City; therefore, intermittent renewable resources must be backed up to a large extent by dispatchable units, which typically operate on fossil fuel. The commenters said EGU output is not replaceable on a one-for-one basis with renewables and energy e fficiency.

Commenters stated the inability of renewable genera tion or energy efficiency to offset affected EGU generation on a one-for-one basis is demonstrat ed by the NYISO's 2010 wind generation study ("NYISO Wind Study"). The commenters said it was found that 8,000 MWs of installed wind would produce 21,829.3 GWhs of wind, but would only displace 15,500 GWhs of fossil
fuel. The commenters said this means that 100 MWhs of wind generation in New York displaces only approximately 71 MWhs of fossil fuel generatio n. The commenters said on a capacity basis, the NYISO Wind Study found that 1 MW of wind is equ ivalent to approximately 0.2 to 0.3 MWs of conventional generation. The commenters said thi s requires that 75% to 80% of the nameplate capacity of wind generation be backed up by convent ional, dispatchable generation in order to
maintain reliable electric service. The commenters said while the NYISO Wind Study does not directly address the displacement of affected EGUs by the Building Blocks of the Clean Power Plan, it shows that New York cannot sustain a one-f or-one displacement of EGUs by renewable resources; instead of using a one-for-one displacem ent, the EPA should allow States to use all "Generation Equivalents" that are available.

Commenters stated revising EPA's rate to mass conve rsion guidance to be consistent with the emission tonnages used in EPA's rate-based limitati on calculation; currently, the guidance for
mass calculation excludes incremental renewable ene rgy, the five nuclear power plants under construction, and EE savings. The commenters said i f one corrected the flaws in the building block rate calculation and applied the same generat ion components (affected fossil fuel generation+ under construction NGCC +new nuclear+ p reserved nuclear+ EE savings),
Colorado's mass based limitation would be set at 31 .889 million metric tons, rather than the
overstated 25.335 million metric tons in 2030 as is currently set for Colorado.

Comment 23: The EPA should incorporate a variability adjustmen t into the mass-based goal
calculation.

Response 23: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:106

Commenters stated EPA should adjust for variability in the conversion of rate-based goal to mass-based goal to address the stringent mass-based equivalents resulting from EPA's proposed approach in the TSD. The commenters added in genera l, EPA's choice of a 2012 baseline does not appear to have a significant impact on the calc ulation of the rate-based targets, however, on a mass basis, the choice of a baseline year can have a significant influence on the resulting goal. The commenters recommend that EPA provide a "variab ility adjustment" in calculating the mass-based equivalents, whether it applies to exist ing sources or both new and existing sources.

Comment 24: Periodic Review/ Mid-course adjustments

Response 24: Under section 111(b) (1) (B), the EPA must review standards of performance for new sources every eight years. While there is no re quirement that the EPA review standards of performance for existing sources under section 111( d), the EPA anticipates that changes to performance standards for new sources may prompt th e EPA to review standards of performance for existing sources as well. Whether such coordina tion is warranted, however, will depend upon the nature of any changes proposed for new sources when the EPA conducts its periodic review.

The following are summaries of the specific public comments under this comment:

Commenters recommended that EPA consider an explici t mechanism for periodic review and "reset" of the program to adjust for unanticipated events and opportunities; EPA should recognize and allow the currently established reset process used by RGGI as a means of possible mid-course corrections for the existing source perf ormance standards to ensure mass-based targets remain comparable to the rate-based alterna tive.

Commenters stated EPA has proposed that a state cou ld use a mass basis rather than an emission rate basis for its state plan and also provided an outline of how to convert the 2030 emission
standard to annual mass emissions. The commenters s tated the outline proposes using a projection of the 2030 load or generation rate for the state and multiplying that by the emission standard; and the EPA has issued a TSD describing t ranslation of this outline. In Washington the projections of load growth are typically only relia ble for 10 years into the future (and often wrong over the last 15 years); a 15 and 20-year pro jection may be made, but the confidence in
these are low. The commenters stated to establish t he mass limit, EPA is suggesting that states project the 2030 load in 2015 using a well educated guess of load 15 years into the future. The
commenters said the states are then beholden to com ply with that mass rate even if the load forecast is wrong; as drafted, EPA would not allow the state to modify the plan to match the actual load, expecting states to implement addition al renewable resources, energy efficiency measures and other methods to make up the differenc e. The commenters recommended that EPA allow states to make "mid-course" adjustments to th e state plans to accommodate changes in load growth between 2016 and 2030.

Commenters stated if a state opts to take the mass- based approach and submits a state plan to EPA in 2016, the states should be afforded a techni cally justified reprieve in the future, should it be obvious that the original mass-based goal is no longer reasonable. The commenters were concerned that continued economic development in th e State could result in unanticipated107

demand growth and related emissions, making it diff icult to meet mass-based goals; this holds
true should a state utilize the calculation which r elies upon the emissions from both affected existing and new sources. In essence, states will b e pigeon-holed by a mass-based goal developed prior to such unforeseen state growth. Th e commenters said increased generation makes it more difficult to comply with mass-based l imits verses rate-based limits; the rule should not become just a test of a state's ability to prog nosticate future economic conditions; therefore, states should be afforded the opportunity to provid e to the EPA an alternative/corrected massbased goal.

Comment 25: Commenters asked if the mass-based goal cold be ta ken as the CO2 emissions remaining after implementation of BSER Blocks 1 and 2.

Response 25: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Comment 26 : New NGCC in conversion calculation; apply a unifo rm emission rate for new generation

Response 26: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated in its guidance to states on calc ulating mass-based equivalent targets, EPA uses each state's 2029 target as the emission rate to be applied to both existing generation, as well as new generation. The commenters said a state with a rate-based goal below the emission rate of new natural gas combined cycle (NGCC) units would be penalized by including new resources in its mass-based target; conversely, a s tate with a rate-based target significantly above
the emission rate of NGCC would benefit from includ ing new resources in its target, because the additional emissions added to the target for each M Wh of generation would exceed the emission rate of new generation. The commenters recommended that EPA require that all states apply a uniform emission rate for new generation in convert ing to a mass-based cap; given that EPA has promulgated emission standards for new fossil resou rces under section 111(b) of the Clean Air Act, the emission rate used should be consistent wi th these standards.

Comment 27: RE & EE108

Response 27: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters identified issues with the displacement of existing fossil generation by RE and EE generation in the conversion from rate-based to mas s-based standards.

Commenters stated in order to maintain consistency across rate-based and mass-based approaches, the displacement of existing fossil gen eration by incremental RE and EE generation should apply only to the computation of the target rates. The commenters stated the EPA should provide states opting to pursue a mass-based approa ch with the opportunity to justify the appropriate amount of existing and new fossil gener ation that should be displaced (rather than apply an assumption that all incremental RE and EE will displace existing fossil fuel-fired generation).

Commenters stated in an EPA example of how to conve rt the rate-based performance requirement to an equivalent mass-based standard, t he calculations show that EPA's BSER for existing EGUs presumes that all growth in renewable generation displaces generation from existing EGUs, rather than avoiding new fossil gene ration. The commenters added this is not a realistic assumption for Florida; consequently, EPA overstates the level of future renewable generation reasonably attributable to existing affe cted EGUs. The commenters said if EPA continues to include renewable generation in establ ishing emission standards, then it should explicitly set standards for renewable generation t hat directly displaces existing affected EGU generation.

Commenters stated EPA's TSD for "State Plan Conside rations" includes a section on "Incorporating End-Use Energy Efficiency and Renewa ble Energy Programs and Measures under a Rate-Based Approach.” in a footnote for tha t section, EPA states "the EPA is also proposing that RE and demand-side EE measures could be used under a mass-based portfolio approach in an approvable state plan. However, the focus of this section is limited to application of such measures under a rate-based approach." The commenters asked if the Agency plans to provide similar information for a mass-based approa ch.

Commenters stated in the original proposal, EPA's g oal-setting equation adds incremental RE and EE to the 2012 baseline generation (in the deno minator of the formula) but does not affect fossil generation or emissions; in the NODA, EPA pr oposed two different approaches for revising the goal-setting formula in which incremen tal RE and EE replace 2012 fossil generation. The commenters said in the rate-to-mass goal transl ation TSD, incremental RE and EE generation replace historical fossil generation, wh ich is similar to the NODA approaches. The
commenters asked if EPA's rate-to-mass translation TSD approach intended to be equivalent to the rate-based limits established in the original p roposal or is it intended to be equivalent to ratebased limits that would be determined using one or both of the approaches included in the
NODA.109

Commenters stated the assumption that 100% of EE an d RE directly replace existing fossil generation should not be included in the rate to ma ss conversion as it was in the technical support document released on November 6, 2014.

Commenters said EPA states that new resources (incr emental RE and EE) under Building Blocks 3 and 4 are expected to reduce generation from affe cted fossil EGUs. The commenters said the state of Georgia has pointed out to EPA how that ap proach differs from the approach taken by EPA in calculating the BSER rate goals. The comment ers have determined, from examining the actual spreadsheets developed by EPA, that that app roach is not what is happening in the calculations; the equation subtracts out both incre mental RE and EE; however, it then adds back in, what they call, BSER RE and BSER EE. The commen ters said per EPA's definition in the TSD and what is in the spreadsheets, BSER is existi ng plus incremental. The commenters said the equation effectively cancels out increment al RE and EE; one ends up adding only existing RE and existing EE (technically); however, since existing EE was never really included in EPA's BSER MWhs for EE, the EE terms are equal a nd completely cancel each other out. The commenters said the spreadsheet equation actually l ooks up the same value twice and subtracts it first, then adds it back in. It is not clear if thi s is intentional or an error. The commenters said these errors are carried over into the projection o f generation approach because it starts with the 82,030,617 MWh and adds incremental required genera tion to it.

Commenters added there are additional errors in the calculation of incremental required generation. The commenters said the method uses the incremental increase in sales as a surrogate for the incremental increase in generation; the 201 2 sales is first increased by 7.51% for transmission losses to translate sales into generat ion; then, it is grown using the regional growth
rate. The commenters said the difference between 20 12 actual generation and the grown value is the incremental required generation. The commenters said while, this approach is valid, the value for 2012 sales includes both 2012 sales plus 2012 E E MWh; this value also inherently includes the existing RE values. The commenters said it is n ot clear why EPA does not include EE in the existing generation approach and does use it in the projection approach. The commenters asked what is EPA's intention by first subtracting out in cremental RE and EE and then adding back in "BSER RE" and "BSER EE"; this appears to be a relic of the spreadsheet and not a real approach. The commenters said EPA needs to clarify when it is appropriate to include existing EE and RE and not worry about what the terms are ca lled in the rule or the spreadsheet.

Commenters stated energy efficiency can and should be explicitly credit in both rate and mass based compliance systems; either system can work wi th the appropriate policy design.

Commenters appreciated that EPA responded to the po pular request for guidance on the rate to mass target conversion calculation by issuing a TSD . The commenters asserted there is an error in the approach the TSD takes to ''quantifying a ge neration level for use in the translation to a mass-based equivalent for existing affected sources ." The commenters said according to the TSD and associated Excel spreadsheet, incremental renew able energy (RE) and generation avoided through energy efficiency (EE) are subtracted from a state's fossil generation in each compliance year; however, this does not match the approach EPA took in setting each state's target emission rate in the Proposal. The commenters said in Append ix 1 of the Goal Computation TSD, target emission rates are calculated by dividing 2012 foss il emissions by total generation in the target year, which includes 2012 fossil generation, at-ris k nuclear, and EE and RE in the target year;110

there is no downward adjustment to fossil generatio n to account for incremental EE and RE. Commenters stated this results in mass targets that are too low because the amount of generation in each state for each year is lower than it should be according to the Goal Computation TSD. The commenters acknowledged that the NODA suggests adjusting the Proposal such that RE and EE are assumed to displace fossil generation rather than supplement it, which seems to be the approach taken in the Rate-to-Mass TSD; however, th e result is a mélange of one approach to setting a rate-based target and an incompatible app roach to calculating an amount of generation to which that rate based target should apply. The c ommenters added this approach does not allow for existing NGCC capacity to be ramped up to meet growing demand, which could easily happen in a state like California where NGCC capaci ty is projected to be below 70 percent after building block 2 is applied according to the Goal C omputation TSD. The commenters requested that EPA ensure consistency across these methodolog ies.

Comment 28: Emission Vehicle

Response 28: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated a number of states have programs that promote clean vehicles, and that will result in reductions of carbon pollution and other air pollutants; this includes the Zero Emission Vehicle (ZEV) regulations - which require that zero -emission vehicles constitute a percentage of vehicle sales - and a supporting memorandum of unde rstanding (MOU) that have been adopted by eight states. The commenters stated the MOU esta blishes a collective target of placing 3.3 million zero emission vehicles on the road by 2025; the majority of the vehicles will be plug-in electric vehicles. The commenters said shifting to these electric vehicles from conventional petroleum-fueled vehicles will significantly reduce overall carbon pollution in our states, but it will also affect electricity demand. The commenters urged EPA to work with the MOU states to identify a rigorous load-growth projection or metho dology that takes into account any projected load changes from these regulatory ZEV programs forthe purposes of translating from a ratebased state goal to a mass-based emission budget.

Modifying the conversion to mass based goals to Not Discourage Promotion of Electric Vehicles

Commenters asserted that the Proposed Rule should b e modified to be "EV neutral" in a state that adopts a mass-based goal, neither encouraging nor discouraging state EV policies; the objective is to remove the CO2 emissions liability associated with the increased electric load due to the adoption of EVs. The commenters recommended that this objective be met by the EPA allowing states to adjust their mass-based goals to reflect actual electric vehicle load.

Commenters proposed adjusted mass-based goals would be calculated as follows:

M t = M + (E actual ) * R avg111

Where:

M t is the adjusted mass-based emission goal M is the unadjusted mass-based goal adopted by a st ate pursuant to the final EPA Rule
E actual is the incremental actual transportation sector el ectrification load, subtracting out transportation load incorporated into M
R avg is the state's average target CO2 emissions rate ( either the interim or final rate)

The commenters said this approach does not exclude transportation electrification load from the compliance demonstration; it simply allows a state' s mass-based goals to be adjusted based upon the actual electricity consumption of EVs, consiste nt with the underlying goal of meeting the rate-based targets set for the state.

The commenters said under this approach, the EPA wi ll in principle have to adopt a procedure to estimate the transportation electrification load co ntained in each state reference scenario. The commenters said for the illustrative approaches des cribed in the November 6 supplemental guidance, the electrification load is so small that in practice it may be possible to treat this as di minimus; for other approaches that may be adopted b y individual states pursuant to the final EPA rule, procedures would need to be adopted assur ing that assumed transportation electrification load is reported.

The commenters said EPA will also need to adopt pro cedures for how actual transportation electrification load will be measured; in the long- term, with the expansion of smart grids and communication between vehicles and the grid it may be possible to directly measure this load; however, there are reasonable procedures that could be adopted for estimating the load until direct measurement is possible. The commenters desc ribed one methodology; that is not meant to be prescriptive, but rather is illustrative, meant to demonstrate that it is feasible to correct for transportation load; other methodologies may also b e feasible:

• The first step would be for a state to use its vehi cle registration database, which includes data on make, model and year, to identify all of th e light duty battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEV) in operation in a particular year.

• For each BEV, the Office of Transportation and Air Quality at the US EPA tracks the electricity use per mile; for the 2014 model year, energy use varies from the most efficient BEV, a BMW i3 at 0.27 kWh/mile, up to a T oyota Rav4 EV at 0.44 kWh/mile.

• The next step would be for a state to estimate the average number of miles driven per vehicle; the average number of miles driven per veh icle can be calculated using data available from the American Community Survey or the US FHWA Highway statistics database; this could be done using statewide averag es, or by using more fine-grained data which incorporates different travel behavior in dif ferent metropolitan areas across a state.

• Then the formula for calculating the total electric ity load of BEVs is as follows:

E = Σ ei x ni x T

Where:112

E is the actual light duty BEV load ei is the efficiency of vehicle i in kWh/mile; ni is the number of vehicle i registered in the sta te T is the annual average number of miles driven per vehicle

The commenters said for PHEVs an analogous calculat ion would be performed, supplemented by use of either survey data or a representative sa mple of vehicles tracked by onboard telematics to determine what percentage of PHEV miles are trav eled in all electric mode.

The commenters said heavy duty vehicles would requi re a different measurement technique; the energy consumption of these vehicles will be heavil y influenced by how heavily they are loaded; because electric trucks and buses will have very sp ecific niches, the use of average vehicle miles travelled data would be inappropriate; however, the se uses will likely be in areas such as ports, urban delivery vehicles, intermodal centers, and ur ban transit routes, where almost all charging will occur at a relatively small number of company owned charging locations, unlike the dispersed residential charging that will dominate t he light duty sector. The commenters said this makes tracking the actual electricity consumed feas ible through metering at these locations.

Commenters stated since opting for rate-based goals would not disfavor the adoption of electric vehicles or similar technologies, it is appropriate to revise the Proposed Rule to ensure that states can opt to implement mass-based goals without creat ing such disincentives. The commenters said it should be noted that states adopting mass-b ased goals could, if inclined to do so, use unrealistically high projections for EV adoption as justification for plans incorporating higher rates of CO2 emissions than would otherwise be perm issible. The commenters recommended that the Proposed Rule be revised to require that s tates adopting mass-based goals adjust those goals at the end of each compliance period to accou nt for any divergence between projected and actual levels of adoption of EVs and similar techno logies (such as heat pumps) that reduce
overall CO2 emissions.

Comment 29: Remove the "At-Risk" nuclear generation from the g oal setting methodology

Response 29: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated the overall experience of Connect icut (and the other RGGI states) demonstrates that a mass-based approach to emission reductions can incentivize economic
otherwise viable nuclear resources to remain online by increasing the competitiveness of legacy nuclear resources with fossil fuel-fired EGUs (whic h should increasingly reflect a carbon price in their offerings).113

Comment 30: Firm Builds and Retirements

Response 30: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated the /"Projecting EGU CO2 Emission s Performance in State Plans" TSD
indicates that firm builds and retirements should b e taken into account when converting a ratebased goal to a mass-based goal. The commenters sai d it is possible at the time of the conversion that a utility may have announced plans for a unit to retire by a certain date, and the retirement may even be in the utility's integrated resource pl an, but there is no legal/enforceable requirement for the unit to actually shutdown by th at date (if circumstances change it may not). The commenters asked if there a trigger that makes an announced/planned retirement "firm" such that it would need to be considered when converting a rate-goal to a mass-goal.

Comment 31: Load Growth

Response 31: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated in particular, we agree with EPA that where load growth is included, it should generally be based on EIA's Annual Energy Ou tlook; however, instead of using the 2013 AEO as EPA proposes, we recommend that the final ru le be based on the most recent AEO, which will be the 2015 version due to be published around the beginning of the year. The
commenters said if the load forecast overestimates load growth, then the mass-based targets could be easier to meet than the rate based targets . The commenters said these types of disparities could lead to gaming and provide incent ives to use exaggerated forecasts. The commenters said forecasting is an imperfect science , therefore we recommend that a state forecast of electricity load growth should be consi dered reasonable if it is no greater than what EIA estimates. The commenters said furthermore, to correct for imperfect forecasts, states that opt for mass-based targets should periodically revi se their mass-based targets to reflect actual electric load growth.

Commenters supported EPA's approach to converting r ate-based to mass-based limits provided in the technical support document "Translation of t he State-Specific Rate- Based CO2 Goals to Mass-Based Equivalents," because it provides states clarity and flexibility in calculating massbased goals. This commenters also supported the EPA 's decision to allow states to develop their own alternative methodologies because it account fo r the diversity among states. However, this
commenters also recommended the EPA allow states to adjust the mass-based limits to account114

for load growth. Failure to account for load growth , the commenters argued discourages states from adopting a mass-based approach.

Commenters stated that federal efficiency standards will reduce electricity use in all states and thereby lower CO2 emissions, helping those states w hich choose mass-based targets to meet their targets. However, the commenters indicated it is re asonable to assume that the EPA will base the determination of mass-based goals (or give states a methodology to do the calculation) that takes into account projected load growth out to 2030.

Commenters stated that the federal efficiency stand ards will reduce future electricity use in all states and thereby lower CO2 emissions, helping tho se states that choose mass-based targets to meet their targets. However, commenters noted the E PA has given states an option for determining mass-based goals that takes into accoun t projected load growth out to 2030 in the
"Translation of the Clean Power Plan Emission Rate- Based CO2 Goals to Mass-Based Equivalents" Technical Support Document issued in N ovember. Commenters noted that load growth projections made by the EIA and used by the EPA do take into account federal appliance efficiency standards that have already been adopted . Commenters also noted that load forecasts
for 2030 have been reduced due to the effects of fe deral efficiency standards, leading to lower mass-based goals when the rate goal is multiplied b y the projection of future electricity generation. So, commenters concluded that, in effec t, federal appliance and equipment efficiency standards will help states meet mass-based goals th at have been adjusted downwards to account for federal standards, assuming states select this option that includes projected load growth or
some variation of it.

Comment 32: The EPA should incorporate growth needs into the m ass-based goal.

Response 32: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated their main concern with the devel opment of a mass-based goal is the recognition by EPA that "growth" needs to be incorp orated into a mass-based goal. The commenters said the growth assumption for a state l ike Montana needs to incorporate the fact that growth occurs not only within the state but al so as growth in the export of electricity to other
states. The commenters did not feel that one method ology can accurately be described by EPA for all states in converting from a rate-based to a mass-based goal.

Commenters added EPA must understand that the Techn ical Support Document developed for illustrative purposes for rate-to mass-based conver sion penalizes states that are net exporters of electricity. The commenters said Montana, in develo ping its own rate-to mass-based tool, fully expects that growth will also occur in demand for t hat portion of the electricity generated in the state that is exported; therefore, EPA must maintai n flexibility for states to propose approaches where all generation in the state increases and not just electricity used for in-state demand. The115

commenters said EPA must also realize that this exp orted electricity demand could be satisfied with Montana generation by either EGU MWhs or by re newable generation and therefore, Montana disagrees that new renewable generation nec essarily replaces EGU MWhs. The commenters said as long as the rate or equivalent m ass target is satisfied through the energy mix, the state plan should be satisfied.

Commenters added both approaches fail to adequately consider the impact of future demand growth on affected units' abilities to reduce emiss ions. The commenters said the Rate-to-Mass TSD's first proposal for calculating mass-based equ ivalents would not incorporate any future load growth into the projection of a mass-based equ ivalent. The commenters said by failing to incorporate any assumptions about how electricity d emand may increase in future years, EPA would effectively prohibit states from meeting new electricity demand with additional generation from existing units, which are some of the most rel iable, proven, and low-cost generation sources available. The commenters said EPA's second option under the Rate-to-Mass TSD incorporates one basic assumption about increased electricity de mand, based on EIA regional projections; however, this load growth assumption may be unreaso nably low in many parts of the country, including South Carolina, if economic growth increa ses substantially beyond current expectations; therefore, this option, too, could le ad to severe implementation and reliability difficulties if load growth is greater than a state or EPA projects in calculating the mass-based equivalent.

Commenters added rather than effectively prohibitin g states from increasing generation from cost-effective, reliable existing units to meet new demand, EPA should defer to states' reasonable projections of future demand in calculating mass-ba sed goals. The commenters stated that in addition, EPA should revise its guidance to align w ith its assumption in the Proposed Rule that the addition of incremental RE, EE, and nuclear gen eration does not displace historic fossil generation. The commenters said because states' ini tial load growth projections could underestimate the amount of load growth that the state w ill experience during a compliance period, EPA should provide a mechanism for a state to revis e its mass-based goal based upon a showing that these and other assumptions the state may have used to convert goals from rates to masses
were incorrect.

Comment 33: Demand growth projection in mass rate goals.

Response 33: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA must define a uniform electri city demand growth projection that can be used in a rate-to-mass conversion, the commenters r ecommended that the Energy Information Agency (EIA) projections are the maximum demand gro wth that can be included. The commenters said the level of demand growth must be subject to a uniform methodology116

established by EPA; an excessive projection of dema nd growth will weaken the target and void the required equivalency between the rate-based and mass-based targets. The commenters said even states that are not attempting to weaken their target will inevitably face pressure to adopt an overly optimistic demand growth projection consiste nt with the state's aspirations for future economic development.

The commenters commissioned analysis from M.J. Brad ley and Associates of past electricity demand and energy forecasts from a range of plannin g entities, including EIA, the California Energy Commission (CEC) and some of the ISO/RTOs; t hey summarize their findings as (also presented in Appendix 9A of comment):

• Generally speaking, EIA, CEC and RTO's all consiste ntly overestimate both demand and consumption, although estimates tend to get more ac curate the closer the estimate is made to the target year.

• Forecasts made before 2009 tend to be several more percentage points off than later year estimates, likely because they do not account for t he economic downturn.

• For all RTOs/ISOs, both peak demand and annual cons umption dropped markedly from
2008-2009.

• Forecasts for demand four years prior range from an overestimate of 14 percent to an underestimate of 1 percent; forecasts one year prio r range from an overestimate of 11 percent to an underestimate of 6 percent.

• Forecasts four years prior overestimate annual cons umption by 2 percent to 10 percent; forecasts one year prior range from an overestimate of 8 percent to an underestimate of 2 percent.

The commenters said there are many reasons for util ities and system planners to overestimate energy growth including: 1) a desire to ensure peak demand and energy use are easily accommodated (reliability) and 2) the opportunity t o use demand and energy forecasts to justify new generation, transmission and distribution inves tments that increase a utility's rate base and increase earnings for shareholders. The commenters said the use of energy forecasts in setting a mass-based target is extremely likely to increase t he estimate of emissions in the future and lead EPA to establish a target that is inflated and easi er to achieve than anticipated by EPA and their modelers. The commenters said EPA must adopt a cons istent and unbiased demand growth projection, and suggests that EPA use current EIA p rojections. The commenters said EPA should
describe this forecast as conservative and not allo w states and companies to develop alternative forecasts, which would provide significant opportun ity for gaming and which EPA should
assume are inflated in their current form. The comm enters said they support the EPA's continued flexibility in the state emission reduction plannin g process under section 111(d), but EPA must clearly define the method for converting rate-based targets and requirements for existing sourceonly mass-based caps in order to ensure that equiva lent emission reductions will be achieved.

Commenters stated EPA states that any mass-based li mit must be equivalent to the rate-based goals determined by EPA for states. The commenters said in order for this to be true, states must117

be able to project growth in electrical demand when making this conversion. The commenters said the rate-based form of the goal doesn't place any limits on electrical demand, so this demand may continue to grow significantly and may be met b y any combination of existing and possibly new units, as long as the state can meet its rate g oal; therefore, EPA must allow states to project demand growth for existing units for the entire com pliance period (extending beyond 2030) when converting to mass-based limits.

Commenters stated EPA stated in its June 2014 propo sal and accompanying documentation that states may project growth when making the rate-to-m ass calculation. The commenters asserted this is an essential part of any equivalent rate-to -mass conversion; however, the language in these documents was unclear about how to apply the projec ted growth in calculating an equivalent mass cap. The commenters said EPA's November 13, 20 14 TSD on translating state-specific rate-based CO2 goals to mass-based equivalents also failed to provide this clarity. The
commenters said neither of the scenarios discussed in EPA's November TSD allows for growth for existing units - one scenario projects no growt h for existing units, while the other assumes that all growth will be taken up by new units, whic h will be regulated under the mass cap; neither of these scenarios is fully equivalent to the rate- based standard.

Commenters said states should be allowed to include electricity demand growth when converting
rate-based limits to mass-based limits. Commenters asserted that states must be able to account for electricity growth when converting rate-based g oals to mass-based limits for existing power plants. Commenters noted that the rate-based goals do not place any limits on electricity production and that electrical demand may continue to grow significantly and may be met by any combination of existing and new units. These commen ters also recommended the EPA allow states to project demand growth for existing units for the entire compliance period (extending beyond 2030) when converting to mass-based limits. The commenters believed growth projections to be an essential part of any equivale nt rate-to-mass conversion and feel the EPA should provide additional guidance on how to apply projected growth when calculating an equivalent mass-based limit. Commenters noted that none of the scenarios discussed in EPA's November TSD allows for growth for existing units.

Comment 34: Generation level

Response 34: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated the existing affected source appr oach from the rate-to-mass goal translation TSD produces a generation level (and CO2 mass) for GA that is 28% less than the generation (and CO2 mass) used to set the rate-based goal in t he original rule proposal. The commenters asked how can a translated mass-based goal be equiv alent to the rate-based goal if it does not use the same generation level.118

Commenters stated on November 6, 2014, EPA issued a technical support document offering guidance for states to convert EPA's rate-based goa ls to mass-based goals (EPA's "Conversion Guidance"). The commenters said the Conversion Guid ance recognizes on page 1 that the formula for converting a rate-based goal into a mas s-based goal simply requires the multiplication of the emission rate goal by a speci fic generation level to determine mass emissions; however, EPA's Conversion Guidance uses a different generation level than EPA assumed in its original rate-based proposal, which results in far more stringent goals.

Commenters stated EPA's original proposal relied on an equation that determined generation by adding incremental renewable generation, nuclear ge neration, and energy efficiency improvements to 2012 generation; however, the prima ry option in EPA's Conversion Guidance utilizes 2012 generation alone - without any increm ental changes - to calculate a mass-based goal. The commenters said although EPA's guidance c ontains several complicated formulae, the variables in those formulae cancel each other out; without the incremental generation changes accounted for in EPA's original rate-based proposal , the mass-based goal relies on a lower generation value, thus resulting in a lower mass-ba sed goal than would be expected if the goal were truly equivalent to EPA's rate-based goal.

Commenters stated because EPA's Conversion Guidance requires the calculation to be made based on 2012 generation alone, instead of the gene ration relied upon in EPA's original proposal (2012 generation plus incremental changes), EPA mas s-based interim limitation for the affected units is 214,771,000 metric tons more stringent tha n the tonnage limitation used in the EPA ratebased calculation. The commenters said the final li mitation for affected units is also 308,867,000 metric tons more stringent than the mass emissions used in the final state rate-based calculation; as a result, EPA has arbitrarily changed its calcul ations to set an even lower limit than EPA calculated as BSER. The commenters provided a chart showing a CO2 mass limits comparison
for affected units.

Commenters stated EPA's Conversion Guidance does co ntain a second option that may be intended to allow for the use of a more appropriate generation level in determining mass-based goals by including a growth factor; however, that a pproach still is not equivalent to the generation level utilized in EPA's original proposa l, and therefore does not result in "equivalent" goals, which EPA claims are necessary for states to employ the mass-based option. The commenters added, EPA's Conversion Guidance seems t o suggest that a growth factor would only be appropriate if states require newly constru cted units to fall under the mass-based goal as well, something that the CAA clearly forbids. The c ommenters said EPA's growth factors are low; if growth is higher than EPA projects, the mas s-based limits will again be overly stringent; therefore, even the second option of EPA 's Conversion Guidance is arbitrary.

Commenters agreed with the EPA's most basic explana tion of the rate-to-mass conversion, which indicates that a state's 2030 CO2 mass-based goal w ill be the result of the state's 2030 rate-based CO2 goal multiplied by the state's generation. The commenters said EPA's method for computing the state's generation level is based on historical (i.e., 2012) generation with no growth, assuming that future demand in years up to and beyond 2030 will be the same as the demand in 2012. The commenters asserted that this g eneration level should reflect a state's forward-projected generation up to and beyond 2030, to account for load growth during that period.119

Commenters stated the EPA manipulates the state's g eneration level by applying adjustments based on the CPP building blocks; the EPA is select ive in its inclusion of building blocks for the state's generation level adjustments, applying only a subset of building blocks to the generation level and doing so in a manner that is inconsistent with the core methodology used in the original rate-based goal-setting formula. The commenters sai d for example, adjustments based on the assumption that new incremental renewable resources and energy efficiency goals will be met are included, and they displace fossil generation a s opposed to being included in addition to fossil generation as they are in the rate-based goa l-setting formula. In general, the commenters considered the EPA's aggressive assumptions of gene ration levels to account for the building blocks to be incompatible with the rate-to-mass con version process, bearing in mind that this generation level will be multiplied by a CO2 rate t hat is already reduced to reflect the application of all of the building blocks.

Commenters stated on November 6, 2014, EPA released a technical support document ("TSD")
for the CPP titled "Translation of the Clean Power Plan Emission Rate-Based CO2 Goals to Mass-Based Equivalents." The commenters said the TS D provided two conceptual examples to convert the emission-rate based goals to mass-based equivalents (caps). The commenters said EPA's examples were extremely simplified and failed to take into consideration the complexities of regional energy markets. The commenters said EPA 's analysis is flawed because EPA assumes in the Adjusted Affected Fossil Generation equation that incremental RE and EE in a state's goal would directly displace that state's i n-state generation. The commenters said a large portion of the RE component in New Jersey's target using either the RPS or the regional potential methodologies comes from out of state resources; th erefore, the generation that would be displaced is more likely to be located in a state c loser to the actual RE source. The commenters added the displacement may include sources that are not "affected units" under the CPP (e.g., simple cycle combustion turbines). The commenters s aid a similar argument can be made for displacement through EE programs, especially where a state is a net exporter of electricity. The commenters added EPA's examples fail to take into c onsideration increases to existing fossil fuel-fired generation due to pending power plant cl osures and increases in demand due to other environmental objectives (e.g., increased deploymen t of electric vehicles). The commenters asserted that the methodology to convert to a mass- based equivalent should be based on 2012 historical fossil generation in order to receive cr edit for fossil plant retirements after the baselin e period while allowing for future increase fossil ge neration where necessary (e.g., nuclear plant retirements, increased deployment of electric vehic les).

Comment 35: The EPA should be receptive to alternative methods for converting rate-based goals to mass-based goals.

Response 35: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:120

Commenters appreciated EPA's recent Rate to Mass Te chnical Support Document released on November 6, 2014, on converting the rate based targ ets to annual mass equivalents. The commenters encouraged EPA to be receptive to altern ative methods - as EPA has indicated in the guidance that it would be - provided that such meth ods provide adequate justification and support for the data and assumptions used to develo p states' mass based targets.

Commenters stated given the risk of forecast error, the commenters asserted that the EPA should revisit its determination of equivalent mass-based targets for new and existing sources. The commenters said the Agency should evaluate whether the AEO2013 reference scenario is the best approach to generating an equivalent target. T he commenters suggested two potential
alternatives here:

• Alternative #1: Use observed trends in electricity consumption; one option to reduce forecasting error is to use some period of current and/or future trends in electricity consumption to establish the equivalent mass-based standard; examples include the trends in electricity observed from 2005 to 2012, 2012 to 2020, or some other combination of current and/or historical periods.

• Alternative #2: Wait to forecast future trends; the EPA could also choose to use a different forecast generated closer to the time of regulation; the Agency could, for example, adopt the reference scenario from a future Annual Energy Outlook issued just before 2020; or it could generate its own scenario, if none is available.

The commenters said both approaches reduce the risk of forecasting error by basing the quantification of an equivalent mass-based target o n data observed, or forecasts made, closer to the time of regulation. The commenters said while b oth approaches introduce a new kind of uncertainty - the precise quantification of an equi valent target - these uncertainties may be tractable in those states with an interest in pursu ing a mass-based target, who presumably have studied their expected future electricity sales and emissions trends in greater detail; on the other hand, these alternatives could produce an undesirab le incentive for states to increase consumption in the coming years in order to produce high baseline scenarios. The commenters said whether these alternatives or others are prefe rable from the EPA's perspective, the commenters suggested that additional analysis is ne eded in order to be certain that mass-based targets under the Clean Power Plan will generate re al emission reductions.

Comment 36: Translating Emission Rate Goals to Mass Goals Unde r the Clean Power Plan

Response 36: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:121

Commenters submitted a whitepaper to offer several ideas for how the EPA might further help
states understand the choice between rate and mass goals and facilitate states choosing the mass goal option.

Commenters stated this methodology first determines the total demand for generation resources in each state in a future year absent the CPP polic y; then calculates the mix of energy efficiency and generation sources required to satisfy this dem and under the CPP policy; finally, the resulting mix of fossil generation and carbon emiss ions from the fossil sources covered under the rule determine the mass goal for each state.

Commenters stated initially, 2012 retail sales, gro ssed up to account for line losses and reflect total 2012 generation, are escalated by a business- as-usual (BAU) load growth rate; this produces an estimate of total state generation needs for 203 0 of approximately 4,587 TWh. The commenters said the 2012 retail sales assumptions i n these calculations are taken from the EPA's GDC and the load growth data are taken from the EPA 's Integrated Planning Model cases issued as part of its June 2014 Regulatory Impact Analysis ; this approach to incorporating load growth factors in the goal development process is analogou s to the EPA's approach taken in the NOx
SIP call.

Commenters stated next, demand and supply resources are deployed sequentially to meet total state generation needs; all four building blocks, a long with generating resources not covered under the CPP rule, are represented in this analyti cal process; in this way, total resources are balanced with total energy demands.

“First, the total BAU state generation needs in 203 0 are reduced by the state's energy efficiency (EE) resource potential (Building Block 4) as speci fied in the GDC. This results in an estimate of the total amount of energy demand in each state tha t is to be met with generating sources. This amount is 4,206 TWh.

Next, total net energy demand is reduced by qualify ing renewable energy resources (Building Block 3) as specified in the GDC.

Following that, a block of energy from generating s ources whose emissions are not covered under the rule are deducted. These include nuclear, hydro-electric, uncovered fossil, and net interstate imports or exports.

The generation from all of these (except new nuclea r) is assumed to remain constant over time. The amount of energy from these fixed resources is calculated from GDC data by deducting 2012 coal, NGCC, oil/gas steam, other covered gener ation, and existing renewable energy from
total 2012 sales.

For states with expected new nuclear generation, th e amount of generation from these new sources is then added to this block of energy.

The last remaining block of demand is met by covere d fossil generation (coal steam, NGCC, oil/gas steam, and other covered generating units 1 1). Generation from NGCC capacity is122

deployed first up to a maximum capacity factor of 7 0% consistent with the EPA's GDC methodology. Any remaining energy needs are met fro m existing coal and oil/gas steam in proportion to the 2012 generation levels from these two sources. This process incorporates Building Block 2 by dispatching NGCC to its maximum potential before coal.

This analytical process so far has produced estimat es of the energy mix required to satisfy electric demand in a future year.

Finally, to create the state's emission budget, the amount of energy produced by each fossil source covered under the rule is multiplied by the average state emissions rate for that fossil source in 2012. The one exception to this process i s the coal emission rate, which is assumed to
be 6% lower than 2012 levels consistent with Buildi ng Block 1 of the GDC.

This results in the estimated covered emissions sho wn in Figure 3 below. The total U.S. covered emission estimate of 1,543 million metric tonnes is a 21 percent reduction relative to 2012
levels.”

Commenters stated this methodology is a "first prin ciples" approach to mass translation in that it starts with the fundamental demand, resource data a nd building block assumptions used by the EPA in the GDC process to determine the EPA's propo sed emission rate goals. The commenters said structured on complete and balanced estimates of electric demand, energy efficiency and generation in future policy years, it is simple, in tuitive, and fully transparent; because it relies o n the same assumptions and calculation process used b y the EPA, the resulting mass goals are consistent with the EPA's definition of Best System of Emission Reduction (BSER) and equivalent to the proposed rate goals.

National Results

Commenters stated this methodology yields an estima te of total U.S. covered emissions when all state budgets are summed across the country of 1,54 3 million metric tonnes. The commenters said this aggregate estimate is quite close to the EPA estimates of 2030 covered emissions in its June 2014 Regulatory Impact Analysis and November 2 014 mass translation TSD; this methodology produces an estimate that is 1.2 percen t below the EPA's TSD estimate and 3.6 percent below the EPA's Regulatory Impact Analysis estimate. The commenters said the small
difference in results between this and the EPA's na tional estimate from the TSD is caused by several factors, most of them quite small. The comm enters said the largest is that this methodology reduces the amount of fossil generation that may be re-dispatched when incremental building block resources (energy effici ency, renewables and new nuclear) exceed load growth. The commenters said technical modifica tions to this methodology could potentially
further reconcile this estimate with the EPA's TSD and Regulatory Impact Analysis estimates.

State Results - Comparison to Emission Rate Reducti ons

Commenters stated as a general matter, the percenta ge reduction in tons tends to be less than the percentage reduction in emission rates; some states that have been focused on the magnitude of the emission rate reduction implied by the EPA's pr oposed rate goals issued in June 2014 may
find this of some interest.123

The commenters said the states tend to cluster them selves into three groups that provide some insight into the underlying assumptions. Most state s, have tonnage reductions that are lower in percentage terms than the emission rate reductions, however two groups of other states stand out.

1. The group of states where the percentage reduction in tons in greater than the percentage reduction in rates. The states in this group includ e Connecticut, Massachusetts, Maine, New Hampshire, New York, Rhode Island and South Car olina. Importantly, this is due to the assumptions underlying the calculations, specif ically a low rate of load growth, limited coal generation, relatively ambitious build ing block assumptions or a large contribution from new nuclear generation. The large share of gas in the BAU energy mix limits the rate reduction, while load growth and re latively large abatement assumptions still result in large tonnage reductions.

2. The group of states - California, Idaho, Kentucky a nd South Dakota - also stands out, but for somewhat different reasons; these states all ha ve mass goals that are higher than 2012
emission levels. The commenters said the reasons fo r this are also tied to the underlying load growth and building block assumptions; these s tates share a combination of relatively high load growth assumptions and/or rela tively limited building block assumptions (and so relatively limited emission aba tement assumptions.)

State Results - Comparison to IPM Modeling Results

Commenters stated another comparison of interest to some stakeholders may be how these mass goals compare to the results of IPM modeling. The c ommenters said a general pattern emerging from this comparison is the notably greater variabi lity in tonnage results from the IPM modeling than the mass goals; this is likely due, at least i n part, to the changes in interstate power flows and in-state generation expected to occur over time both without the CPP and also due to the CPP, and the impact of those changes in state emiss ions. The commenters said these changes are reflected in the IPM modeling results but not the s preadsheet based mass translation methodology; one consequence of this is that any di sparity in mass goals across states will tend to be lower under this type of spreadsheet-based ma ss translation method than one based on fundamental market modeling that captures the impac t of interstate power flows on unit dispatch
and state emissions.

Commenters stated this comparison also illustrates the trade-off between the emissions reductions expected from the rule and the flexibili ty given to states in setting their own mass goals. Both options may have merits, yet in a given state there is sometimes a material discrepancy between the goals produced by the two m ethodologies. The commenters said with the flexibility to choose a translation methodology , each state would have an incentive to choose the methodology that permits the greatest level of emissions and the smallest emission reductions. As an example, if all states are permit ted to choose a mass goal based on either IPM results or this spreadsheet methodology, the mass g oal for the Lower 48 states would effectively be 1,677 million metric tonnes; this result is high er than if either of the two options were used for all states and would achieve a 13 percent reduction from 2012 levels rather than 17 or 20 percent under a single approach.

State Results - Comparison to November TSD Goals124

Commenters stated consistent with the fact that the total national results were quite similar, the results for most states are generally similar as we ll; there are however a number of states where the two goal estimates vary more significantly. The commenters said on a percentage basis, the largest of these are South Carolina, New York and N ew Hampshire. The commenters said this methodology reduces the amount of fossil generation re-dispatched when incremental building block resources (energy efficiency, renewables and new nuclear) exceed load growth; in contrast,
the TSD accounts for imbalances in load and resourc es by effectively reducing the contribution of all sources on a pro rata basis; and on an absol ute basis, the single largest difference is for Texas; this is caused by the same issue, as well as the large size of Texas.

Commenters stated this whitepaper illustrates how a small number of state-specific assumptions, primarily the size of each BSER building block and the rate of load growth, drives the mass goals; it also highlights the value of focusing pol icy discussions on these few assumptions as a primary means to address concerns regarding the lev el of state-specific goals and any disparity of goals across states; more complex translation metho dologies may obscure these fundamental factors. The commenters said any changes to the EPA 's proposed building block assumptions or GDC calculation process made in the final rule coul d be readily incorporated into this rate to mass translation methodology.

The Importance of Building Block and Load Growth As sumptions

Commenters stated it is important to understand the reasons why the mass goals turn out as they do; in fact, a small number of state-specific assum ptions, primarily the size of each BSER building block and the rate of load growth, are the primary drivers of mass goals. The commenters said the simplicity and transparency of this methodology highlights this point and the value of focusing policy discussions on the rea sonableness of those assumptions and whether they should be modified. The commenters said other more complex translation methodologies may obscure these most fundamental assumptions and unnecessarily divert the policy discussion away from what most matters; further, this type of translation methodology can be readily refined if and when the EPA modifies its building b lock and other assumptions underlying the goal development calculations.

Conclusions

Commenters stated all this points to the importance of facilitating state compliance through mass goals rather than rate goals and focusing on mass g oals that cover both existing and new sources, not just existing sources; relying on a rate to mas s translation methodology that is simple, intuitive and transparent; and focusing policy disc ussions regarding the appropriate level of mass goals on a small number of key factors including th e building blocks and load growth.

Comment 37: The proposed rule requires a state electing to use mass-based goals to commit to a projection of future electrical needs too far in ad vance.

Response 37: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal125

Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated the proposed rule requires a stat e that chooses to use mass-based goals rather than rate-based goals to produce a "reference case" forecast of generation by affected EGUs through 2030. The commenters said the state would c omplete this forecast at the time it prepares its plan, and this forecast would determine the sta te's mass-based compliance goals for all compliance periods. The commenters said preparing a n accurate forecast that far in advance, however, would be extremely problematic; for exampl e, a future breakthrough in battery technology that markedly increases the adoption of electric vehicles could result in significant
additional electrical load that could not be antici pated at the time the forecast is prepared. The commenters said EPA should allow states to adjust t heir mass-based goals based on changes that occur after the generation projection is originally made; this would make a mass-based approach
more attractive as an alternative to a rate-based a pproach.

Comment 38: The EPA should provide additional guidance for sta te that choose to use multistate plans for mass-based goals.

Response 38: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO2 E mission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents. See section VIII of the final rule pre amble of the CPP for more information regarding multistate plans. The EPA will provide g uidance to states using multistate plans for mass-based goals as necessary

.
The following are summaries of the specific public comments under this comment:

Commenters stated for those states that do pursue m ultistate plans that require conversion to a mass-based number across states, the commenters rec ommended that EPA provide additional guidance as to how groups of states might approach such a calculation or provide the technical assistance to perform the conversion for the states

.
Commenters were interested in understanding whether multi-state coordination would reduce costs and bring other benefits to their states comp ared to a single-state approach. The commenters sought clarification from EPA on how EPA proposes to calculate mass-based goals.
The commenters said as states consider the various options for 111(d) compliance, it is essential that we have a better sense of what methodologies f or calculating mass-based state goals EPA would accept. The commenters said the material rele ased by EPA on June 2nd does not provide enough information for states to evaluate the conse quences of considering a mass-based approach. The commenters requested that EPA issue n on-binding, illustrative examples of how states could convert their rate-based goals to mass , including the underlying calculations and assumptions.126

Commenters stated to the greatest extent possible, EPA should facilitate and encourage multistate carbon market compliance options; a key compo nent of this facilitation involves establishing standardized targets or calculation me thods for converting the EPA's proposed ratebased targets into mass-based targets. The commente rs said EPA's current proposal contains state compliance goals expressed in a rate-based format o f pounds of CO2 emissions per megawatthour of electricity generation (lbs/MWh); the EPA a llows states to convert this lbs/MWh ratio into a mass-based target expressed in millions of m etric tons of CO2, but does not provide a
standardized conversion method. The commenters said this allows for inconsistencies and confusion among states that wish to convert to a ma ss-based target; not providing a standardized method may also allow for states or their generatin g units to game the system and dilute their goals during the conversion process. The commenters added states wishing to establish multistate compliance plans and/or carbon trading market s would benefit from standardized rate-tomass conversion instructions; this would provide ce rtainty and consistency, which helps ensure that states equally share in the challenges and ben efits of participating in multi-state compliance
and/or carbon markets. The commenters said establis hing a mass-based "cap" on CO2 emissions is the foundation to creating a carbon market such as a cap-and-trade system.

Commenters suggested that calculating a multi-state , mass-based goal by aggregating individual state mass-based goals would be simpler than requir ing a methodology that includes modeling projected emissions from the entire region

. The commenters stated that this would allow the multi-state goal to be adjusted more easily if a st ate joins or leaves the program. The commenters noted that EPA proposes that a multi-state mass-bas ed goal be based on translation of an aggregation of the state-specific rate-based CO2 em ission performance goals, and seeks comment on options for calculating a weighted avera ge rate-based emission performance goal for multiple states. The commenters encouraged EPA to provide states the additional option to calculate a multi-state mass-based goal by aggregat ing individual mass-based state goals

.

Commenters provided an example of four states worki ng together on a multi-state plan and questioned if compliance would be based on the aver age (or weighted average) goal of the four states, or if every state must meet its individual goal through working with the other states.

Commenters stated that regional compliance will req uire translation of state rate-based targets or mass-based targets to multi-state targets to determ ine compliance on a regional/multi-state basis. Commenters noted that the EPA's guidance to states on methods to convert rate-based targets to mass-based targets is a helpful step forward. Comme nters stated that more guidance will need to be provided to states to help them demonstrate equi valence and understand how multi-state compliance options would work across rate and mass- based boundaries.

Comment 39: AEO2013 reference scenario for future electricity consumption.

Response 39: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.127

The following are summaries of the specific public comments under this comment:

Commenters are concerned about the use of electrici ty consumption forecasts from the reference scenario in the Annual Energy Outlook 2013 ("AEO201 3") from the U.S. Energy Information Administration ("EIA"). The commenters said this re port is based on output from the National Energy Modeling System ("NEMS"), the EIA's primary national forecasting and policy analysis model. The commenters said as a general matter, ene rgy models are powerful tools that can support informed decision-making; in this case, how ever, relying on a single forecast to drive critical methodologies used in the Clean Power Plan creates significant risks. The commenters said for over a decade, NEMS has significantly over estimated national electricity sales.

Commenters stated the AEO2013 reference scenario dr ives the EPA's determination of equivalent mass-based standards for new and existin g sources. The commenters said for states that elect a mass-based target that includes both n ew and existing power plants, the EPA provides an "illustrative approach" to demonstratin g equivalence with the default rate-based targets; the EPA selected the corresponding regions in the EMM module of NEMS and applies the average regional electricity consumption growth rate from the AEO2013 reference case over the period 2012 to 2029 to each state. The commente rs said the EPA then calculates incremental demand for new generation by subtracting historical 2012 sales from these NEMS-derived projections for the year 2029, adjusted for transmi ssion losses and natural gas-fired power plants already under construction. The commenters said the Agency then adds this incremental demand to existing sources, building block 3 contributions (new renewable energy and avoided nuclear retirements), and building block 4 contributions (e nergy efficiency), generating a total called the "Final Mass Equivalent Generation." The commenters said finally, the EPA calculates the equivalent mass-based target by multiplying the Fin al Mass Equivalent Generation (MWh) by the default rate-based targets (lbs CO2/MWh) to gen erate an equivalent mass-based target (lbs CO2); thus, the EPA's treatment of incremental new generation is based on the AEO2013 reference scenario projections.

Comment 40: Import/export patterns among states

Response 40: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated when the Clean Power Plan was ann ounced in June 2014, EPA issued proposed carbon reduction goals using a rate approa ch (i.e., in lbs/MWh), but gave states the option to convert these rate-based targets to mass- based targets (pounds of CO2). The commenters said on November 6, 2014 EPA released fu rther guidance on how states might translate the rate-based goals to mass-based equiva lents; two agency proposed two approaches: one focused on existing units alone, and another th at accounts for load growth and includes emissions from new or incremental fossil fuel gener ation. The commenters said the "Existing128

Affected Sources" approach calculates a generation level for each state based on existing 2012 fossil, renewable, and at-risk nuclear generation, and multiplies this value by the previously determined rate-based target to develop a goal in m etric tons of CO2. The commenters said the "Existing Affected and New Sources" approach is mor e complicated, accounting for load growth and including new fossil-fuel fired sources. This a pproach projects sales based on region-specific load growth rates from the EIA's 2013 Annual Energy Outlook, adjusted for transmission losses, and adds these adjusted sales to the generation ass umed for the "Existing Affected Sources" approach. The commenters said this approach assumes that all new or incremental generation to meet load growth comes from new fossil generation w ithin the state in question. Both approaches calculate a "mass equivalent generation level" in MWh, and multiply this by the EPA's rate-based target to calculate a mass-based t arget in metric tons of CO2. By 2030, the "Existing Affected Sources" approach requires a red uction in 2012 emissions by 608 million metric tons nationwide (31 percent of 2012 emission s). The commenters said in contrast, by 2030, the "Existing Affected and New Sources" appro ach requires a reduction in 2012 emissions by 391 million metric tons nationwide (20 percent o f 2012 emissions). The commenters said required emission reductions in the "Existing Affec ted and New Sources" approach are smaller because it accounts for new generation required to meet growing load. The commenters said this simplified approach does not account for changes in import/export patterns among states, and assumes renewable energy and energy efficiency disp lace generation exclusively within the state in question. The commenters said a more accurate ap proach would use a detailed hourly production cost model to assess such changes on a g oing-forward basis, but this type of analysis
is time and resource intensive.

Comment 41: Who should translate the states' assigned rate-bas ed goals into mass-based goals -
the states or the EPA - and how.

Response 41: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated the translation of a rate-based s tate goal into a mass-based state goal is intended to produce an equivalent value; however, d epending on which assumptions and methodology are applied, a variety of outcomes is p ossible. The commenters said these potential differences impact the stringency of what is requir ed within each state to implement Section 111(d); the commenters asked if the stringency can vary based on available methodological choices, is there truly an "equivalent" value. The commenters said although conceptually simple - Emission Rate (lbs/MWh) * Generation (MWh) = Mass Emissions (tons) - there are at least three thorny aspects to the translation from rate t o mass in practice.

1. Future generation is unknown; like equating speed a nd distance when time is undefined, converting an emissions rate to an equivalent mass of emissions for a future year is challenging because the amount of future electricit y generation is unknown.129

2. Measures that will be enforceable under the state p lan are to be excluded from the projection scenario; EPA proposes the use of a proj ected scenario to convert from rate- to mass-based goals and proposes that any programs tha t will be enforceable under the state plan should be excluded from the scenario; this set s up a decision making loop, where the goal conversion is dependent on decisions to be mad e in developing a state plan to implement the goal.

3. The state goal is not an emissions rate; the conver sion is further complicated because the state goal is not in the form of a simple emissions rate; in setting up a mechanism to credit what is, in essence, a mass-based quantity ( the CO2 emissions avoided through various actions that offset generation and emission s from affected fossil-fired generators), EPA created a new metric for state goals.

The commenters said this quasi-emissions rate inclu des adjustments to account for CO2 avoidance from renewable energy, a portion of nucle ar energy, and end-use energy efficiency measures; the quasi-emissions rate means it is not mathematically correct to simply multiply the rate times generation to get mass emissions, as sug gested in the equation above; this adds another twist to an already challenging problem of determin ing the appropriate generation for converting the rate-based goal to a mass-based goal.

The commenters said such uncertainty has the potent ial to create confusion, lead to delays, and produce inequalities across states; given the tight timing, the importance of state-specific analysis to develop an implementation plan that mee ts state objectives, and the time required for potential collaboration with stakeholders, legislat ures, and other states, it would be detrimental to find out years into that effort that EPA did not fi nd the translation to a mass-based goal approvable.

The commenters said states and stakeholders would b enefit from upfront clarity regarding an acceptable methodology and assumptions, as well as an opportunity to comment on the proposed conversion in a transparent way and before all of t he detailed work is done to analyze, negotiate, and develop a plan; thus, it would be beneficial fo r EPA to clarify both (a) the proposed methodology for converting from rate- to mass-based goals and (b) the result of applying the methodology to calculate mass-based state goals, su bject to a public notice and comment period.

Comment 42: Who should translate the states' assigned rate-bas ed goals into mass-based goals -
the states or the EPA - and how.

Response 42: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated although EPA recognizes the benef its of market-based mass emissions programs, there are many questions that it will nee d to address to support the use of mass130

emissions targets for 111(d) compliance; while some anticipated that EPA would release a mathematical calculation for translating the rate t argets to mass emissions targets, EPA instead released several technical support documents, inclu ding one that discusses potential analytic approaches for translating from the rate-based emis sions goal to a mass-based goal,[Projecting EGU CO2 Emission Performance in State Plans TSD] an d projecting the emissions performance that would be achieved through state plans.

Commenters added the modeling described by EPA in t he technical support document requires a state to develop assumptions and projections for el ectricity, load growth, cost and performance of electric generating technologies, and transmissi on capability and expansion; electricity system modeling is regularly done but is no small task and states would not only be developing assumptions for their state, but also other states in their region or power pool. The commenters said while the state-specific burden is lessened fo r states developing multi-state plans, assumptions still be need to be made for neighborin g states to those in the multi-state plan. The commenters asked how much will these assumptions va ry in different state modeling and how could these differences impact the mass emissions t ranslation across states; one thinks EPA will want some consistency in modeling approaches, resou rce and load, and new transmission build assumptions.

Commenters added the modeling process includes a re ference case, alternatively called a baseline case, and a mass-based emissions policy sc enario where the mass emissions target is generated by applying the rate-based goals; there i s also a state policy plan case. The commenters said clarity on which current state poli cies and plans are included in the reference case versus the state plan case is necessary; EPA m ust provide that clarity in a way that does not penalize early movers. The commenters said if an ea rly mover's energy efficiency, carbon reduction, and renewable energy programs are incorp orated into the reference case, it follows that all on-the-books programs are taken as part of the baseline introducing a serious first-mover penalty.

Commenters stated another area for clarification is the calculation of a regional target from individual state rate targets. The commenters asked if modeling is necessary to determine the emissions targets, do states model the individual s tate rate targets, or model a regional target to determine the mass emissions; should the regional t arget be weighted by each state's contribution to fossil fuel generation (111[d] affected generati on) or total generation; should this be based on past generation (e.g., 2012 generation), or project ed future generation (e.g., 2030 generation). The commenters asked what about 111(b) new sources and the translation to mass emissions; where do they fit into the translation to mass if t he EPA state rates targets are for 111(d)-affected sources; presumably, new sources are excluded unles s a state opts to include them, in which case, presumably, the new sources would be counted in the rate and mass calculations for those 111(b) sources a state opts into its 111(d) program . The commenters said while these questions need to be addressed, EPA should be commended for d eveloping a rule that raises these issues and recognizes the diversity of state energy polici es to achieve real and cost-effective carbon
reductions.131

Comment 43: Who should translate the states' assigned rate-bas ed goals into mass-based goals -
the states or the EPA - and how.

Response 43: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters supported market solutions as the best m eans to drive emission reductions at the lowest cost to the economy; enabling states to conv ert the proposal's rate-based goal to massbased goals is a necessity if states are going to b e able to harness many of the flexibilities the proposal contemplates. The commenters said currentl y, the most effective programs being implemented by states are the cap-and-trade program s of California and RGGI, as well as the utility planning approaches utilized by Colorado an d Minnesota. The commenters said having a mass-based goal is an important starting point for other states to be able to contemplate whether these types of approaches would be the best method for complying with the Clean Power Plan.

Commenters stated as the proposal's technical suppo rt document recognizes, there is not a simple method for making the conversion; a state must unde rgo a very complex and expensive modeling exercise to determine the mass-based equivalent to the proposal's goals. The commenters said unfortunately, because of the amount of effort and resources a state would have to expend to simply determine whether a mass-based goal would be a workable approach, the commenters are concerned that states will forego that option. The commenters asserted that the lack of massbased equivalent goals is a major barrier to region al cooperation. The commenters said due to the state-specific nature of the proposed goals, it is very difficult for states to discuss a regional approach without having a means to make an "apples to apples" comparison of their states' reduction requirements. The commenters said the age ncy should assist states with translating the plan's rate-based goal to a mass-based goal by prov iding a presumptive translation for all states or simply providing standardized guidance on the an alytical tools and assumptions needed for making the conversion. The commenters asserted this information is needed, and has written EPA requesting that the agency provide presumptive mass-based standards for each state. The
commenters asserted this information will inform ma ny states' and businesses' comments on the rule, and it should be provided while they have an opportunity to respond during the formal commenting process. The commenters recognized that developing this conversion requires several specific assumptions to be made as part of the modeling process; this is why the information should be provided while the comment pe riod is still open, and why the goals should be "presumptive." The commenters said if a state wo uld like to challenge any or all of the assumptions that drive the outcome of the conversio n, the state should be able to run their own numbers and justify why the assumptions should be d ifferent; the point is to start the conversation for states and regions to utilize all of the cost-saving, flexible options a mass-based
standard can offer.

Comment 44: Tribes & Territories - Support for conversion to m ass-based goal.132

Response 44: The EPA appreciates the comments of support for co nversion to mass-based goal. The EPA has converted the rate-based goals to mass- based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the final CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated in regards to the supplemental pr oposed rule, supports the ability to convert the Navajo Nation rate-based goal to a mass based g oal, and the ability of the Navajo Nation to enter into multi-jurisdictional agreements with oth er jurisdictions, including states, to allow for the trading of emission credits.

Commenters asserted that a mass-based cap is approp riate for the Navajo Nation.

Commenters recommended the EPA codify mass-based go als for tribal and territorial goals because they believe this approach would facilitate quantifiable, non-duplicative, permanent, verifiable, and enforceable CO 2 reductions at designated facilities.

Comment 45: Tribe & Territories - Impacts of mass-based goal c onversion.

Response 45: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters said EPA states in the Supplemental Prop osal that it expects no additional cost or benefit associated with compliance with the emissio n rate goals on the Navajo Nation. The commenters said this is because EPA does not expect any additional emission reductions, as "The EGUs in the Navajo Nation's area of Indian cou ntry are already expected to meet the proposed goals through compliance with other regula tions...if the goal is converted to a massbased goal". The commenters pointed out that EPA's assumption that there is no cost associated with compliance with the goals is fully dependent o n a fair and equitable method of converting the rate-based goals to a mass-based goal. The comm enters said there would certainly be costs, although no benefit, associated with compliance wit h the rate-based goals as proposed for the Navajo Nation.

Comment 46: Tribes & Territories - The Generation output for p urpose of converting to a MassBased Standard should reflect a representative five year period of operations

Response 46: The EPA has converted the rate-based goals to mass -based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal133

Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based equivalents.

The following are summaries of the specific public comments under this comment:

Commenters stated the Supplemental Proposal anticip ates that, instead of a rate-based standard, a plan could convert the goals expressed under the Pr oposed Rule and the Supplemental Proposal
into a mass based standard. The commenters said one suggested approach for deriving a massbased standard would be to apply the Interim and Fi nal goals (expressed in a rate of lbs/MWh) to the historic operating level determined in the base line period for purpose of establishing the proposed carbon dioxide goals. The commenters said in its November 2014 Technical Support Document on conversion to mass-based standard, EPA applied the 2012 Bonanza generating output of 3,090,432 MWh, the lowest output reported under EIA Form 923 data during any of the 10 years 2009-2013. Instead, the commenters urg ed EPA to apply a representative output level reflecting the generation output over a recen t five (5) year period in converting a rate-based
carbon dioxide standard to a mass-based standard fo r the Uintah-Ouray reservation. The commenters said because Bonanza is the only generat ing unit located in the Uintah-Ouray reservation, and because 2012 constituted a very no n-representative year for generating output at the unit, in converting the rate-based standard to an alternative mass-based standard, EPA should use a multi-year average approach; the commenters u rged that a representative 5 year average output level of generation output be utilized in co nverting to any mass-based standard.

Comment 47: The EPA should allow states to adopt mass-based li mits that incorporate
emissions from new sources

Response 47: The EPA has provided a mass-based goal in the final rule and allows states to consider new sources in demonstrating compliance in the following manner

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The following are summaries of the specific public comments under this comment:

Commenters suggested the EPA should provide an alte rnative mass-based target that incorporates emissions from new sources. Commenters noted that states could then choose to submit plans that include new sources if that appro ach is appropriate to their circumstances.

4.7 STATE FLEXIBILITIES

Section 4.7 covers public comments related to the s tate flexibilities related to the final and interim goals.134

4.7.1 Opportunities to adjust the goals

Section 4.7.1 covers public comments related to opp ortunities to adjust the goals in relation to
state flexibilities.

Commenters have raised a number of issues related t o this subsection which are organized by topics (comments) below. Responses are provided for these topics.

Comment 1: States should develop interim goals and timetables

Response 1: The EPA has modified the interim goals in response to comments and our further consideration. The interim period covers the years 2022-2029 and includes illustrative interim emission values for the periods of 2022-2024, 2025- 2027, and 2028-2029. States have the flexibility to use different steps than those inclu ded in the final rule if the state demonstrates in its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the interim goal included in the final rule for the 202 2-2029 period. See section VII of the final rule preamble for discussion of the statewide goals and section VIII discusses flexibility in demonstrating compliance pathways in state plans

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The following are summaries of the specific public comments under this comment:

Commenters indicated that states should be able to develop their own interim goals. Commenters stated that the 2020 interim goa l doesn't provide enough time for an orderly transition to the 2030 target, and that the EPA mus t allow states to determine the interim goal. Commenters indicated this would allow a glid e path to the 2030 target in a way that ensures reliability and reduces rate shock.

Commenters indicated that the EPA should provide fl exibility to states to develop their own interim targets that are reasonable and cost effect ive, but will still ensure progress is made during the interim period and the final goals are met by 2 030. Commenters said that the earliest the EPA would approve a Missouri plan is June 2017 whic h leaves less than three years from the date of approved plan and the start of the interim goals. Commenters indicated that they are concerned about the long project lead times needed to permit, construct, and begin operating new natural gas units and pipeline capacity. Commenter s indicated that if new transmission lines or natural gas pipelines are needed, these projects ca n take seven to ten years to complete. Commenters said that because each state will have unique circumstances with transmission and capacity issues, the EPA must prov ide states flexibility to modify interim goals, especially if new infrastructure is needed to compl y with the goals.

Comment 2: Interim goal should be eliminated, won't affect co mpliance with final goal135

Response 2: The EPA has modified the interim goals in response to comments and further consideration. The interim period covers the years 2022-2029 and includes illustrative interim emission values for the periods of 2022-2024, 2025- 2027, and 2028-2029, see sections I.A. and VII of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters stated that the interim average complian ce goal should be eliminated, and indicates it would not affect compliance with the final goal.

Commenters indicated eliminating the interim 2020-2 029 goal would give states sufficient flexibility to design workable compliance plans whi ch establish reasonable compliance glide paths consistent with ensuring reliability and prot ecting consumer interests. Commenters said
this would allow states to ensure that there is suf ficient time to complete needed infrastructure development (including electric and/or gas transmis sion) in order to provide reliable power, and would reduce concerns regarding the system impacts of abrupt shifts in dispatch between existing coal- and gas-based units. Commenters indi cated it would eliminate conflicts between the timing of the interim period and legislative ca lendars, market rules and utility investment schedules, and it also would recognize and value re ductions achieved since 2012, encouraging early action where possible.

Commenters stated that the proposed guidelines alre ady are designed to allow states to develop their own compliance plans, and a description of th e reduction trajectory to 2030 is a required element of state plans. Commenters said the EPA can and should use the proposed approach to state plans to ensure that state plans and emission reduction glide paths are designed to meet--- and do actually achieve---the 2030 goals, with the ability to make corrective actions or allow for alternative compliance paths if new technologies or market conditions change requirements. Commenters said the proposed regulat ion does not specify acceptable corrective measures, but suggested that the use of coal ash as a substitute for Portland cement in concrete manufacturing is an ideal measure that a state shou ld promote as a "corrective measure".

Commenters stressed that even without the interim a verage compliance goal, the EPA would be able to disapprove proposed plans and glide paths t hat do not meet the minimum requirements and that do not demonstrate satisfactorily how the 2030 goals will be achieved. Commenters indicated that other elements of the EPA's proposed approach to state plans ensure that states make reasonable and verifiable progress toward the 2030 goal, report that progress to EPA and
take corrective measures if needed. Commenters said that ultimately, if states do not show progress toward the 2030 goal, EPA could call for a state to revise its compliance plan or implement its own federal plan.

Comment 3: Interim compliance goal should be eliminated, and states should be allowed to determine their own reduction glide paths and miles tones to achieve the 2030 goals, subject to EPA approval. States should be given the flexibili ty to modify compliance plans and glide paths to address changing technology and the needs of the interconnected power system.136

Response 3: The EPA has modified the interim goals in response to comments and further consideration. The interim period covers the years 2022-2029 and includes illustrative interim emission values for the periods of 2022-2024, 2025- 2027, and 2028-2029. States have the flexibility to use different steps than those inclu ded in the final rule if the state demonstrates in its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the interim goal included in the final rule for the 202 2-2029 period. See section VII of the final rule preamble for discussion of the statewide goals

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The following are summaries of the specific public comments under this comment:

Commenters said eliminating the interim compliance goal and allowing states to determine their own reduction glide paths and milestones to achieve the 2030 goals, subject to EPA approval, would provide states with flexibility in designing their state plans to reduce emission rates. Commenters said this approach would allow states to determine not only which actions and measures to pursue to reduce emission rates, but al so to choose a reasonable schedule for implementing those measures consistent with providi ng safe, reliable, affordable, and environmentally responsible power to customers. Com menters said once approved by EPA, a state's plan, including the emission reduction glid e path, would become federally enforceable. Commenters said states would demonstrate progress t owards the 2030 goal consistent with their projected emission reduction glide path through the annual reporting of emission performance to EPA, taking corrective measures if needed. Commente rs said ultimately, if states could not show reasonable progress toward the 2030 goal, EPA would have the authority to call for a state to correct its plan or issue a federal plan of its own

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Commenters said this approach may allow states suff icient time to complete infrastructure development (including electric and/or gas transmis sion) in order to provide reliable power, and would obviate concerns regarding the system impacts of abrupt shifts in dispatch between existing coal- and gas-based units. Commenters said it would eliminate conflicts between the timing of the interim period and legislative calend ars, market rules, and utility investment
schedules.

Commenters said eliminating the interim compliance average goal does not require a fundamental altering of the proposed guidelines. Co mmenters said instead, the proposed guidelines are already designed to allow states to develop their own compliance plans, and a description of the reduction trajectory to 2030 is a required element of state plans. Commenters said the EPA can and should use the proposed approa ch to state plans to ensure that state plans and emission reduction glide paths are designed to meet and achieve the 2030 goals.

Commenters said states should not be limited to mod ifying plans only to address the failure of a plan element to perform as projected. Commenters sa id states need the flexibility to modify compliance plans and emission glide paths to addres s changing technology and the needs of the interconnected power system. Commenters said as EPA notes, as long as states can continue to demonstrate that plans are designed to achieve the 2030 goals, states should be able to propose
modifications. Commenters said the EPA should clari fy the proposed regulation accordingly.137

Comment 4: The EPA should allow states to tailor compliance t imelines to their unique circumstances by eliminating interim targets if sta te can demonstrate sufficient progress towards 2030 goal. Interconnected electric system is very complex and many aspects of proposal haven't fully considered the complexities

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Response 4: The EPA has modified the interim goals in response to comments and further consideration. The interim period covers the years 2022-2029 and includes illustrative interim emission values for the periods of 2022-2024, 2025- 2027, and 2028-2029. States have the flexibility to use different steps than those inclu ded in the final rule if the state demonstrates in its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the interim goal included in the final rule for the 202 2-2029 period. See section VII of the final rule preamble for discussion of the statewide goals

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The following are summaries of the specific public comments under this comment:

Commenters said at its most basic level, use of the four building block as a mechanism to comply with the emission targets is achievable if E PA provides relief on the interim targets. Commenters said if such relief is not provided NC e nergy believes that implementation of BSER must be carefully examined for feasibility. Comment ers said though EPA acknowledges and discusses the complexity of the interconnected elec trical system in its 111(d) proposal, NV energy believes many aspect of the proposal have no t sufficiently considered fundamental principles of wholesale energy markets, resource di spatch and operations, reliability requirements, and integrated resource planning.

Commenters said it is key to the success of this pr oposal that these issues be addressed in greater depth and with greater flexibility in terms of both the time and application of EPA's Building Blocks to accommodate the complexity of the interco nnected electric system. Commenters said flexibility in development of state milestones and glide paths to meet the 2030 target would also serve to reduce the potential for retirement of ass ets prior to the end of their remaining useful lives, thus minimizing cost and impacts to consumer s.

Comment 5: Interim goal requires very steep reductions in emi ssions in too short an amount of time, and such steep reductions early in the progra m could preclude opportunities to implement more cost effective strategies that require more ti me to ramp up. Interim goals should be
eliminated if a state is able to demonstrate suffic ient progress towards the 2030 goal.

Response 5: The EPA has modified the interim goals in response to comments and further consideration. The interim period covers the years 2022-2029 and includes illustrative interim emission values for the periods of 2022-2024, 2025- 2027, and 2028-2029. States have the flexibility to use different steps than those inclu ded in the final rule if the state demonstrates in its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the interim goal included in the final rule for the 202 2-2029 period. See section VII of the final rule preamble for discussion of the statewide goals

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The following are summaries of the specific public comments under this comment:138

Commenters said the interim goal requires too steep a reduction in emissions in too short an amount of time, and therefore interim goals should be eliminated if a state is able to demonstrate sufficient progress towards the 2030 goal. Commente rs said that there are limits to amount RE and EE that can be developed in timeframe allotted, and said if RE projects trigger the NEPA process (likely as >80% of Nevada is federal land), approval for projects could take years.

Commenters said under the current 111(d) proposal, the methodology for establishing the interim emission rate goals requires that emission reductio ns occur by 2020 in an amount equal to the BSER Building Block assumptions for 6% heat rate im provements and increased utilization (redispatch) of existing natural gas resources. Commen ters said in states currently using coal or oil fired resources, this methodology results in a dram atic reduction in emissions that must be implemented by 2020. Commenters said the consequenc es of these dramatic reductions are exacerbated when considering that a state's plan ma y not be submitted for approval until 2018 and approved by EPA until 2019. Commenters said Nev ada and other states may find it difficult to meet their interim goal in 2020 and such steep r eductions early in the program could preclude opportunities to implement more cost effective stra tegies that require more time to ramp up.

Commenters said all coal and other steam boiler gen eration in Nevada is completely displaced by 2020 as result of EPA's target setting exercise. Co mmenters said thereafter, additional emission reductions needed to achieve the proposed rate are based solely on the BSER assumptions for increased renewables and energy efficiency. Comment ers said while NV Energy acknowledges EPA's suggestion that states have the flexibility t o meet the glide path in ways other than the immediate displacement of coal/steam generation, do ing so is simply not achievable in Nevada during the short timeframe allotted. Commenters sai d there are practical, technical and economic limitations to the quantities of renewable energy a nd energy efficiency that could and would need to be permitted and developed by 2020 to suppo rt the continued operation of coal and steam
boilers in Nevada.

Commenters said renewable energy development is fur ther challenged in Nevada because more than 80% of the state is comprised of federal land. Commenters said as a result, any new generation or transmission projects, including rene wable resources, have a high probability of triggering the National Environmental Policy Act (N EPA) process directly or through a connected action, and once NEPA is triggered, it ca n take years to complete the process before a Record of Decision is obtained and construction beg ins.

Commenters said NV Energy recommends that EPA shoul d allow states to tailor their compliance timelines to their unique circumstances by eliminating the interim targets if a state is able to demonstrate sufficient progress toward the 2030 goal. Commenters said by eliminating the proposed interim target, or at a minimum, allow ing all Building Blocks to be phased in over the full compliance period, states could develop an approvable plan to meet the 2030 emissions rate goal on a smoother and less disruptive impleme ntation schedule while still achieving EPA's
ultimate intent.

Comment 6: Commenters said the state goals should be recalcul ated to accurately reflect the limitations on NGCC redispatch and build up in each state.139

Response 6: The EPA has recalculated the proposed goals. See sections V.D., VI, and VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the final CPP for more information about Building Block 2 and the final goals.

The following are summaries of the specific public comments under this comment:

Commenters said in the alternative, states should b e directed to set emission reduction goals for
the affected EGUs in their state that would reflect whether re-dispatch or build-out is available.

Comment 7: Existing EE programs should be recognized and rule should make it easy for such programs to scale up if needed and give them credit for early action; should increase flexibility of State Plans so after final goals are incorporate d can change plan

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Response 7: The EPA has determined that demand-side EE program s (proposed building block 4) are not a component of the final BSER. See secti on V.A of the preamble for discussion of this
issue

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The following are summaries of the specific public comments under this comment:

Commenters stated that existing state and utility E E programs should be recognized if they utilize EPA-approved or equivalent measurement and verification protocols and standards, and the rule should make it easy for such programs to s cale up if needed and give credit for "early action." Commenters said these programs may include , but not be limited to: utility demand-side management (DSM) (or incremental DSM depending on " credit for early action"), energy efficiency (EE) requirements (or incremental EE dep ending on "credit for early action"), EE carve out for ratepayer funded rebates/incentive, o ther highly efficient energy-efficient appliances and equipment upgrades not included in e xisting programs or in states with no programs, and innovative energy savings programs su ch as tree planting.

Commenters said although the Proposed GHG Rule is c lear in that the EPA is not mandating the method an individual state must use to reach the pr oposed CO2 goals, it is clear that the proposed Florida State target of a 38% reduction in CO2 emis sions, regardless of the method or combination of methods chosen by Florida, will impa ct cost recovery/rate impact, thereby impacting Florida's citizens. Commenters said of pa rticular concern to Florida's ratepayers is that comments by EPA officials during press conferences indicate that, once a State incorporates the Final Goals into an EPA approved State Plan, the re sulting targets, and their corresponding costs,
will be inflexible.

Comment 8: States should be authorized to adapt final plans i n future as conditions change. Section 111(d) doesn't require "anti-backs liding" restrictions. Should be able to take into consideration remaining useful life and electr ic system reliability

.140

Response 8: The EPA will allow states, via State Plan submitta l or revision, to adjust their state wide rate or mass goals per unit inventory changes. If applicability review or formal applicability determinations change the status of units in regard s to their inclusion or exclusion in the state’s affected population, the state may adjust the goal. See section VII of the final rule preamble of

the CPP for more information.

The EPA recognizes the need for states to be able t o revise their plans. Plan modification provisions are in section VIII.E.7 of the CPP final preamble.

With respect to the comments on remaining useful li fe, see the response to comment 2 in section

4.7.2.

With respect to comments on reliability, see preamb le sections II.C and VIII.G.2.

The following are summaries of the specific public comments under this comment:

Commenters said states should be given broad flexib ility to adapt their final plans in the future as conditions change. Commenters said in particular, b ecause CAA Section 111(d) does not require that "anti-backsliding" restrictions be adopted as part of a final rule, EPA should not include such a provision, particularly here where EPA offers no support for it. Commenters said not including this restriction would increase states' flexibility by removing an unnecessary constraint on their broad authority to implement the federal emissions guidelines. Commenters said part of that broad authority should be to make pragmatic adjustm ents as circumstances change so long as they achieve the applicable state emission rate goa l consistent with the guidelines.

Commenters said among the pragmatic adjustments tha t CAA Section 111(d) grants states is the authority to establish performance standards that t ake into consideration the remaining useful life existing sources. Commenters said another important factor for states and affected stakeholders to consider will be the impacts of the proposed CO2 guidelines on the bulk electric system reliability. Commenters said providing states with flexibility to adjust their compliance plans to meet their targets while assuring reliability is no t compromised will reduce costs and potential
adverse effects on electric customers.

Comment 9: Existing EGU state goals must be periodically revi ewed and adjusted

Response 9: The EPA agrees with the commenters that under sect ion 111(b) (1) (B), the EPA must review standards of performance for new source s every eight years. While there is no requirement that the EPA review standards of perfor mance for existing sources under section 111(d), the EPA anticipates that changes to perform ance standards for new sources may prompt the EPA to review standards of performance for exis ting sources as well. Whether such coordination is warranted, however, will depend upo n the nature of any changes proposed for new sources when the EPA conducts its periodic revi ew.

The following are summaries of the specific public comments under this comment:141

Commenters stated that the EPA must finalize a comm itment to periodically review and adjust
the CPP State Goals. Commenters indicated that the EPA has ample authority to finalize a commitment for periodic review (and adjustment, if needed) of the Clean Power Plan (CPP).

Commenters stated that Section 111(d) does not cont ain an explicit requirement for periodic review of the existing source performance standards - however, the purpose of the statute, its relationship to section 111(b) which does require r eview every eight years, along with its reference to a section 110 procedure, and longstand ing EPA interpretations requiring periodic review, give the Agency ample authority to finalize a commitment for periodic of the CPP.

Commenters said that for new sources, the Administr ator must "at least every 8 years, review and, if appropriate, revise the [performance standa rds]." Commenters said that in the CPP proposal, EPA recognizes that this "requirement pro vides for regular updating of performance standards as technical advances provide technologie s that are cleaner or less costly." Commenters stated that this same principle applies to the CPP. Commenters said that all of
"section 111 was intended to assure the use of avai lable technology and to stimulate the development of new technology." Commenters stated t hat in order to be consistent with the track of the new source standards, and continue to promot e new technology for pollution control on sources as they age, the CPP similarly must be peri odically updated. Commenters stated that there is support for this idea in section 111(d), w hich requires the EPA to "prescribe regulations, which shall establish a procedure similar to that p rovided in [section 110] under which each State shall submit to the Administrator a plan." Commente rs said that this includes a cross reference to the requirement to revise state plans "from time to time as may be necessary to take account of revisions of such national primary or secondary amb ient air quality standard or the availability of improved or more expeditious methods of attaining s uch standard." Commenters indicated that while CO2 is not a criteria pollutant, the language in CAA section 111(d) requiring a "procedure similar to that provided by section [110]" may be r ead to extend to all section 110 review requirements as well. Commenters stated that theref ore, state CPP plans must also be subject to review when section 111(b) standards are updated an d incorporated in state SIPs.

Commenters contended that this is consistent with E PA's longstanding regulatory framework. Commenters said that the general 111(d) regulations require that, when corresponding new source standard of performance is proposed an emiss ion guideline must also be proposed. Commenters added that the 1975 preamble also states EPA's expectation that there will be subsequent plans submitted after the initial emissi ons guidelines are set.

Existing municipal waste combustion units precedent . Commenters said that the EPA has previously concluded that the periodic review assoc iated with some NSPS is also applicable to an existing source performance standard promulgated under section 129. Commenters said that existing solid waste combustion units are regulated under CAA section 111(d) with emissions limits based on CAA section 112 and must comply wit h all CAA section 129(a) requirements.
Commenters stated that Section 129 does include an explicit five-year periodic review requirement for new sources, but not for existing s ources. Commenters added that however, when EPA finalized emissions guidelines for existin g municipal waste combustors in 1991 under CAA sections 111(d) and 129, the Agency committed t o review the standard four years from the142

date of promulgation as required by the CAA. Commen ters said that this review will include an assessment of such factors as the need for integrat ion with other programs, the existence of alternative methods, enforceability, improvements i n emission control technology, and reporting requirements.

Commenters stated periodic review would ensure emis sions controlled to greatest degree possible. Commenters said that the procedural refe rence to CAA section 110 and the regulations for adoption and submittal of state plans for exist ing sources provide the EPA with ample authority to require periodic review of the CPP. Co mmenters said further, the EPA has a history of including the CAA section 111(b) periodic review requirement when setting CAA section 111(d) emissions guidelines. Commenters said that because the CAA is silent regarding the periodic review of CAA section 111(d) standards, "t he question is whether the agency's answer is based on a permissible construction of the statute. " Commenters said that an agency's interpretation is reasonable if it is not only a lo gical construction of the specific provision but also gives effect to the statute as a whole. Commen ters stated that the purpose of the section 111 is to apply the best system of emission reduction a nd "assure the use of available technology and to stimulate the development of new technology." Co mmenters contended that a periodic review of the CPP would ensure that CO2 from existing powe r plants are controlled to the greatest degree practicable and would spur innovation in pol lution control. Commenters urged the EPA to commit to a periodic review of these standards.

Comment 10: The EPA must allow states to adjust goals to allow for remaining useful life, practical constraints, and technical achievability

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Response 10: These guidelines do not provide for states to make additional goal adjustments based on remaining useful life and other facility-s pecific factors because states can fully consider these factors in designing their plans. Section 111 (d) requires that EPA’s emission guidelines permit the states to consider remaining useful life in applying standards of performance to particular affected EGUs, and does not call for fac ility-specific remaining useful life

considerations to be taken into account in determin ing the levels of emission performance that reflect the BSER. For additional response to concer ns about remaining useful life, and about stranded assets, see the response to comments 1 and 2 in RTC chapter 4.7.2.

The subcategory-specific emission performance rates and state goals in the final emission guidelines are achievable. Since proposal, the EPA has significantly modified its approach to defining the BSER and its method of calculating emi ssion performance rates that reflect the BSER, as explained in final CPP preamble sections V -VII and in VIII.G. The agency has modified the interim goals, including changing the start of the interim period from 2020 in the proposal to 2022 under the final guidelines, in res ponse to comments and further consideration. The interim period covers the years 2022-2029 and i ncludes illustrative interim emission values for phasing in emissions improvements during the pe riods of 2022-2024, 2025-2027, and 2028- 2029. States have the flexibility to use different interim step performance levels than those
included in the final rule if the state demonstrate s in its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the inte rim goal included in the final rule for the 2022- 2029 period.143

Regarding adjustments of state goals, see section V II of the final rule preamble for discussion ofpotential state plan adjustments of state goals . See section VIII.G for explanation of why goal adjustments (which a commenter termed a “safety val ve”) are not warranted for facility-specific considerations such as remaining useful life. Also, see CPP final preamble section VIII.G for a description of a safety valve for addressing electr icity reliability concerns under specified circumstances that is included in the final guideli nes.

We explain our interpretation of remaining useful l ife in section VIII of the CPP final preamble and Section IX of the Legal Memorandum. We explain there that the guidelines do permit states to consider remaining useful life and other facilit y specific factors. The guidelines are designed to permit trading and the creation of interstate em ission markets. We view the remaining useful life consideration as primarily regarding a concern for facilities with relatively short remaining useful lives and the potential that they may be req uired to install prohibitively costly pollution control devices (these guidelines to not impose suc h a requirement). Nonetheless, the agency also conducted a “stranded assets” analysis to dete rmine if commenters’ concerns were correct that the rule would force widespread retirements of units with relatively long book lives. As explained in Section VIII.B.1 of the CPP final prea mble, we found that this need not be the case. This of course may depend on how states choose to d esign their state plans, but it cannot be said that this rule requires the result. Insofar as this comment asserts that this rule will necessarily effectuate a regulatory taking, see the discussion of the Just Compensation Clause in the Legal Memorandum accompanying the final rule

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The following are summaries of the specific public comments under this comment:

Commenters said the EPA's building block approach t o establishing emission rate requirements for states is based on incorrect or inadequately te sted assumptions regarding the generation and distribution of electricity and the ability of part icular sources and electric systems to meet the Proposed Rule's ambitious goals. Commenters said to address these problems EPA must permit states to adjust their goals as necessary given: 1) the remaining useful life of existing high carbon emitting sources; 2) practical impossibilities asso ciated with infrastructure, legal or reliability constraints; and 3) the technical achievability of a given strategy as applied to a particular source or in the context of a particular set of circumstan ces. Commenters also said states should have the ability to modify goals based on actual achieva bility.

Commenters said the EPA's proposal has no safety va lve for states confronted with physical or legal impossibilities, or for states confronted wit h assumed source efficiency gains that are not technically feasible. Commenters said states have t he statutory right and obligation to consider the remaining useful life of existing sources and p rotect their enormous capital investment from a governmental taking, which EPA's Proposed Rule will compel if not amended. Commenters said moreover, EPA's proposal is largely built upon assu mptions regarding redispatch and the ability of states to mandate new infrastructure and generat ion activities that are not always true.

Commenters said the EPA is in no position, on a sou rce-by-source basis, to know: 1) the role specific sources play in the community and in the l ocal electrical markets; 2) the practical and legal constraints that exist in some places to the construction of replacement generation; and 3) the presence or absence of the necessary state law to implement the building blocks. Commenters said without giving states flexibility t o address source-specific concerns, EPA's144

Proposed Rule may unconstitutionally commandeer sta te laws and work an unconstitutional taking by forcing the retirement of assets backed b y decades of multi-billion dollar investment.

Commenters also stated that the final rule must spe cifically allow states to adjust compliance dates for individual generating units based on the remaining useful life of the
facilities. Commenters also stated that the timeli nes in the proposed regulation should be extended in order to provide sufficient time for de velopment of additional natural gas distribution infrastructure (e.g., pipelines).

Commenters said the EPA must give a state the flexi bility to establish its own standard of performance based on, among other things, the remai ning useful life of the existing source to which the standard applies, and indicated that the EPA cannot make the state goals rigid prior to a state completing its evaluation and drafting its Section 111(d) plan.

Commenters stated, throughout their comments is the recurring theme that EPA's proposed building blocks are not achievable in practice. Com menters said, for example, Wisconsin argues that EPA did not consider what is achievable in pra ctice for the specific units being controlled, when the interactions between building blocks are c onsidered, or when applied to individual

states.

Commenters stated, EPA must consider all factors sp ecifically dictated to EPA by Congress under Section 111(d) when setting the BSER and the resulting emission guidelines. Commenters said, these include such factors as cost of achievi ng reductions and impact on energy requirements. Commenters said, a specific example f or Wisconsin is their comment which argues that EPA did not consider the remaining life of coal fired EGUs when considering heat rate improvement capability. Commenters said, many of Wisconsin's EGUs considered for heat rate improvements under the proposed Clean Power Pl an have already been converted to natural gas fired boilers or are otherwise slated for retir ement in advance of the Clean Power Plan compliance date.

Comment 11: The EPA should allow the phase-in of compliance to ols over the entire compliance period, and propose a compliance path to account for their circumstances. This would allow states to take into account remaining u seful lives and retrofits and established early
retirement dates on a timeline that works best for their circumstances

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Response 11: The EPA has modified the interim goals in response to comments and further consideration. The interim period covers the years 2022-2029 and includes illustrative interim emission values for the periods of 2022-2024, 2025- 2027, and 2028-2029. States have the flexibility to use different steps than those inclu ded in the final rule if the state demonstrates in its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the interim goal included in the final rule for the 202 2-2029 period. See section VII of the final rule preamble for discussion of the statewide goals

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For additional response to this comment, see respon se to comment 10 immediately above and to
comments 1 and 2 in section 4.7.2.145

The following are summaries of the specific public comments under this comment:

Commenters said if interim goals are adopted, they should take into account the remaining useful life of existing facilities, recent environmental r etrofits, and established early retirement dates, and one way this can be achieved is by allowing the phase-in of compliance tools over the entire compliance period.

Commenters said as states contemplate ways to achie ve the proposed interim goals, the lack of available compliance options may lead them to simpl y require the retirement of coal resources to achieve compliance. Commenters said however, there are several reasons why this approach is contrary to Section 111(d) of the Clean Air Act, wh ich requires recognition of the remaining useful lives of resources, as well as other provisi ons of the Clean Air Act which may require the installation of major environmental controls or may have resulted in established retirement dates for specific resources. Commenters said to remedy t his, EPA should allow states to tailor their interim goals for their unique circumstances, or, a t a minimum allow the phase-in of compliance tools over the entire compliance period.

Commenters said in part to address issues related t o the interim goals, EPA solicits comment in the NODA on two specific adjustments to the interim goal calculations, aimed at allowing a more gradual phase-in of building blocks 1 and 2 du ring the 2020-2029 period. Commenters said first, EPA proposes that a phase-in schedule could be developed for building block 2 on the basis of whether, and to what extent, additional infrastr ucture improvements are needed to support increased deployment of natural gas-fueled generati on. Commenters said second, EPA proposes that it could take into account the book life of ge neration assets, including the book life of major upgrades to the asset in determining the appropriat e glide path. Commenters recommended that EPA allow states to phase-in all of the tools it ch ooses to use for compliance over the entire 2020-2029 compliance period, and said that EPA shou ld not prescribe nor preclude any of these approaches.

Commenters said the EPA should not attempt to devel op standard or simplified assumptions to
account for each state's need for additional natura l gas infrastructure or the remaining book life of assets in each state. Commenters said rather, EP A should allow states to propose a compliance path to account for their circumstances, which may include, among other things, the need for natural gas infrastructure development, existing li ves of generation assets, and approved
settlements for coal resource retirements. Commente rs said preserving this flexibility would allow states to take into account remaining useful lives and retrofits and incorporate compliance plans for other environmental programs on a timelin e that works best for their circumstances while still meeting the 2030 goal.

Comment 12: States should have ability to adjust state goals a nd determination of acceptable performance to account for changes in load characte ristics arising from shifts in demographics, productivity, and economic growth

Response 12: See response 11 above.146

Regarding the comment on the potential for economic growth to increase emissions, the agency notes that the emission guidelines allow states to adopt rate-based regulatory approaches that limit emissions per unit of generation by affected sources. Also, the agency observes that zeroemitting electricity generation and increases in en ergy efficiency can meet electricity demand in a growing economy without increasing carbon emissio ns from electricity generation.

The following are summaries of the specific public comments under this comment:

Commenters said states should have the ability to a djust state goals and determination of acceptable performance to account for changes in lo ad characteristics arising from shifts in demographics, productivity and economic growth. Com menters said for example, for purposes of demonstrating achievement, the CPP contemplates flu id year-to-year adjustments to reflect measured energy savings attributable to demand-side efficiency efforts, and yet calls for rigid adherence to overall reduction goals established at the outset. (See, e.g., Section I (A) (1) (c)). Commenters said depending on the interaction of eff iciency savings and load growth over time, even the successful deployment of planned measures may well produce results that deviate from projected reductions.

Commenters said load growth projections are premise d on an array of assumptions regarding future conditions that may or may not track the act ual course of events. Commenters said in the event of stronger than expected industrial producti on, or greater increases in population, electric consumption will outpace projections no matter how well-designed a state plan to limit carbon emissions may be or how diligently the measures are implemented. Commenters said conversely, even without any planned measures, emissions would be reduced if industrial production deteriorates, plants close, and state population de creases, but such reductions would be directly contrary to the stated goal of supporting a vibrant and growing economy.

Commenters said the EPA requested comment on how th e consequences of a deficiency in performance should vary depending on the underlying reasons, acknowledging that "a possible scenario is that despite successful plan implementa tion, emissions under the plan turn out to be higher than projected at the time of plan approval because actual economic conditions vary from economic assumptions used when projecting emission performance." (See Section VIII (B) (2) (e)). Commenters said that possibility could arise, for instance, where a mass-based goal is established or an emissions approach to measurement is utilized, and actual demand ends up exceeding projections due to greater productivity, industrial expansion or new employers deciding to locate in the state. Commenters said a state should not be penalized for success in achieving better than expected economic growth. Com menters said productivity gains should be credited when assessing performance in the same man ner and to the same degree that efficiency savings are computed.

Commenters said the proposed rule provides no means of modifying the goals to account for major new industries or substantial economic develo pment. The commenters said Northwest Minnesota may see the development of two large nick el-copper mines and a major steel mill in the early 2020s. The commenters said these projects will be going into an economically disadvantages area and are sorely needed to maintai n a healthy economy in that part of the state. The commenters said it would be very difficult, if not impossible, to accommodate these major new loads and still achieve the very large reductio ns in CO2 emissions mandated for Minnesota147

under the rule. The commenters said the rule must p rovide a mechanism for accommodating the effect of substantial new development.

Comment 13: Final rule should allow states to exercise case-by -case flexibility to issue facilityspecific variances and to adjust state targets. St ates should also have the ability to set emission performance standards and develop longer compliance times

Response 13: See Section VII for a discussion of how inventory applicability concerns and state goal adjustments may interact. See also response to comment 10 above.

The following are summaries of the specific public comments under this comment:

Commenters said that EPA should give states the abi lity to adjust not only the emission limits of the targets but also the dates for implementation.

Commenters said that the approach of allowing state s to exercise their discretion to apply less stringent standards and longer compliance schedules to individual facilities or "class of facilities," would be permissible under the propose d Clean Power Plan as well as under the variance authority of 40 C.P.R. Section 60.24(f). C ommenters said further, Birchwood Power feels that it is important for EPA to eliminate any confusion by specifically recognizing this authority in the final rule or accompanying materia ls as a viable option to avoid stranding assets. Commenters said states are likely to have more comf ort adopting such an approach if EPA speaks to it directly in the final rule.

Commenters said existing IPP coal-fired sources, li ke the Birchwood facility, are at risk of being retired before the end of their useful life, to the detriment of Virginia ratepayers, as well as the project's investors, and EPA should use its authori ty under CAA section 111 (d) and 40 C.F .R. 60.24(f) to allow states to apply less stringent em issions standards or longer compliance schedules due to facility-specific considerations, e.g., unreasonable cost of control resulting from plant age, location or basic process design. Commen ters said if EPA were to recognize that states may utilize the CAA section 111 (d) exemption/varia nce authority for facility-specific
considerations and allow the state emission reducti on target to be adjusted accordingly, reasonable state-specific determinations can be fai rly made and single asset entities can be protected on a case-by-case basis. Commenters also indicated that in the final rule EPA should make it clear that they are not limiting various co mpliance options, such as emission caps, hours of operation limitations or other mechanisms to ach ieve CO2 reductions.

Commenters said EPA's final rule should allow state s to exercise case-by-case flexibility to issue facility-specific variances and to adjust their sta te targets during the variance period accordingly. Commenters said states should also have the ability - consistent with CAA section 111(d) and 40 C.P.R. 60.24(f) - to set emission performance stand ards and develop longer compliance schedules, and indicated that anything other than t hat would impermissibly encroach upon authority the CAA expressly provides the states.

Commenters said states should be able to make any " case-by-case" exceptions based on factors such as: (l) unreasonable costs of control resultin g from plant age, location, or basic process148

design; (2) the physical impossibility of installin g necessary control equipment; or (3) other factors specific to the facility (or class of facil ities) that make application of a less stringent standard or final compliance time significantly mor e reasonable.

Comment 14: Final rule should allow states to adjust both emis sion performance goals and the dates those goals would be implemented; in Florida the cost of CPP could be reduced by >50% by avoiding stranded assets; Florida

Response 14:

The CO2 rates and state goals in the final emission guidelines are achievable. The EPA has modified the interim goals in response to comments and our further consideration. The interim period covers the years 2022-2029 and includes illu strative interim emission values for the periods of 2022-2024, 2025-2027, and 2028-2029. Sta tes have the flexibility to use different interim step performance levels than those included in the final rule if the state demonstrates in its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the interim goal included in the final rule for the 202 2-2029 period.

See section VII, of the final rule preamble for dis cussion of the statewide goals and potential adjustments

.
For response to concerns about stranded assets, see the response to comment 1 in RTC chapter

4.7.2.

The following are summaries of the specific public comments under this comment:

Commenters said that Florida and other states shoul d be given the flexibility to address stranded costs by being allowed to adjust both emission perf ormance goals and the dates those goals would be implemented. Commenters said that the cos ts of the CPP to their consumers could be reduced by over 50% by avoiding stranded assets.

Commenters said that to comply with the FUA of 1978 , many Florida utilities were forced to cancel planned gas-fired units and replace them wit h coal-fired units. Commenters said that their utilities spend over $2 billion to upgrade the unit s to meet CAIR and CASPR, as well at the MATS rule, and the majority of their coal units car ry significant debt and will not reach the end of their expected useful life before the implementa tion of the CPP. Commenters said the proposed regulation would result in significant str anded costs to their utility customers, which
will be reflected in increased electric rates.

Commenters said while Florida consumer-owned utilit ies produce about 20% of the state's energy, they produce about 44% of coal-fired energy . Commenters said if EPA allows states to delay the implementation of the proposed ESPS to av oid stranded assets, we estimate that the costs of the CPP to FMEA utility customers could be reduced by over 50%. Commenters said the CPP should provide sufficient flexibility to states to adjust both emission performance goals and the dates those goals would be implemented.149

Comment 15: States must have flexibility to adjust emission ta rgets to avoid being locked into an approach that does not achieve the most desirabl e emission reductions and that does not account for circumstances that will change between now and the ultimate 2030 target date. EPA should ensure that procedures for plan modification requests by states are not onerous

Response 15: See section VII of the final rule preamble for dis cussion of when states may change their goals. Also see section VIII for discu ssion of state plans.

The following are summaries of the specific public comments under this comment:

Commenters said because power generation and distri bution in California involve so many different moving parts, from weather patterns to co mplex energy delivery systems, it is paramount that California retain its current flexib ility to achieve its commitments under the proposed EPA Clean Power Plan by responding to chan ging conditions as it works towards the target reductions set by EPA. Commenters said an EP A rule that eliminates such flexibility could have the unintended consequence of locking Californ ia into an approach that does not achieve
the most desirable emission reductions and that doe s not account for circumstances that will change between now and the ultimate 2030 target dat e.

Commenters said states should not be locked into a particular path in their initial submissions where circumstances may later warrant a different a pproach. Commenters said hence, during the interim period and after 2030, states should retain the ability to alter their previously-approved plans to take new and significant factors into acco unt, subject to showing that the states will achieve the necessary CPP targets. Commenters said the EPA appears to adopt this approach in its proposal, see 79 Fed. Reg. at 34,917, 34954, pr oposed section 60.5785, but should ensure that procedures for plan modification requests by states are not onerous and that the Agency will be flexible itself in accommodating those requests. Co mmenters said for example, EPA should expressly recognize that economic conditions may ex ist in the future which may change assumptions and estimates regarding power generatio n, emissions and costs, just as it has when it considers situations where actual emissions perform ance may not meet state goals. See 79 Fed. Reg. at 34,907-908 (recognizing that actual economi c conditions may vary from economic assumptions used when projecting emissions performa nce and seeking comment on what consequences should follow if actual emissions exce ed estimates).

Comment 16: The EPA should allow states to adjust their baseli ne and goals, especially any mass limits, in the future to reflect unexpected ch anges in the power sector. Without such adjustments, regional distortions in dispatch of ge neration may occur.

Response 16: See response 15 above.

The following are summaries of the specific public comments under this comment:150

Commenters said that EPA should allow states to adj ust their goals in the future to reflect unexpected changes in the power sector. Commenters said state power sectors may undergo profound, unexpected changes after state plans are developed, such as reduction in hydropower generation due to a major drought, increased electr ical demand due to unanticipated economic growth, or changes in state laws regarding RE and E E programs. Commenters said the EPA should allow states to adjust their baselines and g oals to ensure that state goals are as reasonable and flexible as possible and take changes to the po wer sector into consideration. Commenters said this issue is especially important for states that choose to comply via a mass cap. Commenters said given the impossibility of accurate ly predicting anything a decade into the future, it is essential that EPA allows these state s the option of adjusting their mass-based goals if the projections of energy demand or generation m ade when crafting the plan prove to be
inaccurate.

Commenters said in addition to making it more diffi cult for a state to comply with a no-longerappropriate mass limit, failure to adjust mass limi ts could lead to serious distortions in dispatch of generation within a region and make it challengi ng for neighboring states to meet their own limits. Commenters said this problem would likely b e most severe when neighboring states comply with different types of goals (i.e., mass- v ersus rate-based). Commenters said for example, if one state has an overly restrictive mas s cap and a second state, a neighbor of the first, complied via a rate-based standard, dispatch might be diverted to the second state rather than in the state who’s EGUs were approaching their mass ca ps. Commenters explained this would require the second state to take additional, unplan ned measures (RE, EE, etc.) to balance the increased CO2 emissions and comply with their rate- based goal and may not lead to lower CO2
emissions overall.

Commenters said ideally, EPA would allow states to adjust their baseline and goals at any time when they can demonstrate a reasonable need to do s o. Commenters said however, at a minimum, EPA should allow states to either adjust t heir goals periodically or demonstrate that their goals are still appropriate. Commenters said Wisconsin successfully followed a similar approach to implementation of NOx allocations under the Clean Air Interstate Rule (CAIR) and found that reallocating NOx allowances within our b udget every five years provided additional certainty to utilities and allowed them to meet mor e reasonable limits.

Comment 17: State should be able to modify targets and plan to reflect increased usage of existing NGCC units that offset permanent closure o f out-of-state coal-fired EGUs

Response 17: See section VII of the final rule preamble for dis cussion of when states may adjust their goals.

EPA took a regional approach to quantifying BSER in this final CPP. The NGCC rate derived reflects the expected increase in generation from N GCC block 2. See response 15 regarding adjustments.

The following are summaries of the specific public comments under this comment:151

Commenters indicated that power plant decisions aff ecting a coal EGU in another state can affect NGCC operations in a given state, and this has impl ications for state plans and emission reduction targets.

Commenters explained that for instance a major coal fired power plant in Colstrip in Montana could potentially partially or completely cease ope ration over the next 10 years. Commenters said that because all three of Washington's investo r owned utilities own part of the plant, it is likely that their share of the generation capacity of this plant would be offset at least partially by existing combined cycle power plants located in Was hington and Idaho. Commenters explained that as existing combined cycle power plants ramp u p, they could contribute extra emissions resulting in a higher lbs/MWh final emission rate, even though combined emissions from Washington and Montana would in fact decrease. Comm enters suggested that the EPA allow a state to modify its approved state plan and recalcu late its emission standard to reflect the increased usage of existing NGCC units that offset the permanent closure of out of state coal
EGUs. Commenters indicated this would minimize the inherent penalty a state would face while remaining consistent with the overall goal of the p roposal to ensure that greenhouse gases nationwide, not just within individual states, are reduced.

Comment 18: The EPA must clarify in the final regulation that states can modify compliance plans even if they are meeting goal

Response 18: See section VIII.B. of the final rule preamble of the CPP for the EPA’s response
to this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA must clarify that st ates are not limited to modifying plans only to address the failure of a plan element to perform as projected. Although the preamble clearly states that States can seek EPA approval for modifi ed plans, the proposed regulation as written could be read to limit states' ability to propose m odifications only where a modification is necessary in order to ensure that the emission perf ormance goals will be met. Commenters referred to proposed 40 C.F.R. Section 60.5785, 79 Fed. Reg. at 34,954 ("If one (or more) of the elements of the state plan set in Section 60.5740 require revision with respect to reaching the emission performance goal set in Section 60.5765 a request may be submitted to the Administrator indicating the proposed corrections t o the state plan to ensure the emission performance goal is met.").

Commenters stated that 79 Fed. Reg. 34,917 allows f or states to propose modifications to approved plans to update or alter existing enforcea ble measures or add new enforceable measures. Commenters stated this is an important st ate flexibility as it allows states to address changing circumstances over the long life of compli ance. Commenters stated it is not likely that plans developed in 2016 would reflect the emission reduction options available in 2025, nor could they. Commenters stated plans developed in 20 16 also may not be able to appropriately address the requirements of the interconnected powe r system in the future. Also, commenters stated the implementation of the Building Blocks si multaneously will require fundamental152

changes in how the power system is operated and pla nned---many of these changes cannot be anticipated at the time state plans are submitted a nd before implementation has begun. Commenters stated new generation or energy storage technologies that provide a cleaner, more reliable or cost effective path to achieve the 2030 goals should be allowed to replace existing elements of the state compliance plan. Commenters s tated as EPA notes, as long as states can continue to demonstrate that plans are designed to achieve the 2030 goals, states should be able to propose modifications. [79 Fed. Reg. at 34,917 ( "During the course of implementation of an approved state plan, a state may wish to update or alter one or more of the enforceable measures in the state plan, or replace certain existing meas ures with new measures. The EPA proposes that the state may revise its state plan provided that t he revision does not result in reducing the required emission performance for affected EGUs spe cified in the original approved plan.")]. Commenters stated the EPA should clarify the proposed regulation accordingly.

Comment 19: Some sort of safety valve should be provided for s tates unable to fully comply with performance requirements

Response 19: See section VIII.G. of the final rule preamble of the CPP for the EPA’s response
to this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated that State Implementation Plans s hould be allowed to include some sort of off-ramp or safety valve to guard against unforesee n impacts on reliability and cost. Commenters stated the safety valve provision would apply to those states that - despite their best efforts- cannot fully comply with the pe rformance requirements. Commenters said safety valve modifications could take the form of a relaxation of the performance requirements, exemptions for must run or critically needed units, or extension of time to meet the 2030 requirement. Commenters stated that because the app roach used to develop BSER is untested, the rule must contain such flexibility.

Commenters said the IPM model is inadequate to full y assess system reliability impacts, and the EPA should include flexibility in the final rul e for states and utilities to continue to utilize existing resource and transmission planning process es and tools to ensure reliability is not compromised as a result of complying with EPA's Cle an Power Plan. Commenters said in the event impacts to reliability are predicted, states should be allowed the flexibility to incorporate mitigation measures, including the time to implemen t such measures, into their state plans. Commenters said if reliability impacts are encounte red during implementation of state plans, EPA should allow a reliability safety valve or vari ance process that suspends compliance for those states or entities which make adequate demons trations.

Commenters said that states should be allowed to in corporate safety values into their state plans that allow deviations from the state plan to addres s situations where increases in the cost of electricity exceed a certain amount. Commenters in dicated that Missouri law requires the Air Conservation Commission to consider, among many oth er factors, the consumer impacts of applying an emissions standard and compliance sched ule to an affected source, including any disproportionate electric rate impacts on low incom e populations. Commenters indicated the153

regulation should allow States to consider such eco nomic factors and extend deadlines or adjust target goals as needed to avoid excessive increases in electricity rates.

Commenters said states should be granted a structur ed exemption to allow emissions in excess of their target levels for a declared emergency period such as 2014 Polar Vortex, a major nature gas transmission outage, or a long-term forced outage o f a zero-emissions resource.

Comment 20: The EPA should establish an appropriate "safety va lve" mechanism to adjust the stringency of the program if the assumptions relied upon in setting the goal prove not to be true or have changed due to unexpected circumstances. T here also needs to be a mechanism to adjust for the shutdown of existing nuclear plants when th eir license extensions expire or other major energy development that may increase the carbon int ensity of a state's generating fleet

.
Response 20: See section VIII.G. of the final rule preamble of the CPP for the EPA’s response
to this comment.

The following are summaries of the specific public comments under this comment:

Commenters said the Proposed Rule takes the positio n that the emission goals are binding on the states, and that once finalized, states may not adj ust the goals to make them less stringent. Commenters said the number of assumptions made by E PA in calculating state goals, and the sensitivity of the goal to these assumptions, as we ll as the potential for force majeure events, dictates the need for an adjustment mechanism.

Commenters said the EPA's state emissions goals are based on numerous assumptions and projections about the amount NGCC capacity, RE, nuc lear energy, and EE that states and EGUs could implement in over the next 15 years. These co mmenters said it is very unlikely that any state can make all necessary corrections to these a ssumptions during the rulemaking process. These commenters said in addition, the achievabilit y of the goals is also subject to numerous implicit assumptions about new transmission and pip eline capacity, technology improvement, and, in the case of mass-based goals, limits on dem and growth. These commenters said the sheer number of assumptions, and the sensitivity of state emission targets to these assumptions virtually guarantees that EPA's projections about w hat might be achievable for EGUs in any given state could be significantly incorrect. These commenters said finally, force majeure events, including unanticipated regulatory, weather, or oth er events outside the control of a state's EGUs could significantly disrupt a state's or EGU's abil ity to meet its emission target. These commenters said for example, an earthquake or hurri cane could lead to the extended shutdown of a large base load nuclear facility; similarly a lar ge, unexpected cold-weather event (similar to last winter's Polar Vortex) could constrain natural gas supplies and disrupt a state's plan to redispatch significant generation from coal to NGCC u nits.

Commenters said the EPA should establish an appropr iate "safety valve" mechanism to adjust the stringency of the program if the assumptions re lied upon in setting the goal prove not to be true or have changed due to unexpected circumstance s. Commenters also said the final rule should establish an adjustment mechanism under whic h the EPA, on the basis of an application from a state, could (without having to reopen the r ule) allow states to reflect a change in the154

underlying state goals. Commenters said changes cou ld include decreasing the stringency of the emissions rate goal or extending the compliance dea dline for a particular state in order to mitigate any significant adverse reliability effect s or to reflect changed circumstances that cannot feasibly be offset by other actions within control of the state.

Commenters stated that EPA proposes to finalize the goal for each state as provided in the Proposed rule, but the EPA stated that adjustments to the goal may be appropriate based on comments that implementation of the building blocks at the levels envisioned by EPA is technically infeasible or too costly. The commenter s stated that the state emissions goals are based on numerous assumptions and projections on th e future levels of NGCC generation, RE, and EE states and EGUs could implement in over the next 15 years. They also stated that the achievability of the goals is also subject to numer ous implicit assumptions about new transmission and pipeline capacity, technology impr ovement, and, in the case of mass-based goals, limits on demand growth. The commenters reco mmended that the EPA establish an appropriate mechanism to adjust the stringency of t he state emission goals if the assumptions relied upon in setting the goal for a particular st ate prove not to be true or have changed due to unexpected circumstances.

Commenters said states should have broad discretion to make any changes to their plans so long as they achieve the minimum applicable state emissi on rate goal - the minimum federal requirement. Commenters said providing states with flexibility to adjust their compliance plans will allow states to respond to future constraints while minimizing cost and reliability impacts to
electric customers.

Commenters said in addition, there needs to be a me chanism to adjust for the shutdown of existing nuclear plants when their license extensio ns expire or other major energy development that may increase the carbon intensity of a state's generating fleet. Commenters added that adjustment should also be allowed to account for an order by another federal agency or during drought

Comment 21: States should have the authority to increase emiss ion rates because of new fossil fuel fired generation added during the time period January 1, 2012 through January 2014.

Response 21: See section VII of the final rule preamble of the CPP for more information about when a state may adjust its goals. The EPA has inco rporated fossil fuel units that commenced construction prior to January 8, 2014 in its quanti fication of BSER. These values are also incorporated into the conversion to state and mass goals. Therefore, EPA does not believe a state would have the need to make any further adjustments on this front.

The following are summaries of the specific public comments under this comment:

Commenters said the draft guidelines appear to crea te a window between January 1, 2012 and January of 2014 where new generation can come on-li ne and the state not receive recognition for higher levels of emissions. Commenters said generat ion that came on line during that period is not fully reflected in the baseline year. Commenter s said additional emissions during that period because of the plant will have to be fully absorbed by the state and the other generators - those
conditions could not have been foreseen even two or three years earlier. Commenters suggested155

that the final regulation should allow states to in crease emission rates because of new fossil fuel fired generation during this unaccounted period.

Comment 22: Goal adjustment should be allowed for more than ju st demonstration of increased

cost.

Response 22: See section VII of the final rule preamble for dis cussion of how states can adjust their goals.

The following are summaries of the specific public comments under this comment:

Commenters indicated that overall achievability, an d not just cost, should be allowed to be considered in determining the need for target modif ication. Other commenters suggested that goals should be allowed to adjust based on other fa ctors.

Commenters stated that as written, the rule indicat es that EPA will only modify a proposed target upon a showing that the cost to comply was s ignificantly higher than that proposed by
EPA. Commenters contended that overall achievabili ty that does not adversely affect reliability is perhaps an even greater factor than just increas ed cost. Commenters stated overall achievability can include matters such as: feasibil ity and effectiveness of a measurement and verification protocol for EE; time needed to constr uct major transmission upgrades, regulatory approvals needed to ensure timely cost recovery of efficiency improvements at power plants; marketing of EE program, and the deployment and sit ing of new natural gas infrastructure and renewable resources. Commenters stated that the pr oposed evidentiary burden for target modification in the proposed rule is too narrowly d rawn and should be expanded to include more than just significantly increased costs.

Commenters said that as required by the statue and existing regulations, States must be granted flexibility in establishing state goals that includ e goal adjustment based on state-specific or
unforeseen circumstances as well as consideration o f specific facts applicable to designated facilities including remaining useful life. Commen ters indicated that the EPA allow states an opportunity to file for relief and for a change to interim or final goals if necessary, based upon changed circumstance or good cause shown.

Commenters recommended that the EPA set guidelines allowing each state the flexibility to tailor the requirements to address the unique chara cteristics of its energy infrastructure and maintain fuel diversity. Commenters also said that the guidelines must respect the primacy of the states by allowing states to develop plans that establish performance standards and discretion and flexibility in establishing compliance mechanis ms.

Commenters stated that the EPA should allow states to modify their plans if they wish to do so. Commenters indicated that they expected that s tates may wish to amend their plans so they can continue achieving the most cost-effective emis sions reduction possible, especially if new technologies become economically viable during the implementation period.156

Commenters indicated that when economic conditions have changed substantially, or if growth assumptions have resulted in underestimating CO2 em issions due to robust economic activity, states should be eligible to revise state plans to more accurately reflect program costs and performance, and to reflect current conditions.

Commenters indicated that in the event of a fundame ntal change in system configuration the EPA should allow states to adjust their goals. Acc ording to commenters such changes could
result from unforeseen and unavoidable loss of zero CO2 emitting generation resulting from nuclear or RE EGUs shutting down due to circumstanc es beyond anyone's control such as due to earthquake or tornado. Commenters indicated that s uch adjustments would be necessary due to the higher fossil fuel consumption that would be re quired for some time as the system increases generation from existing power plants to continue t o ensure reliability in the absence of a significant amount of energy and capacity.

Comment 23: The EPA should include an explicit mechanism for u pdating state goals after rule
is finalized

.
Response 23: See response 22 above.

The following are summaries of the specific public comments under this comment:

Commenters said that the goals set by the EPA may n eed to be changed after each state has had an opportunity to conduct a state-specific analysis . Commenters stated that EPA should include an explicit mechanism for updating state goals afte r the final rule. The commenters noted that EPA's state goals are based on numerous questionabl e assumptions and projections about the amount of heat rate improvements, NGCC capacity, re newable energy, nuclear energy, and energy efficiency that states and EGUs could implem ent in the future. The commenters stated that the achievability of the goals is also subject to numerous implicit assumptions about new transmission and pipeline capacity, technology impr ovement, and, in the case of mass-based goals, limits on demand growth. The commenters stat ed that the sheer number of assumptions, and the sensitivity of state emission targets to th ese assumptions virtually guarantees that EPA's projections about what might be achievable for EGUs in any given state could be significantly incorrect. The commenters stated that force majeure events, including unanticipated regulatory, weather, or other events outside the control of a s tate's EGUs could significantly disrupt a state's or EGU's ability to meet its emission target. The c ommenters noted that for example, an earthquake, hurricane, or cyber-attack could lead t o the extended shutdown of a large baseload nuclear facility; similarly a large, unexpected col d weather event (similar to last winter's Polar Vortex) could constrain natural gas supplies and di srupt a state's plan to redispatch significant generation from coal to NGCC units. The commenters stated that despite the substantial likelihood that the assumptions underlying EPA's de termination of state goals will turn out to be significantly incorrect, EPA has failed to provide an explicit mechanism for adjust state goals to address unanticipated difficulties in meeting the g oals. The commenters stated that if EPA persists in requiring state emission rates to be no less stringent than the EPA guideline, EPA should provide an explicit mechanism for states to request a change to their emission target after finalization of the Proposed Rule. The commenters s tated that EPA should also include a specific157

safe harbor mechanism for states and EGUs that woul d excuse their failure to meet the federal goal in cases of force majeure.

Comment 24: Flexibility for unforeseen circumstances, as it re lates to RGGI

Response 24: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters said that in several sections of the pro posed rule EPA uses the Regional Greenhouse Gas Initiative (RGGI) as an example of h ow a multi-state or mass-based approach to reducing emissions can be successful and economical ly sustainable, and the EPA indicates that RGGI participation may be used as a component of a state's or region's compliance plan. Commenters stressed that membership in RGGI is voluntary, and is a cooperative effort
between member states. Commenters said that the EPA has not considered the possibility that a member state may withdraw from the group at any tim e, and thereby alter the effectiveness of the compliance plan for the remaining members. Comm enters asked "If the actions required of members are part of an enforceable compliance plan, and the region or group is thrown out of compliance by the action of one member state, would the remaining member states then be subject to federal enforcement action, despite the fact that the non-compliance was due to action by a different state."

Commenters indicated that the EPA must incorporate provisions into the final rule to allow states the flexibility necessary to respond to unanticipat ed circumstances. Commenters stated that flexibility is needed in cases where markets are im pacted by extreme weather events, fuel shortages or other events beyond the control of sta tes or sources, and that provisions are needed to avoid conflicts between a mandate for compliance and the necessity of assuring continued reliability of the electric power grid. Commenters indicated that providing a framework for states to develop compliance plans that incorporate suffic ient flexibility is an essential component of the future stability and reliability of power grid operations. Commenters stated that the proposed rule must acknowledge that factors beyond a state's control may affect compliance, and must provide a mechanism to allow states sufficient flex ibility to respond to such circumstances.

Comment 25: To simplify the adoption of Regional Greenhouse Ga s Initiative (RGGI) as a compliance mechanism for CPP, final rule should con tain a reset provision similar to that in RGGI program

.
Response 25: The EPA is finalizing subcategory-specific emissio n performance rates, ratebased, and mass-based state goals as explained in s ections VI and VII of the final rule preamble.158

The following are summaries of the specific public comments under this comment:

Commenters said to simplify the adoption of RGGI as a compliance mechanism, the final rule should contain a reset provision similar to that in the RGGI program.

Commenters said the RGGI states constructed the pro gram at the outset with the understanding that any pioneering effort could require change ove r time. These commenters said for this purpose, the original agreement among the states ca lled for a program appraisal, or "reset", at specific time intervals, and said the reset provisi on was intended to ensure that the program could adjust to changing circumstances and forestall unin tended consequences. These commenters said in the reset process completed in 2013, for instanc e, a series of public and transparent studies revealed that the original emissions cap (and assoc iated allowance budgets) was no longer relevant to the circumstances "on the ground" due t o extensive natural gas use, successful energy efficiency and renewable energy programs, and econo mic shifts. These commenters said these
same studies indicated that in order for the emissi on allowance price to have an effect on generator decision-making, a process for bringing b anked allowances into the marketplace was needed. These commenters said these and other chang es to the program were executed in all the participating states during a two-year process.

Commenters said similarly, EPA should recognize in its final rulemaking that there are changes in the electric power market that are unforeseen at the present time, and that states that adopt a mass-based Existing Source Performance Standard com pliance approach should be provided with an opportunity to revisit the mass-based cap c hosen in their state plans on a periodic basis. These commenters said for example, the feasibility of electric transportation may improve dramatically with specific advances associated with battery technology, and in such a case, electric demand could increase significantly even a s economy-wide emissions may plummet. These commenters said RGGI states should have an op portunity to revisit their electric sector emission caps to respond to such an environmentally -positive development. These commenters said in the same manner, sudden changes in natural gas prices, or the unexpected loss of a significant portion of the nuclear generation fleet may lead to a need to reset the carbon dioxide emission cap to avoid unsustainably high power pric e impacts. These commenters said finally, a change in the number of states participating in the RGGI program may trigger a recalibration of the program so that it continues to serve as a 111( d) compliance mechanism; the EPA should recognize that this outcome is also unforeseen at t he present time.

Comment 26: Small electric providers

Response 26: Small electric providers are subject to the same s ource category rates as all other providers if they meet applicability criteria estab lished in Section IV.D. However, states have the flexibility to distribute reductions among its EGUs in the manner it best sees fit. Please see section XII.C. of the preamble for more information regarding the impact to small entities

.
The following are summaries of the specific public comments under this comment:

Commenters indicated small electric providers have special considerations.159

Commenters said that in June 2011, EPA convened a S mall Entity Representative (SER) panel with respect to its rulemaking on NSPS for new and existing units. Commenters indicated that this process was held pursuant to the requirements of the Small Business Regulatory Enforcement and Fairness Act (SBREFA), which is int ended to provide small businesses flexibility in meeting federal regulations. Comment ers said that though this process was not completed by EPA in 2011, Commenters filed comments that are relevant in this proceeding. According to commenters, more than 90 percent of pu blic power utilities qualify as small
businesses under SBREFA. Commenters indicated that they also offers these comments for review under the Regulatory Flexibility Act (RFA) a nd calls for consideration by the EPA, as well as by state agencies, of the many special gove rnance issues, bond, debt management, and local governmental obligations that are to be consi dered under the RFA.

Commenters stated that the rule must provide the fl exibility necessary to ensure that small electric providers - most of which are cooperatives or municipal systems that tend to have very small generation fleets largely dependent on a sing le plant - have compliance options that are achievable, to avoid putting them at a disadvantage . Commenters suggested that state agencies may want to set up subcategories or special practic es and other measures to address unit concerns, and in particular, those utilities with s mall single units. Commenters said that these should include unit-by-unit determinations by state agencies that factor the size of unit, age, remaining useful life, and feasibility of the reduc tion measures since they cannot easily accomplish the reduction goals. Commenters said tha t in addition to the pollution reduction methods, state agencies should allow for reasonable methods of monitoring and verification for energy efficiency to avoid measures that are very b urdensome and/or expensive for very small utilities. Commenters pointed to the analysis provi ded by Professor Bradford Cornell for FTI Consulting that addresses the unique impacts of CO2 reduction measures for public power (municipal and electric coop) as well as some other for profit utilities.

Commenters stated that, instead of allowing states to conduct a unit-by-unit analysis to determine what they can reasonably achieve in emission reduct ions, the EPA proposed to establish statewide goals that assume all sources can achieve the goal. The commenters explained that, if the state determines that a cooperative or other ut ility cannot achieve the prescribed goal, other utilities would need to make up the difference, and that this removes any incentive for a state to fairly evaluate what an individual utility could ac hieve and set its requirement accordingly.

Commenters indicated that specifically, the EPA nee ds to be aware of the fact that there are numerous small municipal systems that have only one generation resource under 100 MW today. Commenters said that the implications for those com munities under the Proposed Rule are particularly grave as those municipal systems do no t have the flexibility to rely on other units.

Commenters indicated that since Section 111(d) call s for the consideration of compliance costs, the EPA must take into account the unique impacts t hat any final rule will have on public power utilities owning only coal-fired power plants. Comm enters also suggested the EPA review 2014 paper written by Professor Bradford Cornell, for FT I Consulting, regarding the potential impacts to public power, rural electric cooperative utiliti es, and other utilities as a result of a regulatory system with no effective control technologies or ot her options to reduce CO2 economically.160

Commenters indicated that large utilities generally own numerous jurisdictional EGUs, and this variety of ownership in their generating fleet presents other advantages that small utilities simply cannot employ. Commenters indicated that forexample, they can implement both plantwide and fleet-wide measures to achieve emission re duction requirements. Commenters stated that moreover, large utilities with multiple plants within their fleet can maintain flexibility to meet load from certain resources when output for ju risdictional resources is necessarily reduced when achieving required emissions reductions. Comme nters indicated that because of these difference, states should be permitted and encourag ed to shape their respective SIPs in such a way that assists small utilities to provide them wi th flexibility in implementing the Proposed Rule that is already inherent in large utilities' a bility to implement the Proposed Rule. Commenters said that increased flexibility will not soften the requirements of the Proposed Rule, but will instead afford the states the authority to revise certain requirements in addressing special considerations unique to small utilities.

Commenters said the EPA established four "building blocks" as their interpretation of the BSER which will be difficult for the cooperatives to mee t. Commenters said that, even though the reduction goals vary considerably, the requirements give the states little leeway on how to achieve the EPA's goals. Commenters said the rural electric cooperatives' limited generation portfolio will be unable either cost-effectively im plement or technically achieve the building blocks because of their reliance on coal-fired gene ration, and other practical realities limit cooperatives.

Commenters stated that, EPA has significant flaws i n each of the building blocks that negate the EPA's perceived flexibility. Commenters said that, EPA needs to recalculates the goals for each state based on what building blocks each state can achieve. Commenters said this recalculation will help mitigate some of the changes faced by coo peratives and other utilities.

Comment 27: Unique challenges faced by small municipal utiliti es warrant adjustments to proposed rule – the EPA must recognize states role in establishing targets and must limit BSER to the source-specific technological and operationa l measures that Congress contemplated

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Response 27: Small municipal utilities are subject to the same final goals as all other utilities. Please see section XII.C. of the preamble for more information regarding the impact to small
entities

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The following are summaries of the specific public comments under this comment:

Commenters said the challenges faced by small munic ipal utilities can be minimized by allowing states a role in developing emissions targets. Com menters said as a small municipal utility whose principal generating resource is a single coa l fired unit (Sherco 3) in which it owns only a minority stake, Southern Minnesota Municipal Power Agency (SMMPA) faces unique obstacles in complying with EPA's proposed Clean Power Plan w hile still providing its customers an affordable supply of energy. Commenters said as dra fted, the Proposed Rule will likely result in either the curtailment or shutdown of Sherco 3, whi ch has historically provided approximately 2.5 million MWh of base load generation to SMMPA's members on an annual basis.161

Commenters said the curtailment or shutdown of Sher co 3 would, at best, severely hamper SMMPA's ability to provide affordable power to its customer base and, at worst, frustrate that ability entirely. Commenters said these outcomes ca n best be minimized, or possibly avoided altogether, by recognizing the States' assigned rol e in the process of establishing and applying standards of performance to existing sources and by limiting BSER to the source-specific technological and operational measures that Congres s contemplated and EPA has long recognized

Comment 28 : States must be able to update the mass goal based on the rate-to-mass conversion, if demand increases differently than projected

Response 28: The EPA is finalzing mass goals as explained in se ction VII of the preamble.

The following are summaries of the specific public comments under this comment:

Commenters supported the concept of being able to c onvert from rate to mass to establish the state goal. Commenters said that projecting the dem and for electricity in a state 20 years from now cannot be done with accuracy - technology and e lectricity demand can change quite dramatically over such a long horizon. Commenters s aid that for this reason and others, there may be hesitation to adopt a rate-to-mass goal conv ersion. Commenters said that if there is a provision for a mass-based goal conversion there mu st also be an ability to update the mass goal based on the conversion, should the demand for elec tricity increase differently than projected.

Comment 29: Determination of RE potential and ability of state s to alter their renewable energy goals

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Response 29: The EPA has revised the proposed goals taking into consideration several RE adjustments brought up by commenters. See section V.E. of the final rule preamble of the CPP for more information about the changes to Building Block 3 and the CO2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule su pporting the final CPP for how the final goals were calculated.

The following are summaries of the specific public comments under this comment:

Commenters said that that there are significant log istical issues associated with adding new renewable resources which may preclude states from meeting the proposed goals. To address this uncertainty Commenters requested that EPA include a provision allowing states to seek adjustments to their renewable energy goals in conn ection with the state plan development and approval process upon a demonstration that such goa ls are technically infeasible. Commenters said such a provision would protect states and elec tricity consumers from unintended reliability issues or unreasonable costs associated with trying to meet a standard that is technically infeasible, while retaining EPA's ultimate authorit y to determine whether the goal revision is appropriate.

Commenters said the EPA should allow states to dete rmine their own renewable potential, including transmission availability, and integratio n schedules based on thorough state specific162

and regional analyses and interest from renewable d evelopers. Commenters said if states are not allowed to determine their own RE potential, then t he EPA should evaluate the RE potential of each state independently.

Commenters said because EPA accounted for hydropowe r production by including it in setting renewable energy and energy efficiency goals, EPA s hould not penalize states with hydropower by not allowing them to use hydropower for complian ce. Commenters said instead, EPA should give states the flexibility to use existing hydropo wer to demonstrate compliance with the state goal.

Comment 30: States should have the authority and flexibility t o adjust EE goals to reflect what is realistically achievable. If EPA uses proposed methodology for calculating EE savings, there must be a mechanism for adjusting state rate goals if the import/export allocations between states change significantly

Response 30: The EPA has determined that demand-side EE program s (proposed building block 4) are not a component of the final BSER. See secti on V.A of the preamble for discussion of this
issue

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The following are summaries of the specific public comments under this comment:

Commenters recommended that the EPA change the prop osed rule to give states the authority and flexibility to consider regional customer and e nergy demand profiles and accordingly adjust energy efficiency goals included in Building Block 4 to reflect what is realistically achievable.

Commenters said EPA asks if states that are exporte rs, whether they should have to scale up the EE savings to establish BSER in order to ensure all EE is included in BSER goals. Commenters said this methodology requires that the remaining M Wh of avoided generation due to EE be
allocated to the various states from which North Ca rolina imports. Commenters said using this approach to calculate BSER goals, which are fixed o nce the rule is promulgated, assumes that all states will maintain the same in terms of their imp ort/export relationships through 2030. Commenters said given the changes in generation, co sts, and usage that may develop as a result of this significant rule making, this assumption ap pears highly inaccurate. Commenters said if EPA adopts such a methodology, NCDENR recommends pr oviding a mechanism for correcting state CO2 rate goals if the import/export allocatio ns between states change significantly.

Commenters believed that states should be able to a djust their EE goals over time. 23541 noted that it is impossible to predict what level of EE s avings will be achievable on a sustained basis over decades. Commenters stated that at some point, states may reach a point of diminishing returns where achieving additional energy savings b ecomes cost-prohibitive. Commenters suggested that if a state discovers that it is reac hing that point and can demonstrate this to EPA, EPA should allow the state to adjust our EE goal to be less stringent. Commenters stated that having the ability to make this kind of correction would recognize the savings already achieved by leading states and make the EE goals more equita ble among states.163

Comment 31: Commenters said States should retain the flexibili ty to choose whether RE and Energy Efficiency (EE) measures should be subtracte d from the numerator or added to the
denominator.

Response 31: The EPA has determined that demand-side EE program s (proposed building block 4) are not a component of the final BSER. See secti on V.A of the preamble for discussion of this issue. Renewable energy remains a component of the final BSER. See the CO2 Emission Performance Rate and Goal Computation TSD for CPP F inal Rule supporting the final CPP for the final goals and more information on how they we re calculated.

The following are summaries of the specific public comments under this comment:

Commenters stated the Nevada Agencies favors allowi ng states the flexibility to choose whether
RE and EE measures should be subtracted from the nu merator or added to the denominator.

Comment 32: State-specific concerns and advances in technology may require goal adjustments

Response 32: The EPA maintains that the final rule provides amp le flexibilities to states to comply with the goals and that adjustments are not needed. States are allowed to use the BSER measures, or other measures in their state plans to comply with the goals; there are flexibilities within the BSER measures and how they are executed; and states also have non-BSER measures at their disposal. See sections V and VIII.A of the final rule preamble of the CPP for more information. With respect to adjustments for hydro intensive states, EPA has incorporated this concern into adjusting its baseline levels for hydr o intensive state and believes this will accommodate fluctuations in hydro generation in tho se states in future years, as discussed in section VII of the final rule preamble.

The following are summaries of the specific public comments under this comment:

Commenters indicated that which compliance pathways are available to each state and to what degree varies significantly, and emphasized that ea ch Western state has a very different profile when it comes to electricity production. Commenter s said that some western states rely heavily on hydropower and natural gas generation, while oth ers generate electricity mostly from coal,
and these differences translate into differences in appropriate compliance pathways.

Commenters indicated that the EPA must be able to a djust the goals as appropriate under
warranted circumstances. Commenters indicated that because RE and EE technologies change over time, requiring 70 percent utilization of exis ting NGC under BB2 may not be necessary in the future. Commenters said that similarly to assu me that 40 year old nuclear plants can continue to operate indefinitely is unrealistic and inappropriate. Commenters stated that to require permanence of programs of this nature is un reasonable and short-sighted.

Comment 33: Grid reliability concerns164

Response 33: The EPA maintains that the final rule provides amp le flexibilities to states to maintain grid reliability. States are allowed to us e the BSER measures, or other measures in their state plans to comply with the goals; there are fle xibilities within the BSER measures and how they are executed; and states also have non-BSER me asures at their disposal. See sections V and VIII.A of the final rule preamble of the CPP for mo re information.

The following are summaries of the specific public comments under this comment:

Commenters indicated that the final rule should spe cifically grant states some level of flexibility in achieving compliance if adjustments are needed t o maintain grid reliability or respond to changes in energy market conditions.

Several commenters stated that the schedule should be extended to allow a reasonable opportunity for compliance to allow flexibility for the continued operation of base load generation where it is needed to support reliabilit y.

Comment 34: General goal setting, prioritization and adjustmen t comments

Response 34: See preamble section VIII for a discussion of stat e flexibility in state plan

submittal.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA should allow states to set less stringent performance standards and longer compliance schedules, and states should be given maximum flexibility by the EPA to implement CO2 performance standards for fossil-fuel ed power plants within their jurisdiction.

Commenters indicated that states should have a larg er role in how the final emission targets are established because the goals will require states t o make changes in the way they dispatch electricity and manage nuclear and renewable power assets. Commenters said that states are in a better position to determine the feasibility of som e of the EPA assumptions.

Commenters suggested that EPA use a tiered-set of h igher-to-lower priorities for approving state implementation plans in an expanded set of building blocks for BSER measures. Commenters indicated the EPA should place a higher priority on energy efficiency and substitution of coal and natural gas with clean energy generation source s of wind, polar photovoltaic, biomass, and biogas.

Commenters strongly supported the ability, given to states by the proposed rule, to administratively adjust the requirements for indivi dual EGUs in their State plan.

Commenters said the EPA should allow states to prop ose alternative timelines for meeting their interim targets if, and only if, a preexisting and binding compliance agreement involving an existing generating unit is in effect.165

Commenters encouraged EPA to move forward with the CPP, but indicated that the state targets may have to be adjusted in a few years. Commenters suggested EPA consider strengthening the regulation further.

Comment 35: Non-transmission alternatives and tiered set of pr iorities

Response 35: The EPA is providing the states with ample flexibi lities to comply with the final goals. States are allowed to use the BSER measures, or other measures in their state plans to comply with the goals; there are flexibilities with in the BSER measures and how they are executed; and states also have non-BSER measures at their disposal. See sections V and VIII.A of the final rule preamble of the CPP for more info rmation.

The following are summaries of the specific public comments under this comment:

Commenters suggested the EPA should encourage non-t ransmission alternatives, and should develop a tiered-set of priority steps for states t o use in planning.

Non-transmission Alternatives. Commenters suggeste d that an opportunity may exist for the EPA and the Federal Energy Regulatory Commission (F ERC) to coordinate with the states through the requirement to develop state implementa tion plans to comply with the Clean Power Plan. Commenters said that there may be some crossw alk opportunities with requirements for regional transmission planning under the FERC 1000 rule, which requires consideration of nontransmission alternatives (NTAs or Non-Transmission Solutions) during regional transmission planning. Commenters indicated that NTAs are resour ces that can replace the need for additional transmission through energy efficiency, demand resp onse, distributed generation, or centralized generation sited near load. Commenters said that th e additional benefits of NTAs are avoided energy costs, reduced wholesale electricity costs, reduced air pollution and water usage, and avoided land use and siting issues. Commenters indi cated no ready source of funding or cost allocation methodology exists for non-transmission issues, and suggested that the economic and
environmental benefits of NTAs could be calculated under research and formulas developed during a collaborative step by EPA, FERC and the st ates. Commenters said a memorandum of understanding between EPA and FERC with a linkage t o language in the final rules for the Clean Power Plan could simultaneously address gaps in gri d reliability issues, regional energy planning (specifically transmission planning under FERC 1000 ), add a requirement to develop a
calculation of costs and environmental benefits of reduced air pollution (including greenhouse gas reductions) and reduced water usage from the gr eater use of NTAs, and some requirement for participation of public utility commissions and state air and water quality regulators to participate in mutual planning processes. Commenter s suggested that perhaps a portion of this work encouraging NTAs falls under the EPA creating in the final rule a tier-system to prioritize a Best System of Emission Reduction (BSER).

Tier-set of Priorities. Commenters said the propose d building blocks to create a best system of emission reduction for the state implementation pla ns could recommend a tier-set of priority steps as follows:

1. System-wide energy efficiency measures166

2. Increased use of combined heat and power systems

3. Greater utilization of waste-to-energy generation o ptions

4. Deeper utility market integration of distributed en ergy resources (DERs) particularly with increased use of microgrids, energy storage, and di stributed generation of renewable energy sources such as wind, solar, and biomass and biogas.

5. Demand reduction

6. Re-dispatch from coal-fired steam and oil/gas fired steam generation by increasing generation from existing natural gas combined cycle plants.

Comment 36: Comments specific to Alaska's situation

Response 36: The EPA is not including emission performance goal s for Alaska in this final rule. See section VII of the preamble for discussion of t his issue

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The following are summaries of the specific public comments under this comment:

Commenters contended that EPA should exempt Alaska from the rule and allow the state to continue with ongoing energy projects that are tail ored to Alaska's unique circumstances focused
on rural communities and non-affected EGU's. The co mmenters stated that federal intervention would only result in unintended financial consequen ces. The commenters stated that Alaska's energy efficiency programs often focus on improving thermal, rather than electric, efficiency, and more than 35% of total renewable energy funding has gone to heat recovery and biomass heat projects. The commenters added that thermal en ergy efficiency measures displace diesel
fuel and reduce carbon emissions and also serves to reduce, rather than increase, costs to customers. The commenters stated that in a typical Alaska household, 80% of the energy consumed is used for space and water heat and progr ams tend to be more successful as homeowners are more inclined to invest in energy ef ficiency measures that reduce thermal energy consumption. The commenters added that in th e arctic and subarctic climate, thermal energy has significantly greater import for health and human safety. The commenters also added that Alaska's renewable energy and energy efficienc y projects also often focus on communities with the highest costs, which are rural communities . The commenters stated that Alaskan consumers pay among the highest rates for heating a nd electricity in the country-50% higher than the U.S. average, and remote communities face great er challenges in ensuring electric service reliability. The commenters stated that to be credi ted towards compliance with this Proposed Rule, energy efficiency measures must relate to ele ctric energy produced at affected EGUs. The commenters contended that the rule will likely forc ibly refocus state energy efficiency programs from thermal energy to electric generation. The com menters added that because many rural
communities are not connected to the "affected EGUs " the renewable energy and energy efficiency measures may not qualify for inclusion i n Alaska's State Plan. The commenters contended that forcing Alaska to focus on reducing carbon emissions within the Rail belt could jeopardize funding for existing and future energy p rograms in rural communities where the state is partnering with Village Corporations, Tribal ent ities and Village Utility Cooperatives. The167

commenters concluded that this result is inconsiste nt with EPA's environmental justice mandate to avoid disproportionately high and adverse human health or environmental effects on minority and low income communities. The commenters also exp lained that Alaska cannot reduce carbon emissions from the specific "affected EGUs" in a ti mely manner without exorbitant cost or compromising reliability of electric service. The c ommenters added that Alaska's existing informal energy policy has the impact of reducing c arbon emissions and the state supports several renewable energy, energy efficiency, and na tural gas development programs that will not count toward compliance with the Proposed Rule beca use they impact non-affected EGUs or target space heat, rather than electric, efficiency . The commenters described the programs Alaska is running. The commenters added that their Rail be lt utilities are just completing a substantial upgrade of their generation fleet, resulting in sub stantial heat rate improvements. The
commenters noted that there are limited carbon emis sions from this sector in Alaska.

Comment 37: Commenters asserted that the Rule provides flexibi lity for states to meet their goals.

Response 37: The EPA agrees with the commenters that the final rule provides flexibility for states to meet their goals. Please see sections VI and VII of the final rule preamble of the CPP
and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the final CPP for the final goals

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The following are summaries of the specific public comments under this comment:

Commenters stated that they do not foresee any issu e with small utilities in North Carolina unless the one NGCC unit owned/operated by a munici pality that the commenters identified unless the unit remains in the goal calculation. Th e commenters noted that this unit actually operates as a peaking unit and should be excluded f rom the rule.

Commenters stated that with the variety of complian ce options, including energy efficiency and renewable energy, New York and other states will be able to meet their targets at low cost, while providing new options for consumers. The commenters noted that by driving investment in renewable energy and other advanced energy technolo gies, the Clean Power Plan will further accelerate the country's transition to a high- perf orming grid that is efficient, reliable, resilient, flexible, clean, affordable, and consumer- focused and to energy independence. The commenters stated that the Proposal recognizes the value of ad vanced energy technologies for reducing emissions, especially wind energy, solar power, and hydropower and that the Proposal is flexible enough to provide new business opportunities, spur investment, and encourage technologyneutral solutions to allow for competition in the m arketplace, depending on how states choose to implement it.

Comment 38: The EPA is attempting to restrict the states' abil ity to challenge the EPA's assumptions in developing the state goals by refusi ng to change a state's goals even if the state shows a particular block is not feasible unless the state also proves that additional reductions
from the other blocks are not feasible. The EPA's i nterpretation of FCAA section 111(d) is not correct. The EPA does not have the legal authority to require a state to go beyond BSER to meet a standard of performance in order to account for t he EPA erring in its assumptions on one or
more of the blocks.168

Response 38: See Preamble section VII and VIII.

The following are summaries of the specific public comments under this comment:

Commenters stated, the EPA indicates in the preambl e that if a state demonstrates that a particular block is not feasible for the state to i mplement as the EPA assumed, the EPA would not adjust the state's goal to reflect that change unless the state also demonstrates that it could no t get additional reductions from application of other building blocks, or in related, comparable measures (79 FR 34893). Commenters said, effectivel y the EPA is requiring states to reprove BSER for all four of its building blocks and beyond before admitting that the EPA has erred in its assumptions on any of the building blocks. Comm enters said, the EPA attempts to support this position by claiming that the building blocks do not represent BSER themselves and only represent what the EPA considers to be a reasonable overall level of reductions. Commenters said, the building blocks are used to directly dete rmine the state goals. Commenters said, the EPA cannot sever the link from the building blocks to EPA's BSER determination in such an arbitrary fashion and the EPA's interpretation of F CAA section 111(d) with regard to what represents BSER is flawed. Commenters said, the EPA 's legal obligation under section 111(d) is to establish standards of performance for existing sources through the application of BSER. Commenters said, while the TCEQ maintains the EPA d oes not have the legal authority to establish Blocks 2 - 4 as BSER, the clear applicati on of section 111(d) in the context of the EPA's proposed rule is that the state goals would r epresent the standard of performance and the building blocks are what the EPA assumes are the ap plication of the technology to achieve that standard of performance, i.e., what the EPA conside rs to be BSER. Commenters said, the EPA cannot require a state to go beyond BSER under sect ion 111(d). Commenters stated that requiring a state to demonstrate that it cannot ach ieve additional reductions from the application of other building blocks requires states to go beyo nd BSER, since EPA represents each building block as an independent basis for emission reductio n, that, when combined, result in an applied overall state goal. Commenters said, if, as the EPA contends, the building blocks do not represent BSER, then the EPA has not met its legal obligation to evaluate and apply BSER to set a standard of performance under the FCAA and the pr oposed rule is invalid and should be
withdrawn.

Commenters stated, in the proposed rule, EPA sugges ts that "[a] state may demonstrate during the comment period that application of one of the b uilding blocks to that state would not be expected to produce the level of emission reduction quantified by EPA because implementation of the building block at the levels envisioned by E PA was technically infeasible, or because the costs of doing so were significantly higher than pr ojected by EPA." [79 Fed. Reg. 34893 (June 18, 2014)] Commenters said, EPA then declares it "e xpects that, for any particular state, even if the application of the measures in one building blo ck to that state would not produce the level of emission reductions reflected in EPA's quantificati on for that state, the state will be able to reasonably implement measures in other of the build ing blocks more stringently, so that the state would still be able to achieve the proposed goal." Commenters said, this position lacks reason and only points to EPA's misguided attempt to base the BSER on achievement of a total
reduction in emissions rather than an accurate tech nical analysis. Commenters said, perhaps this position does not apply to South Dakota because the y argue in these comments that all of the building blocks proposed for South Dakota are eithe r technically infeasible or forecasted to be a higher cost than EPA projects, however, state goals as determined by BSER in the final rules169

should be based on sound technical analysis, not a sliding scale in order to reach a political target.

Comment 39: Commenters argued that the EPA has implied that ev en if the BSER and state goals are not achievable by application of the four building blocks, EPA will not change the BSER because there may be other things that can be done to reduce emissions. Commenters argued that this approach is inconsistent with sect ion 111 for EPA to select a BSER this is unachievable because section 111 requires EPA to de termine controls that are adequately
demonstrated and emission limitations that are achi evable, meaning controls that a source must
be able to install and be able to use to meet the r esulting emission limitation, according to the commenters. Commenters stated, because the emission limitation is representative of what BSER can achieve, sources have always been free to selec t alternate controls that meet the BSER limit, but it is contrary to the CAA to set a BSER that is not achievable with any of the controls
available to the actual source of emissions.

Response 39: EPA is finalizing subcategory-specific emission per formance, rate-based state goals, and mass-based state goals and believes that all EGUs have compliance options available to meet its reduction obligation.

Comment 40: States should hear utility petitions for acceptin g a unit as delivering adequate heat rate performance and change the state’s target

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Response 40: There are no unit-level heat rate requirements in the quantification of BSER. It reflects the regional fleet reduction potential thr ough a building block.

The following are summaries of the specific public comments under this comment:

Commenters recommended that states be allowed to he ar petitions from utilities for accepting a unit as delivering adequate heat rate performance, giving consideration to cost effective deployment of heat rate improvement measures. Comme nters stated that upon state approval of the unit's petition, the state's target would be ad justed to reflect the change in the state's Block 1 stringency.

4.7.2 Stranded assets/stranded investments

Chapter 4.7.2 covers public comments related to con cerns that the proposed state goals would
result in stranded assets and stranded investments. Many additional comments and responses on the topics of stranded assets and remaining useful life are in RTC chapter 5.11; there is substantial overlap among comments in chapters 4.7. 2 and 5.11. A few additional comments and responses on these topics are in the preceding sect ion, RTC chapter 4.7.1.Note that some of these
comments on stranded assets also discuss BSER issue s that are not addressed here. For170

responses to those comments, see RTC chapters 3 and 4, and sections V-VII of the final CPP preamble.

Commenters have raised a number of issues related t o this subsection which are organized by topics (comments) below. Responses are provided for these topics.

Comment 1: General; CPP will result in stranded assets/costs

Response 1: The EPA shares the goal of minimizing stranded asse ts. Although nothing in section 111(d) explicitly bars a guideline that res ults in some facilities becoming uneconomic before the end of their useful lives, the EPA nonet heless has striven to design the guidelines so as to give states flexibility to develop plans that al low power companies to recover their investments in generation units.

In response to public comments, the EPA significant ly revised its approach to BSER and goalsetting in the final rule, as explained in preamble sections V through VII. These changes, including moving the start date of the program from 2020 to 2022 and other important changes,

ensure that CO 2 performance rates and state goals in the final gui delines are achievable considering cost.

The July 2015 docket memo titled “Stranded assets a nalysis” shows that the CO2 performance rates and equivalent state goals in the final guide lines can be met without the retirement of affected EGUs before the end of their book life, an d without the retirement of affected EGUs before the end of the book life of capital-intensiv e pollution control retrofits installed on those EGUs. Thus, the emission performance levels in the final guidelines provide state with sufficient flexibility to address stranded asset concerns.

See section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C -E, and XII.E of the final rule preamble of the CPP for additional response to this comment

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The following are summaries of the specific public comments under this comment:

Several commenters stated that the proposed rule wi ll result in the stranding of assets.

Commenters stated the Proposed Rule will result in stranded costs of approximately $3 billion;
the basis for this conclusion is set forth in the P ace Study.

Commenters stated the Fuel Use Act of 1978 made coa l-powered generating stations the only viable alternative at the time many of the rural co operatives were constructing power facilities. The commenters said the current proposed rule effec tively requires a complete shuttering of all coal-powered facilities in Arizona. The commenters said this fails to recognize the capital investments that were incurred in order to comply w ith the Fuel Use Act that are still be paid off. The commenters said if the proposal is finalized as written, the rural citizens of Arizona will be171

forced to shoulder additional financial burdens to comply with an administrative regulation that could change again when political whims shift. The commenters said Arizona's citizens have a reliable and balanced portfolio of energy sources, which utilities here have worked diligently to create. The commenters said this proposal will cost jobs, create uncertainty, and increase power rates across the state; Arizona's economy cannot wi thstand such an unfunded mandate.

Commenters stated the EPA's goal-setting methodolog y could result in significant stranded investments, which in turn would result in higher e lectricity rates for Members. The commenters said NERA's estimates for the costs of the proposed rule are more realistic than those significantly underestimated by the EPA. The commen ters said NERC has raised serious concerns about potential reliability risks.

Commenters stated EPA's goal-setting methodology co uld result in significant stranded investments, which in turn would result in higher e lectricity rates.

Commenters stated that in spite of this clear congr essional intent to regulate air pollution in a manner that avoids unreasonable economic impacts on entire industries, EPA's proposed rule would lead to significant stranded costs as coal-fi red power plants - many of which have recently invested in expensive upgrades - are forced to reti re under EPA's guidelines. Commenters said
that EPA's own calculations assume that eleven stat es will be required to shut down every coalfired power plant in the state in order to comply w ith the state goal. Commenters said that several other states would be required to reduce coal gener ation by more than 50 percent. Commenters said that the state goals in the proposed rule, if adopted as EPA has formulated them, would require a reduction in annual electricity generatio n from existing coal units of more than 376 TWh, or of 25 percent versus the 2012 baseline. Com menters said that a reduction of this magnitude could lead to dozens of shutdowns of plan ts that have just recently made multimillion dollar investments in new pollution control technology to comply with EPA's MATS
rule. Commenters said utilities that have invested in expensive emissions controls for mercury and other hazardous air pollutants will thus be fac ed with billions of dollars in stranded costs as a result of EPA's proposed rule. Commenters said that the imposition of such significant costs on owners of coal-fired power plants is neither reason able nor appropriate in light of the goals of the
CAA.

Comment 2: States cannot determine remaining useful life, res ults in stranded assets

Response 2: The flexibility provided to states by the final emi ssion guidelines enables states to consider remaining useful life of particular facili ties in designing their plans. CPP preamble sections VIII(C) and VIII.G.1.(c)-(f), and the “Leg al Memorandum Accompanying Clean Power Plan for Certain Issues,” highlight that states hav e many options on how to design their plan requirements, and note various ways that states can take into account facility-specific considerations in designing their plans.

In response to public comments, the EPA significan tly revised its approach to BSER and goalsetting in the final rule, as explained in preamble sections V through VII. These changes,172

including moving the start date of the program from 2020 to 2022 and other important changes,

ensure that CO 2 performance rates and state goals in the final gui delines are achievable considering cost, and leave room for states, in pra ctice, to consider facility-specific circumstances such as remaining useful life.

The emission guidelines do not provide for states t o make additional goal adjustments based on remaining useful life and other facility-specific f actors because states can fully consider these factors in designing their plans. Section 111(d) re quires that EPA’s emission guidelines permit the states to consider remaining useful life in app lying standards of performance to particular affected EGUs, and does not call for facility-speci fic remaining useful life considerations to be taken into account in determining the levels of emi ssion performance that reflect the BSER.

For additional response to this and other comments on remaining useful life, including legal interpretation issues, see final CPP preamble secti on VIII.G.1, the “Legal Memorandum Accompanying Clean Power Plan for Certain Issues,” and RTC chapter 5.11. With respect to stranded assets, the EPA’s July 15 memorandum title d “Stranded Assets Analysis” shows that the national EGU performance rates in the final gui delines can be met without the retirement of affected EGUs before the end of their book life, an d without the retirement of affected EGUs before the end of the book life of capital-intensiv e pollution control retrofits installed on those EGUs. Thus, the final CO2 performance rates and st ate goals provide state with sufficient flexibility to address stranded asset concerns. See also the response to comment 1, CPP final preamble section VIII.G and the legal memorandum re garding stranded assets concerns.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA notes that "under the propose d guideline, states would have the flexibility to adopt a state plan that relies on em ission-reducing requirements that do not require affected EGUs with a short remaining useful life to make major capital expenditures or incur
unreasonable costs." The commenters said EPA furthe r states that "of the four building blocks considered by the EPA in developing state goals, on ly the first block, heat rate improvements, involves capital investments at the affected EGUs w hich, if mandated by a state rule, might give rise to remaining useful life considerations at a p articular facility." The commenters said the agency believes that "the issue of remaining useful life will arise infrequently in the development of state plans to limit CO2 emissions from affected existing EGUs." The commenters said therefore, EPA "purposes that the remaining useful life of affected EGUs, and the other facilityspecific factors identified in the existing impleme nting regulations, should not be considered as a basis for adjusting a state emission performance go al or for relieving a state of its obligation to develop and submit an approvable plan that achieves the goal on time."

Commenters disagreed with EPA's factual assertions; for example the commenters have invested significant capital to comply with air emission sta ndards; in reliance on the ability to recover the costs of complying with those standards; with no co nsideration of useful life, units may be forced to retire, stranding the capital investment made to comply with other EPA rules, and increasing the cost to customers to comply with the CPP.173

Commenters stated EPA dismisses the statutory requi rement to allow states to consider remaining useful life because states can employ Bui lding Blocks 2 (natural gas re-dispatch), 3 (renewable energy) and 4 (demand-side energy effici ency) rather than Building Block 1, thereby - according to EPA - allowing the state to allow EG U owners to avoid capital expenditures. The commenters said this decision effectively forces st ates to adopt specific control measures in
violation of the "federalism bar." The commenters s aid a state may want to employ Building Block 1, the only at-the-unit measure, but, knowing that EPA has dismissed remaining useful life considerations as "unnecessary," believe that it ca nnot employ Building Block 1 and, instead, must employ Building Blocks 2, 3 and 4. The comment ers said this determination denies a state "real choice" with regard to how it chooses to meet the goal because it cannot choose freely from among the BSER building blocks; for this reason, EP A, in dismissing its obligation to allow states to consider remaining useful life, is violat ing principles of cooperative federalism.

Commenters stated CAA section 111(d)(1)(B) requires that EPA's regulations: [S]hall permit the State in applying a standard of performance to any particular source... to take into consideration, among other factors, the remaining useful life of t he existing source to which such standard applies. The commenters said by its own terms, sect ion 111(d) reflects an expectation that the application of BSER and standards of performance mu st reflect a unit-by-unit analysis to determine which units can meet the proposed standar ds. The commenters said despite the "remaining useful life" requirement in section 111( d), the Proposal deprives the States of their right to consider the various statutory factors whe n setting the actual standards that are to apply to affected sources; instead, EPA proposes statewid e, binding, nonnegotiable minimum emission targets that allow for at best minimal State consid eration of unit-specific factors when determining how to apply EPA's guidelines to derive the actual standards that are to apply to the affected existing sources. The commenters said the approach taken by EPA in the Proposal does not comply with the process required by section 111 (d) and its implementing regulations. The commenters said EPA should withdraw this Proposal a nd issue a new one, limiting its actions to:

(i) Defining the procedures under which the States will develop and submit their section 111(d) plans; and

(ii) Identifying the BSER that has been adequately demonstrated.

Commenters said the guideline should make clear tha t in setting the actual standards the States will be allowed to consider the various source-spec ific factors referred to in the statute, including costs, feasibility and the remaining useful life of each existing source. If that were to occur, per the terms of the statute, the States would have a c lear indication of the BSER and the requisite flexibility to apply that guidance on a case-by-cas e basis to derive the appropriate standard(s) for
each affected source. The commenters said without a consideration of unit-specific factors, the Proposal could - according to EPA's own State Optio n 1 IPM modeling - result in premature closures (like Plant Scherer Units 1 and 2), or sub stantially reduced operations (for Plant Wansley).

Commenters stated Building Block 2 does not permit states to adequately take into consideration the "remaining useful life" of existing sources and "other factors" in setting performance standards as required by Section 111(d). The commen ters said implementation of Section 111(d) is based on the principle of cooperative federalism that underlies Section 110 and many other174

aspects of the CAA. The commenters said EPA does no t and cannot set national emission standards or establish the standards of performance for individual sources; instead, EPA is tasked only with the assignment to "establish a procedure" that the states can then rely on in setting the performance standards. The commenters said the stat es rely on EPA's emission guidelines in preparing a plan submission, but are specifically a llowed to consider "among other factors, the remaining useful life of the existing source." The commenters said EPA has offered no justification that would excuse a state's failure t o comply with an express requirement under Section 111(d).

Commenters stated EPA contends that the structure o f its rule allows states flexibility to consider remaining useful life for individual sources in the context of developing their State 111(d) plans; however, to the extent a State makes an adjustment to the standard of performance for an individual source, EPA requires states to make "com pensating emission reductions" from other sources: "Therefore, to the extent that a performan ce standard that a state may wish to adopt for affected EGUs raises facility-specific issues, the state is free to make adjustments to a particular facility's requirements on facility-specific ground s, so long as any adjustments are reflected (along with any necessary compensating emission red uctions) as part of the state's Clean Air Act section 111(d) plan submission." The commenters sai d thus, under the Proposed Rule, states would not be able to deviate from the proposed emis sion rate goals. The commenters said this requirement is unprecedented and imposes improper c onstraints on the authority reserved to the states under Section 111(d) of the Act; the practic al implication of EPA's "compensation" requirement and the accelerated compliance timeline imposed by the proposed "interim goals" is that states may be forced to (1) retire generating units ten or more years before the end of their remaining useful life, and, as a result, strand mil lions of dollars of assets that are dispatchreliable, and (2) implement costly short-term solut ions in order to meet customers' energy requirements.

Commenters stated EPA's continued implementation of Building Block 2 would have significant consequences for Montana-Dakota and its customers. The commenters said the Proposed Rule may force the premature retirement of the Big Stone Plant in South Dakota; Montana-Dakota depends on the plant as a source of low-cost reliab le power. The commenters said Big Stone is in the middle of installing a $384 million dollar Air Quality Control System (AQCS) required by an EPA rule establishing Regional Haze Program require ments for South Dakota. The commenters said South Dakota determined that the AQCS project was cost-effective for Big Stone considering that Big Stone is expected to operate f or at least another 30 years; however, because Big Stone is the only coal-fired electric generatin g unit located in South Dakota, it is unlikely that the state could make "compensating emission re ductions" to account for continued operation of Big Stone to allow for amortization of these inv estments over the remaining useful life of the
unit.

Commenters stated given EPA's proposed inclusion of avoided generation from coal-fired EGUs as a primary component of its defined BSER, strande d costs from premature closures of coalfired generation must be considered "costs of contr ol" that states can consider in making decisions in their state plan submission regarding standards of performance. The commenters said the impacts of closing these units long before the end of their remaining useful lives are sufficiently significant that it would be contrary to Section 111(d) to limit the states' ability to
consider them. The commenters said states should ha ve the authority to consider whether (1)175

modifications to the timing of compliance or (2) th e level of the state goal are necessary to avoid unreasonable economic consequences for power genera tors and their customers.

Commenters stated the EPA's assessment of economic impacts of the Clean Power Plan is plainly inaccurate; one of the major shortcomings i s the failure of the proposal to account for the impact on utilities, consumers and the economy that result from stranded investments. The commenters said the proposal anticipates (but under estimates) that it will force the premature retirement of "some" coal plants, as well as a redu ction in the reliance on existing coal resources by shifting generation to natural gas and renewable resources. The commenters said premature retirement inescapably results in economic losses b ecause useful life is properly thought of in terms of an asset's ability to yield on-going econo mic value, so shutting down an electric generating facility prior to the end of its useful life is sure to result in losses for someone - and ultimately the ratepayer.

Commenters stated the useful life represents the pe riod over which an asset is expected to provide value to its owner; in fact, the accounting assumption as to the useful lives of assets should be based on economic and engineering studies , on experience, and on any other available information about an asset's physical and economic properties. The commenters said in the case of public power electric utilities, the generating assets are, in effect, owned by the utility's customers, with the utility acting as their agent; so, customers bear the economic costs of ownership, but also realize the economic benefits. The commenters said as long as the goingforward variable costs of producing electricity wit h the coal plant are less than the all-in costs (fixed and variable) of viable replacements (market purchases, or resource acquisitions), the plant will yield economic benefits for customers. T he commenters said if the plant ceases operation during its economically useful life, cust omers will suffer an economic loss from electric rates that will be higher than they would have been it if the plant continued to operate. The commenters said the loss borne by customers wil l be the same irrespective of the debt
service schedule.

Comment 3: During oil embargo Congress said only build coal-f ired plants, then federal and state regulations required massive investments in p ollution control, now CPP will result in premature closings at great cost to consumers and d ecreased electric reliability. Premature closings will result in significant stranded assets which must be avoided, states should be able to adjust goals and implementation schedule, goal sett ing analysis must be recalculated imbedding
into the model full economic return for investments

.
Response 3: See response to comments 1 and 2 in this section (4 .7.2)

.
Regarding the comment that EPA could rerun modeled reductions for states in a building block approach imbedding into the model full economic ret urn for these investments, the agency has performed an alternative analysis described in the July 2015 docket memo titled “Stranded assets analysis.”

The following are summaries of the specific public comments under this comment:

Commenters said utility specific analysis and the E PA's Regulatory Impact Analysis show that the shift to natural gas would result in the premat ure closing of many coal-fired176

units. Commenters said recently, utilities have sp ent billions of dollars for "state of the art" air pollution control systems to meet the emission limi ts of the Clean Air Interstate Rule (CAIR) and the utility MATS rule, and the EPA’s proposal does not take into account the billions in stranded
costs for those units that will fall on consumers i f those units are forced to prematurely shut
down.

Commenters said the EPA's failure to account for, a nd appropriately adjust states goals to reflect these commitments, is especially troubling since EP A provided no guidance to utilities that undertook the significant investments required by M ATS that it contemplated forcing the closure of these plants in the near term. Several commente rs said Congress dictated during the oil embargo that utilities build coal-fired generating units rather than oil or gas units, and other federal and state requirements have required massiv e investment in pollution controls for these same coal plants. Several commenters added the EPA is now proposing a regulation that will assure the premature closure of the coal units at g reat cost to consumers, and in a manner that threatens electric reliability. Several commenters indicated the EPA failed to include these
stranded costs in the national cost assessment deve loped by EPA. Commenters said failure to assess this cost impact is contrary to EPA's own gu idelines which require the cost impact of a Section 111 proposal be assessed. Commenters said the EPA's nod to the necessity of addressing
stranded costs in the NODA is limited and fails to provide adequate guidance as to how EPA might propose to imbed into a 111(d) program a mech anism to address this critical issue.

Commenters said that although the CAA requires cons ideration of remaining useful life, and the
EPA Administrator said the rules would allow states to "avoid stranded costs", the proposed goal for South Dakota will likely result in the retireme nt of the state's single coal plant, resulting in
stranded assets.

Commenters said the Clean Air Act requires EPA to " permit the State in applying a standard of performance...to take into consideration, among oth er factors, the remaining useful life of the existing source to which such standard applies." Co mmenters said within the proposed rule, EPA states, "because of the way state-specific goals ha ve been developed in these proposed guidelines, remaining useful life and other facilit y-specific considerations should not affect the
determination of a state's rate-based or mass-based emission performance goal." Commenters said EPA Administrator Gina McCarthy, in her testim ony before the U.S. Senate Committee on Environment and Public Works, said the rules would allow states to "avoid stranded costs." Commenters said despite this statement, the propose d goal for South Dakota will likely result in the retirement of the state's single coal plant. Co mmenters said if the state goal is not set at feasible level, the result will be stranded assets in South Dakota, despite Administrator McCarthy's statement.

Commenters said that in addition to not including s tranded costs in the assessment, the EPA also failed to assess the costs of building new gas pipe lines and transmission lines that would be required by the closure of so many coal plants.

Commenters said that the EPA must allow states the flexibility to adjust both the emission standards and implementation dates to assure that t he state standards reflect a BSER that assures the reliability and security of the electric system while providing reasonably prices electricity to
the consumer.177

Commenters said even as the EPA is proposing a rule which establishes state-by-state reduction goals based on modeled closure of existing coal uni ts, it is, at the same time, requiring emissions control projects for plants it presumes will close - this is poor environmental and energy policy. Commenters stressed that utilities must be allowed to utilize investments for their full economic life in order to pay back financial obliga tions associated with these facilities and to capture appropriate economic return on that investm ent. Commenters said that it would be appropriate for EPA to rerun modeled reductions for states in a BB approach imbedding into the
model full economic return for these investments.

Comment 4: Rule will result in plant closures and associated stranded assets. Shutting down facility prior to end of its useful life will resul t in a loss, regardless of whether debt has already been paid. Their analysis indicates total cumulati ve losses due to early retirements of coal plants could range from $10 to $284 billion, with associat ed electric rate increases ranging from about 4 to 32 percent. Rule should be changed to allow stat es to accurately incorporate their own determinations of the remaining useful life of affe cted facilities into the development and implementation of their compliance plans.

Response 4: See response to comments 1 and 2 in this section ( 4.7.2). See also section I.A, II.FG, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the f inal rule preamble of the CPP for the EPA’s response to this comment

.
The following are summaries of the specific public comments under this comment:

Commenters stated that it is generally expected tha t compliance with the emission goals contained in the Proposal will likely cause the pre mature retirement of a significant number of U.S. coal-fired generating plants. By the term prem ature, commenters said they mean that the plants will be shut down before the end of their us eful lives. Commenters said certain stakeholders (e.g., electric utilities and their cu stomers and local communities) will suffer
economic losses as a result. Commenters said these losses include foregone economic value because the facility is no longer allowed to operat e, as well as paying certain costs now "stranded" because the facility no longer produces the revenue to cover those costs. Commenters
said the notion that economic losses will result fr om premature retirement is inescapable because useful life is properly thought of in terms of an a sset's ability to yield on-going economic value. Commenters said hence, shutting down an electric ge nerating facility prior to the end of its
useful life is sure to result in losses for someone . Commenters said that the proposed regulation would force the retirement or restrict the use of p lants, which would result in stranded assets.

Commenters stated that CAA Section 111(d) (1)(B), p ermits states to take into consideration, "among other factors, the remaining useful life of the source" in developing their state compliance plan. Commenters indicated however, in i ts construction of the building blocks and the resulting calculation of interim and final emis sion reduction goals, the EPA has substantially encroached on this state discretion, resulting in l osses to the remaining useful life of generation
sources and increased costs to consumers.178

Commenters stated that like any long-lived asset, e lectric generating plants require long-term financing. Commenters said it is sometimes mistaken ly thought that an asset's useful life is directly related to the debt repayment or servicing schedule associated with its financing. Commenters said that this in turn might lead some t o conclude that retirement of an asset after the debt has been repaid somehow mitigates the econ omic losses attendant with retirement - this
is not the case.

Commenters indicated that there is no single, unamb iguous way to precisely measure the useful life of an asset, but the underlying notion is that useful life represents the period over which an asset is expected to provide value to its owner. C ommenters stated that useful life is an economic concept with no necessary relationship to the period of debt service. Commenters said that since total debt incurred represents a sunk co st that must be paid whether or not the asset remains useful, the loss of economic value resultin g from the premature retirement of an asset is unaffected by the debt service schedule. Commenters stated that rather, useful life pertains to the time horizon over which an asset is expected to pro vide economic value to the owner.

Commenters said that in the case of public power el ectric utilities, the generating assets are, in effect, owned by the utilities' customers, with the government entity acting as their agent.
Commenters stated that both the costs and the benef its of asset ownership are conveyed to customers through their electric rates. Commenters said that if the plant ceases operation during its economically useful life, customers will suffer an economic loss from electric rates that will be higher than they would have been it the plant co ntinued to operate. Commenters emphasized that the loss borne by customers will be same irres pective of the debt service schedule.

Commenters stated that on average, across the secto r, approximately 40 percent of total electric output is produced from coal, with much higher perc entages in some situations. Commenters stated that this clearly constitutes a significant investment for these public power utilities and their customers, undertaken in anticipation of real izing long-term benefits over the useful lives of the coal plants. Commenters said that in many case s, unscheduled retirements over the next few years, related to the Proposed Rule, will truncate the expected benefit streams while the plants are still economically useful and thus result in si gnificant economic losses to public power

customers.

Commenters said that the useful lives of individual coal facilities will depend on a variety of factors, some of which may be unique to specific fa cilities. Thus, commenters said, it is difficult to offer a value that represents the remaining usef ul life of the combined public power coal fleet, but clearly the general expectation is that coal pl ants have very long useful lives. Commenters said that a 2007 survey of 10 state utility commiss ions conducted by the Wyoming Office of Consumer Advocate found that respondents generally expected to see useful lives for coal plants in the range of 40 to 60 years. Commenters said tha t similarly, data show that the average number of years between the in-service and expected retirement dates for coal plants owned by public power utilities is 35 years. Thus, commenter s stated, public power electric customers will likely suffer significant economic losses from the premature retirement of coal facilities if the Proposed Rule is finalized.

Commenters said that these early retirements will l ead to higher electric prices related to replacement power costs, new capital investments, p lant decommissioning costs, and possible179

credit downgrades. Commenters indicated they have c onducted some preliminary analysis to estimate the range of economic losses, and associat ed rate increases, faced by public power customers as a result of possible premature retirem ents of coal plans under the Proposed Rule.

Commenters indicated that their analysis indicates that the total, cumulative losses could range from about $10 billion to about $284 billion, with associated electric rate increases ranging from about 4 to 32 percent. Commenters said that these v alues represent an indicative range of possible outcomes for the composite public power se ctor.

Commenters said that many factors will affect the r esults including: the baseline level of electric rates before the coal plant retirements; long-term natural gas prices; installed costs of replacement generation resources (e.g., NGCCs and g as pipeline and storage facilities); variable costs and operating characteristics of replacement facilities (including energy efficiency and increased utilization of existing gas plants); the number of coal plants retired and associated electric output; long-term coal prices; variable co sts and operating characteristics of the coal plants subject to retirement; and the time horizon for the analysis, which reflects the remaining useful lives of the affected coal plants. Commenter s indicated that one cannot predict precise outcomes with any degree of confidence, and the wid e range of possible outcomes is cause for
concern. Commenters stated that it is not clear wha t the final impacts will be, but under some plausible assumptions, they could be quite severe. Several commenters recommended that the proposed regulation be changed to allow states to t ruly and accurately incorporate their own determinations of the remaining useful life of affe cted facilities into the development and implementation of their compliance plans.

Commenters stated to address stakeholder concern re garding limited cost-effective options and stranded investments, U.S. EPA proposes to take int o account the book life of the original generation asset, as well as the book life of any m ajor upgrades to the asset, such as major pollution control retrofits. The commenters said Oh io will have a well-controlled coal powered EGU fleet as a result of the Mercury Air Toxics Sta ndard (MATS); it is illogical to expect these
efficient and well-controlled units to not be utili zed after significant investments have occurred. The commenters said U.S. EPA is seeking comment on how book life may be used to develop an alternative glide path to reaching the final goal. The commenters said when legally allowed, it is
U.S. EPA's role under the CAA to establish the best system of emission reduction (BSER) for stationary sources and the states obligation to dev elop a plan based on BSER that sets a standard of performance considering remaining useful life of those sources. The commenters said U.S. EPA is again inserting itself into areas that have been governed by the Public Utilities Commission of the states by trying to develop a for mulation of book life for power plants. The commenters said this is another example of U.S. EPA attempting to inject the federal government into the area that traditionally has bee n the states'. The commenters said this approach only reinforces the concern of U.S. EPA at tempting to use Section 111(d) to usurp state authority.

Comment 5: If a coal-fired generating facility is forced to re tire early, there will be stranded costs. If improvements were made to the coal-fired plant to comply with regulations such as the regional haze regulation, these costs will also be stranded. The costs will be stranded regardless180

of whether any associated debt has been paid off, b ut stranded debt is most clearly demonstrated when facility has been financed with long-term debt that is still being repaid. Generally public power utilities raise funds with long-term debt in form of municipal bonds which can have maturities as long as 50 years. Due to these long maturities the consequences are more significant for public power or municipal utilities (compared to most investor-owned utilities or merchant power plants) and therefore states should be allowed to set up subcategories or alternative regulatory compliance options for these types of utilities. EPA should give states flexibility to adjust both emission reduction goals and implementation dates.

Response 5: See response to comments 1 and 2 in this section (4 .7.2)

. See also section I.A, II.FG, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the f inal rule preamble of the CPP for the EPA’s response to this comment

.
The following are summaries of the specific public comments under this comment:

Commenters said if the proposed rule forced the pre mature retirement of a coal generating facility, an electric utility's inability to recove r the "legitimate, prudent, and verifiable
cost" should be considered a stranded cost. Comme nters indicated that member companies would be providing examples of stranded costs likel y to result from the proposed rule, and discussed one such example to demonstrate their con cerns.

Commenters stated that if Laramie River Station (LR S), which serves consumers in several states, is forced to retire a unit or the entire pl ant, this will result in significant stranded investment. Commenters indicated that currently, LR S is under a mandate from the EPA under the Regional Haze Rule to install Selective Catalyt ic Reduction (SCRs) on all three units at LRS, at a cost of $750 million to the project owner s. Commenters added that these investments must be made by 2019, a year before the start of th e interim compliance period under the Proposed Rule. Commenters said that if a unit at LR S is forced to retire, $250 million of consumer-owned investment to meet Regional Haze rul es will be stranded, on top of the economic value of the remaining useful life of the unit. Commenters said that those costs will no longer be spread out over the 20 year remaining lif e of LRS, but must nonetheless be recovered from consumers, a cost for which they will no longe r receive any value. Commenters emphasized that these stranded costs would exist wh ether the cost of financing a generating facility has been paid or is still being paid. Comm enters indicated that nonetheless, the existence of stranded cost is most clearly demonstrated when a facility has been financed with long-term debt, intended to roughly match the useful life of the facility, that is still being repaid.

Commenters explained that as state- or locally-owne d, not-for-profit entities, public power utilities are limited in how they raise funds for l ong-term infrastructure investments of all sorts, including electric power generation facilities and facility modifications - generally public power utilities raise these funds with long-term debt in the form of municipal bonds. Commenters said that municipal bonds are unique in that they tend t o have maturities nearly twice as long as corporate bonds and generally are issued as a serie s of bonds with varying maturities, rather than a single maturity. Commenters said that while the t ypical power-related bond issue is relatively small, issuances financing electric generation or t ransmission projects generally total hundreds of
millions or even billions of dollars and can have m aturities as long as 50 years. Several commenters indicated that if a coal generating plan t is retired early as a result of the proposed181

regulation, customers will be forced to pay for the cost of financing a new source of power generation, while also repaying the debt remaining on the retired plant (which could include debt associated with upgrades completed to comply with o ther EPA regulations such as Regional haze). Commenters said that how to accurately acco unt for such stranded assets is something that has, so far, not been addressed by the propose d rule, and that needs to be remedied in a way that accurately balances the utility's need for fin ancial stability and the customer's need for
reasonable rates.

Commenters stated that the EPA should finalize a ru le with an explicit opportunity for states to set up subcategories or alternative regulatory comp liance options for public power or municipal utilities because municipal bonds tend to have matu rities nearly twice as long as corporate bonds. Commenters indicated that therefore, the consequenc es are more significant than for most investor-owned utilities or merchant power plants. Commenters contended that Section 111(d) expressly allows for state consideration of such fa ctors.

Commenters stated that the EPA must allow states th e flexibility to adjust both the emission reduction goals and implementation dates to assure that the requirements on the state reflect a BSER that assures the reliability and security of t he electric system while providing reasonably priced electricity to the consumer.

Comment 6: EPA should take into account book life of original asset and any upgrades as it relates to both interim and final goals. EPA shoul d exclude from re-dispatch any coal-fired generation with remaining book life as of January 1 , 2030. Commenters provided definition of book life and examples of significant pollution con trols, and identified the states with goals that would change as a result of such an exclusion. Inc orporating this exclusion would translate into more reasonable, equitable goals, and still result in substantial emissions reductions.

Response 6: The EPA disagrees that the remaining useful life o f particular facilities should be reflected in the CO2 emission rates and state goals established in the emission guidelines. Section 111(d) requires that EPA’s emi ssion guidelines permit the states to consider remaining useful life in applying standards of perf ormance to particular affected EGUs, and does not call for facility-specific remaining useful lif e considerations to be taken into account in determining the levels of emission performance that reflect the BSER.

See response to comments 1 and 2 in this section (4 .7.2)

. See also sections I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response
to this comment

.
The following are summaries of the specific public comments under this comment:

Commenters said in the NODA, the EPA acknowledges t hat "an additional way to address"
concerns about stranded investments in connection w ith the interim goal "may be for the agency to take account of the book life of the original ge neration asset, as well as the book life of any major upgrades to the asset, such as major pollutio n control
retrofits."182

Commenters supported this alternative, but believes that it should be extended to address the final goal, as well as the interim goal, because th e potential for stranded investments does not go away at the end of the interim period. Commenters s aid that many EGUs will have remaining book life in 2030, and in order to assure that the application of building block 2 does not result in premature closure of these plants, the EPA should a djust the redispatch calculation.

Commenters said specifically, they propose that the EPA exclude from re-dispatch any coal-fired generation with a remaining book life as of January 1, 2030. Commenters said book life would be defined as the period ending on the later of:

• 40 years after initial commencement of operation of the EGU; or

• 20 years after commencement of operation of signifi cant air pollution controls.

Commenters said for most plants, significant air po llution controls would consist of selective catalytic reduction systems (SCR), baghouses or flu e gas desulfurization (FGD) systems. Commenters said that for small utilities, as define d by the Federal Energy Regulatory Commission (FERC), significant air pollution contro ls would also include selective non-catalytic reduction systems (SNCR) or electrostatic precipita tors (ESP).

Commenters indicated that this stranded investment exclusion would affect only those states where the amount of generation with book life remai ning in 2030 exceeds the amount of redispatch assumed in building block 2. Commenters sa id based on their analysis, if coal-fired EGUs with remaining book life were excluded from re -dispatch, the goals in eight states would increase: Arizona, California, Delaware, Flor ida, Mississippi, Nevada, New Hampshire and New Jersey. Commenters indicated they used the Brattle data to calculate the approximate impact of the stranded investment exclusion on tota l CO2 emissions. Commenters stated that in
terms of the number of states affected and the tota l amount of CO2 reductions achieved, the impact of the proposal would be minimal.

Commenters noted that the Brattle data did not acco unt for small utility EGUs that would be excluded from re-dispatch due to the installation o f SNCR or ESP. Commenters indicated that they are aware, however, that Apache Unit 3 would q ualify for the exclusion on that basis and took that into account in calculating the impact of the proposal. Commenters indicated that they do not believe that excluding small utility EGUs in other affected states would have a substantial impact on the CO2 reductions achieved.

Commenters said that under their proposal, Arizona' s final goal would be 955 lbs CO2/MWh, rather than the 702 lbs CO2/MWh originally proposed in the CPP. Commenters said the 34 % reduction in rate required of Arizona would still b e substantial and would represent significant progress toward reducing greenhouse gas emissions. Commenters added that at the same time, it would be much more reasonable and equitable, when c ompared to the reductions required of other states, than the 52 % reduction required in t he CPP proposal. Commenters said it would also be much more consistent with EPA's stated goal of establishing "reasonable rather than maximum possible implementation levels" for each bu ilding block.183

Comment 7: Reduced use of very efficient coal-fired units wil l result in these units being economically stranded. Instead, these units should be deemed as already meeting BB1 measures, and should be exempt from BB2; reduced use of any E GU with remaining life will result in stranded assets; one-size-fits-all approach not app ropriate

Response 7: The EPA disagrees that the remaining useful life o f particular facilities should be reflected in the subcategory-specific emission perf ormance rates and state goals established in the emission guidelines. Section 111(d) requires t hat EPA’s emission guidelines permit the states to consider remaining useful life in applyin g standards of performance to particular affected EGUs, and does not call for facility-speci fic remaining useful life considerations to be taken into account in determining the levels of emi ssion performance that reflect the BSER. Permitting consideration of short remaining useful life by states is not a one-size-fits-all approach.

See response to comments 1 and 2 in this section (4 .7.2) . See also section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response
to this comment

.
The following are summaries of the specific public comments under this comment:

Commenters said that the EPA states that EGUs have plenty of time to replace older generation with new generation, conduct co-firing or fuel swit ching and conduct heat rate improvements and re-dispatch in the meantime - while they doubt that is the case with other EGUs, it certainly is not true for their utility. Commenters stated th at three of their four units are relatively new, having operated for less than 4 years, and these un its have a projected life of 50 years, which means they will not be replaced until long after th e target compliance date for this proposed rule. Commenters said further, and more significantly, be cause these units are so new, they already operate with optimal heat rates.

Commenters said the efficiency of these units is ac tually a benefit that the EPA could use, if the rule is properly revised, to help the state of Illi nois achieve the goals that the EPA has set under
Block 1. Commenters stated that PSGC 1 and 2 alread y operate at a CO2 emission rate that outperforms the 6% USEPA goal by a significant amou nt, measured against the state coal-fired fleet rate - they are 14% more efficient than the s tate coal-fired fleet average, as per Illinois EPA.
Commenters noted that Trimble Unit 2 is similar in terms of its emission rate and that Trimble 1, while not supercritical, is also very efficient com pared to a fleet average. Commenters said therefore, Illinois (and by extension the Commonwea lth of Kentucky) can achieve a heat rate improvement of their coal fleets under Building Blo ck 1 by simply operating the PSGC and Trimble units to their maximum capabilities. Commen ters said their units already emit CO2 at a rate lower than what would be accomplished by the B lock 1 measures, and accordingly, these units should be deemed as already meeting Block 1 m easures.

Commenters added that this, of course, presupposes that PSGC and the Trimble units will not be re-dispatched to lower and less efficient operating levels under the EPA's Block 2 approach. Commenters said improving the states' coal-fired re source heat rates requires the continued baseloading of these facilities and those efforts will be significantly impaired if these units are used t o load-follow other resources, as the EPA anticipates as a result of Block 2. Commenters said184

conversely, providing some type of carve-out for un its that can, when base-loaded, improve the states' positions in terms of CO2 emission, will no t only help the state, but could avoid, to a great extent, our real concerns over these assets being e conomically stranded.

Several commenters indicated that even the reduced use of existing coal-fired EGUs will result in stranded assets. Commenters said even the rampin g down of an EGU designed to be baseloaded results in a reduction in power sales. Comme nters said these sales are used to offset the fixed costs needed to operate the plant, and the re duction in sales results in an increase in costs to our members as fewer MWhs in sales must support the same amount of fixed costs. Commenters added that on top of that, we must procure outside energy that would otherwise have been provided by the affected EGU. Commenters said furth er, and more troubling, is the suggestion that an affected EGU install natural gas combined c ycle ("NGCC") to offset its emissions, which creates another layer of financial burden - additio nal debt to finance and build an NGCC facility compounded by the stranded cost that the operation of that new NGCC facility creates at the
affected EGU.

Commenters expressed grave concerns about the impac t this rule will have given our operation inside multiple ISO markets. Commenters said IMEA h as invested significant economic resources into ownership in four EGUs which operate in energy markets regulated by Federal Energy Regulatory Commission ("FERC") under the Fed eral Power Act. Commenters said in several instances, FERC has ruled that "one size fi ts all" is not the best approach for all the market regions. Commenters said that the EPA's prop osed implementation using Blocks 2 through Block 4 have taken that "one size fits all" approach without analyzing the practical limitations of implementing these blocks in the ent ire country or the disruption the rule's approach promises in the operation of the capacity and energy markets operated by the ISOs.

Commenters stated reducing usage of coal-fired EGUs lowers their efficiency and thus their cost-effectiveness, while potentially increasing em issions of ozone precursors. The commenters said this creates pressure for early retirements, r aising the risk of stranded assets and higher costs for electricity consumers.

Comment 8: CPP will prematurely retire many coal-fired power plants, result in stranded
investment costs and increased customer costs

Response 8: See response to comments 1 and 2 in this section ( 4.7.2) . See section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the fina l rule preamble of the CPP for the EPA’s response to this comment . Additionally, see GHG Mitigation Measures TSD.

The following are summaries of the specific public comments under this comment:

Power purchase agreements. Commenters said the lack of cost recovery certainty will likely lead to increased financing costs in the future, increas ed customer costs, and possibly regulatory denial of power purchase agreements (PPAs). Commen ters said the problem for jurisdictional
utilities results from the increased risk associate d with recovery of PPA-related expenditures through prudency reviews. Commenters said the lack of cost recovery certainty will most likely result in less-than-optimal financing arrangements and increased customer costs as compared to existing coal-fired electricity generation assets. Commenters said this result could lead to185

regulatory denial of PPAs, giving rise to new regul atory proceedings to determine whether the actions of the jurisdictional utilities were pruden t, including consideration of the economic consequences to customers from prematurely retiring coal plants. Commenters said this regulatory dilemma subjects Tucson Electric Power ( TEP) and its customers to unnecessary and potentially costly economic risk.

Arizona - ROI. Commenters said TEP has made signifi cant investments in coal-fired plants and related equipment in order to provide safe, reliabl e and cost-effective electric service to its
customers in Arizona. Commenters said this investme nt was premised upon TEP's opportunity to earn a reasonable return of and on its capital. Com menters said Arizona is a cost of service jurisdiction, thus, utility rates are determined af ter consideration of costs, including capital costs required to provide electric service to customers. Commenters said a critical component in establishing rates is determination of a reasonable Return on Investment (ROI).

Commenters said although numerous factors are consi dered in this determination, there can be no doubt that certainty of cost recovery is an impo rtant component. Commenters said recovery of costs associated with generation and transmission a ssets utilized to provision electric service coincides with investor expectations, and the intro duction of increased risk and uncertainty regarding cost recovery can subject a utility to in creased financing costs. Commenters said under a cost of service scenario, additional costs are ul timately borne by ratepayers. Commenters said
increased risk associated with an overreliance on m arket-based generation can have an adverse impact on TEP's ability to earn a reasonable return on its investment. Commenters said the
unfortunate effect of a lower ROI can be unfavorabl e financing terms, which result in higher utility rates. Commenters said these adverse conseq uences can be avoided by not relying too much on a volatile electric generation marketplace. Commenters said prematurely retiring used and useful electric generation assets would be an u nreasonable and costly consequence of the EPA's Proposal.

Minnesota - Sherco 3. Commenters stated the combine d impact of Building Blocks 2 and 3 will require Sherco 3 (Sherco 3 is pulverized coal power plant with state-of-art air quality controls in Minnesota) to run less frequently, under certain op erating scenarios, it may become uneconomic to run the plant. The commenters said to the extent that Sherco 3 is not dispatched often enough to generate a certain revenue stream, it may not ma ke economic sense to continue the plant's operations long-term, thereby resulting in Sherco 3 's premature retirement. The commenters said
this outcome would result in millions of dollars in stranded assets for which cost recovery will be a significant concern.

Arizona - BB infeasibility leads to early retiremen t. Commenters stated EPA has proposed a 6% heat rate improvement. The commenters said Arizona' s coal-fired EGU fleet is the sixth youngest in the nation; given the relatively young age of Arizona's coal-fired EGU fleet, the efficiency improvements that have already been achi eved, and another of other considerations, it is infeasible for Arizona utilities to improve coal unit heat rates by 6% under BB1. The commenters said prematurely retiring these coal-fir ed EGUs by forcing ceased operation, before they are able reach their remaining useful life, wi ll result in stranded investment costs that will be passed directly to Arizona electric customers.186

Florida - >90% coal-fired generation must be elimin ated. Commenters stated assessments for Florida have indicated, that to achieve the emissio n cap, more than 90 percent of the current coal-fired generation in the state, which produce a bout one-third of the state's electricity, must be
eliminated. The commenters said the shutdown of tho se units well before the end of their useful life takes away the invest-backed expectation witho ut compensation; to achieve the state's goal, some less-efficient gas-fired generation must also be retired. The commenters expected that three of its fossil fuel-fired units would be retired pre maturely if EPA finalizes the rule as proposed. The commenters said to replace the coal-fired and l ess-efficient generation, utilities must expand energy efficiency efforts; improve heat rates; impo rt more power; and build new, lower-carbonemitting natural gas plants, nuclear plants, and re newable energy facilities.

Florida - Gulf Power. Commenters stated EPA’s compl iance modeling retires 100% of Gulf Power's coal-fired capacity - Crist Units 4-7, Dani el Units 1-2, Scherer Unit 3 and Smith Units 1- 2 - by 2018. The commenters said these units total 2009 MWs net summer capability, represents 77% of Gulf's owned generation capability. The comm enters said for Florida as a whole, EPA's compliance modeling retires 6,358 MWs by 2020 of co al due to the Clean Power Plan proposal; additionally, 3,395 MWs of oil and gas retire by 20 20 in Florida in EPA's modeling. The commenters said adding the expected units retiring due to MATS, per EPA modeling, a total of 12,222 MWs of coal and oil/gas is retired by 2020. The commenters said these retirements represent 21% of Florida's 2012 total generation ca pacity and 80% of Florida's 2012 coal capacity. The commenters said the retirements in EP A's modeling would create stranded investments and significant replacement generation costs; furthermore, the time schedule of these retirements as contemplated by EPA's compliance mod eling is unrealistic due to the time required to build replacement generation, transmiss ion, and natural gas pipeline infrastructure.

Virginia - Birchwood. Commenters stated the Birchwo od facility has generated revenues under its power purchase contract that obligates Birchwoo d to be available to deliver electricity. The commenters said payments made by Virginia Power und er the contract are directly recovered from Virginia ratepayers, who are effectively amort izing the cost of building the facility over a 30-year period. The commenters said if Birchwood ca nnot be operated profitably under the Clean Power Plan program, it will be forced to reti re before the end of its useful life, limiting the value Virginia ratepayers received for their invest ment.

Iowa. Commenters stated EPA's reduction requirement s for some states are effectively unachievable without the forced, premature retireme nt of some existing coal and natural gasfired units that still have remaining useful life. The commenters said this would result in stranded costs that would be borne by consumers through high er electric bills, as well as potential negative impacts on local reliability. The commente rs said it is unclear how this scenario would affect those members of Iowa Association of Municip al Utilities (IAMU) who own minority shares in generating plants.

Running coal-fired plant not always economically fe asible. Commenters stated forcing changes in the operation of coal plants, especially retirem ents of coal units, will create stranded costs. The commenters said because there is no practical way t o reduce the heat rate under building block 1, the only option remaining at a source is a drastic one: the owners are faced with the requirement to run the plant less or shut down one or more unit s entirely. The commenters said the first option, running the plant less, will reduce the eff iciency of the plant (and the heat rate, contrary187

to EPA's objective) and cause an increase in the op erating costs, wholesale cost increases that will have to be passed on to our members and their customer-owners. The commenters said further, as EPA itself acknowledges, if coal plants are dispatched as load-following units, they will have higher heat rates when operated in this f ashion and during periods of startup and shutdown. The commenters said it is unlikely, howev er, that simply running the plant less will be sufficient to meet the CO2 emission reduction requi red of units, whether under the rate-based or mass-based approach. The commenters said if, instea d, the owners are forced to shut down a unit prematurely, it will cause significant stranded cos ts and will run afoul of the directive of 111(d) to take into account remaining useful life, an expr ess statutory mandate.

Arizona - even relatively new plants will be forced to retire. Commenters stated Arizona is home
to some of the newest coal fired units in the count ry with the most recent units commencing operation as recently as 2009; these investments as sume a long and useful life of 40 years or more. The commenters said the application of buildi ng block 2 would require the retirement of virtually all if not all coal generation in the sta te by 2020, with no consideration to the useful lif e of the existing coal fleet. The commenters said ret iring these units far earlier than a reasonable planned useful life would result in excessive stran ded costs and ratepayers essentially paying twice for this generation capacity.

Investment expectations. Commenters stated EPA spec ifically acknowledges in the Preamble to the proposed rule that coal has a place in the U.S. generation mix through 2030 and beyond. The commenters said the cooperative owners of clean coa l generation facilities in Illinois have committed capital resources and taken on long term debt with the reasonable expectation that their units would be providing base load, reliable electricity for their members for decades in the future. The commenters said they believed that this long term cost stability and reliability to be in those members' best interests; however, the requ irements of the proposed rule may strand those assets, especially in light of the failure to address the mis-match between the "integrated grid" concept and the state jurisdictional issues. The commenters appreciated that how investment expectations in plants are impacted by t he proposed rule was raised as an issue in the Notice of Data Availability ("NODA") issued on Octo ber 28th, as it is hard to overstate the significance of this issue. The commenters hoped th at EPA will work to avoid cutting short the useful life of generation resources that can still provide much needed base load generation well into the future and stranding those assets.

National cost assessment shortcomings. Commenters s tated the CPP emission reduction goals for the states are all based on four compliance buildin g blocks (BBs) that were developed considering national and regional assumptions and c osts that do not translate to states and
utilities. The commenters said the four BBs that ar e the basis of the mandatory standards for the states assure that many utilities will have to prem aturely shut down capital intensive, low cost coal plants, many with long remaining operating liv es and unpaid debt, which will cause major
stranded investment costs to consumers. The comment ers said these stranded asset costs were not included in the national cost assessment developed by EPA; EPA also failed to assess the costs of building new gas pipelines and transmission line s that would be required by the closure of so many coal plants. The commenters said the four BBs approach threatens continuing electric reliability and assures that many states and utilit ies cannot meet the mandatory emission limiting goals in a cost-effective manner.188

Regulatory taking. Commenters stated because the pr oposal as it stands would likely result in the premature closure of existing power plants, the pro posal's requirements would appear to be a regulatory taking requiring compensation because of the premature closures and uneconomic curtailment it will require.

Arizona - severe impacts. Commenters stated the ret irement of some or all coal-fired generating capacity in Arizona that would be necessary to meet the interim and final goals of the CPP would result in significant stranded asset value for util ities in Arizona. The commenters said this stranded value is only exacerbated by recent invest ments in control technology and plant upgrades in recent years. The commenters said depen ding on the treatment, these costs would be recovered through higher rates for Arizona customer s. The commenters said the stranded asset value under the building block scenario is estimate d to be $3.8 billion in 2020 ($3.0 billion in 2013$), resulting from the retirement of all coal g eneration in the state. The commenters said the
ultimate treatment of these stranded costs could re sult in severe rate impacts for Arizona
customers in or around 2020.

Not just and reasonable result. Commenters stated E PA's proposal will not produce a just and
reasonable result insofar as the emissions standard s will accelerate the closure of coal-fired generation.

MRES and Laramie River Station. Commenters stated f or MRES, the Clean Power Plan is likely to be costly; MRES only has one base load resource which is a coal plant, and no Natural Gas Combined Cycle (NGCC) capacity, MRES is left with f ew options to reduce CO2. The commenters said to entirely shut down all three uni ts at Laramie River Station would cause MRES alone an increase in wholesale power costs of 65%, and would cause member municipal utilities on average a 20% increase in retail rates to their customer-owners. (That is not even considering what it would do to the costs for the o ther 5 co-owners of the plant.) The commenters said if a less drastic approach were tak en and only one unit at LRS were retired, it would cost MRES approximately 20% more or $35 milli on annually to replace the lost base load generation with lower emitting natural gas, assumin g natural gas prices do not experience a rapid
escalation. The commenters said these costs are dir ect costs that would be felt by consumers in Iowa, Minnesota, North Dakota and South Dakota. The commenters said if the owners of LRS are forced to retire a unit or the entire plant, th is will result in significant stranded investment. The commenters said LRS has a gross book value of a bout $1.2 Billion, and the Western Minnesota/MRES share of that is about $200 million. The commenters said currently, LRS is under a mandate from EPA under the Regional Haze Ru le to install Selective Catalytic Reduction (SCRs) on all three units at LRS; this wi ll come at a cost of $750 million to the project owners. The commenters said for MRES, its s hare of this cost will be approximately $125 million, which will cause an increase in whole sale rates of 10%. The commenters said these investments must be made by 2019, a year befo re the start of the interim compliance period
of the Clean Power Plan. The commenters said if for ced to retire a unit, $250 million of consumer-owned investment to meet Regional Haze rul es will be stranded, on top of the economic value of the remaining useful life of the unit. The commenters said those costs will no longer be spread out over the 20-30 year remaining life of LRS, but must nonetheless be recovered from ratepayers, a cost for which they wi ll no longer receive any value.189

Miscellaneous. Commenters stated Florida Municipal Electric Association (FMEA) members invested billions of dollars on new coal fired gene ration, because there was no other alternative for baseload generation. The commenters said many o f the utilities carry considerable debt on
these coal fired units. The commenters said the uti lities recently spent $2 billion for new air pollution controls to meet the interstate rule and the utility max rules. The commenters said forcing these utilities out of service prematurely, will leave ratepayers with hundreds of millions of dollars in stranded costs; these costs do not ap pear to be taken into consideration in EPA's economic analysis.

Commenters stated MEAC members have funded half-a-b illion dollars of emissions-controlled state-of-the-art controls for Georgia's coal-genera ting resources based on recent federal and state rules. The commenters said the proposal would also require reduced coal unit operations, potentially shutting these units down, which would strand the costs of these recent environmental investments and again raise the cost of electricity unnecessarily to Georgia's communities.

Commenters stated based on EPA's calculations conta ined in the proposed rule, Seminole's coalfired generating facilities have been arbitrarily s cheduled for retirement well before the end of their useful life, with no regard for economic hard ship it will cause members and consumers. The commenters said in 1978, the U.S. enacted the Power Plant and Industrial Fuel Use Act, which restricted new power plants from using oil or natur al gas for power generation, and encouraged the use of coal; the Seminole's coal-fired facility came online in 1984. The commenters said Seminole has invested more than $530 million i n environmental control technology and recycling practices, $260 million of which was plac ed in service less than 5 years ago. The commenters said should the EPA's proposed carbon ru le be finalized, these costly investments will become stranded assets, and Seminole's coal-fi red power plants will be forced to closed, leaving 300 hard-working, skilled employees without a job.

Comment 9: Plant operating at lower capacity than constructed for; not optimal; costs become
stranded

Response 9: See section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI. C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response to this comment . Also, see response to comments 1
and 2 in this section.

In addition to the concern about operating coal les s, EPA compliance modeling still anticipates that the remaining coal fleet operate at a high uti lization level. There is no expection, assumption, or requirement that all coal units ramp down operation equally. EPA anticipates
some of the reduction in fossil steam will come thr ough already scheduled coal retirements, while other untis remain online and operate in typi cal baseline fashion.

The following are summaries of the specific public comments under this comment:

Commenters stated the assumption of simply operatin g coal less is not necessarily efficient or practical. The commenters said unlike most NGCC uni ts, coal units don't use the fuel to operate the turbines that produce the electricity; rather, coal units use the coal to super-heat water to create steam which is then used to operate the turb ines and produce electricity. The commenters190

said large conversions of water to steam cannot var y quickly throughout the day or "back-off"
when a certain emissions limitation is reached. The commenters said this complex process requires planning a significant fuel to steam conve rsion, for a significant amount of power, for an extended period of time. The commenters said the co mplex process to bring the water to the appropriate level of steam for production is the sa me process whether the plant is to operate for
the next 25 hours or the next 2500 hours. The comme nters said the direction to simply operate a coal-fired plant less, means that the plant would i ncur the same costs, start-up time and wear and tear for less generation output as it would if it r an at full capacity; this means a higher cost to operate the plant and a less efficient use of the p lant (i.e., a lower heat rate). The commenters said if a plant is operating at a lower capacity th an what it was constructed for, it is not running at optimal capability and is therefore not recoveri ng the cost to construct, operate, and maintain it; these costs then become stranded; and for custo mer-owned utilities like municipals and cooperatives, the stranded costs become an addition al and direct expense for the rate-payer.

Comment 10: Rapid forced retirement of coal-fired units will c ause significant stranded assets and may result in increased ratepayer rates

Response 10: See responses to comments 1 and 2 in this section (4.7.2), including the reference to the July 2015 docket memo titled “Stranded asset s analysis .” See section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response
to this comment

.
The following are summaries of the specific public comments under this comment:

Commenters stated that if EPA does not modify the a ssumptions of Building Block 1 in the proposed BSER, the rapid retirement of coal-fired g eneration due to the re-dispatch envisioned in Building Block 2 would cause significant costs for Florida and its ratepayers in terms of stranded assets. Commenters said such rapid changes in the electricity mix raise the potential for significant stranded costs, which may have energy c ost implications for California ratepayers. Commenters added that due to the inter related nature of the electricity grid, it is impossible for states such as California to impleme nt the Proposed Rule in a vacuum; compliance challenges and constraints faced by neig hboring or regional partners will also have a profound impact on California and the California ut ilities.

Commenters indicated that the forced early retireme nts of four coal-fired generating facilities in Wyoming would result in serious threats to regional reliability and a financial catastrophe for ratepayers. Commenters said as explained in our De cember 16, 2013, letter to Assistant Administrator McCabe, in 2020 the stranded investme nt for Dave Johnston will be $393,632,687; for Naughton, $326,213,892; for Jim B ridger, $524,351,740; for Wyodak, $248,714,883. Commenters indicated that in addition to the amounts listed at that time, Jim Bridger is undergoing investments in regional haze compliance which will add about $800 million of invested capital. Commenters stated that these investments should have a depreciable life of at least 20 years. Commenters stated the fo ur plants are system assets, so Wyoming ratepayers would bear about 15.7% of those amounts. However, commenters said since we
believe such closures would have a wide economic im pact and be accompanied by a broad191

impact on the coal industry, we also anticipate tha t there will be fewer ratepayers to shoulder these burdens, sending rates higher than the 15.7% would suggest. Commenters clarified that
none of these calculations include the cost of cons tructing replacement generation or purchasing replacement power.

Commenters expressed concerns regarding possible st randed costs from early retirement of baseload units that have been substantially retrofi tted within the last decade. The commenters explained that of the remaining affected coal-fired facilities in Minnesota, most, if not all, have had emissions reductions equipment installed within the previous ten years. The commenters added that given the stringency of Minnesota' rate- based standard, some coal-fired resources
would need to be curtailed too soon to recover thei r fixed operations and maintenance costs. The commenters stated that since these changes were mad e to fully comply with existing EPA rules,
and took into account the costs and useful life of the retrofits, early replacement will shift extra costs to ratepayers that can be avoided by careful, long-term planning. The commenters requested EPA clarify the rate impact methodology f or facilities that have had major equipment installations to comply with mercury, regional haze , and interstate air quality rules. The commenters noted that to properly estimate the rate impacts of early retirement, capital budgets
for retired assets need-to be modified to reflect a shorter operating life, and capital depreciation schedules changed to match the modeled retirement d ate. The commenters added that the recovery of decommissioning costs would need to be adjusted so that sufficient funds would be
available to remove and remediate the sites. The co mmenters stated that this is unit-specific information that does not appear to exist in EPA's technical support documents. The commenters also stated that it will be easier to manage strand ed costs if the interim goal is eliminated. The commenters stated that alternatively, the final rul e could provide states with the flexibility and authority to conduct its own unit-level evaluations through IRP and rate cases so that state commissions could take depreciation adjustments and rate impacts into account when submitting a state compliance plan.

Commenters stated the proposed rule is inconsistent with changes made in response to other EPA actions and risks stranding those investments. The commenters said under the EPA's building block methodology, the commenters would have to ret ire all of the coal-fired resources covered by the EPA's plan for Arizona in order to comply wi th both the interim and final goals; under this scenario, The commenters stated their reliance on natural gas would increase from 28 percent to 70 percent by 2020. The commenters said the remaining 15 percent reflects the commenters’ ownership in the Navajo Generating Stat ion and the Four Corners Power Plant,
both located on Native American land and covered un der a separate rulemaking.

Stranded assets

Commenters stated EPA's CPP proposes that one of th e coal fired plants in Missouri, built four years ago is projected to be closed permanently by 2020 while it still has significant useful life, and long before the bonds used to build the plant a re paid off. The commenters said this plant operates at emission levels significantly lower tha n that normally projected for the U.S. Coal fleet. The commenters stated have a significant fid uciary responsibility for the continued operation of these plants and believes it is essent ial that certain specific issues are fully explaine d and communicated within the docket governing this s et of proposed guidelines.192

Comment 11 : Re-dispatch will lead to forced early retirement of coal-fired EGUs which will result in significant stranded costs resulting in F L ratepayers facing 25-50% rate increases which will be stifling to economic development; value of recent environmental upgrades will be lost; EPA's treatment of Georgia nuclear plants under con struction is punitive; discussion of
reasonableness of each of BB for JEA

Response 11: See response to comments 1 and 2 in this section (4 .7.2)

. See section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the fina l rule preamble of the CPP for the EPA’s response to this comment . EPA no longer includes the Georgia nuclear plants in its quantification of BSER. See section V.A of the fina l rule preamble for discussion of nuclear generation and the BSER.

The following are summaries of the specific public comments under this comment:

Re-dispatch will lead to early retirement. Commente rs said that as proposed, the CO2 reduction requirements would effectively require JEA and othe r Florida utilities to retire generation assets prior to the end of their useful lives. Commenters said their solid fuel facilities were designed and constructed to run as base load energy supply, meaning they perform at very high capacity
factors. Commenters said when the base load units a re operated as designed, they achieve heat rate efficiency and low dispatch cost. Commenters s aid by requiring significant re-dispatch away from these base load units, the rule prevents them from running as designed, further degrading efficiency and ultimately making continued operatio n of these units non-economic. Commenters said the rule forces early retirement in practice, even if it does not do so explicitly.

Commenters said they have more than $1.5 billion in debt outstanding on solid fuel generating assets, amortizing over the expected useful life of those facilities to 2039. Commenters said by forcing re-dispatch and retirement of the units beg inning in 2020 - the practical consequence of having to meet even the interim goal - the EPA will leave JEA's customers holding a bill for $795 million in stranded costs.

Recent environmental upgrades and GA under-construc tion nuclear. Commenters said their unique geographic position results in a double pena lization under the rule: not only will we be forced to comply with the Florida state plan for ge nerating assets, but we also will be forced to comply with Georgia's state plan. Commenters said t wo of JEA's key generating resources - Plant Scherer and Plant Vogtle - are located in the state of Georgia, but supply or will supply
substantial load in northeast Florida. Commenters s aid Georgia's goal is all but impossible to meet with the continued operation of Plant Scherer, jeopardizing JEA's lowest-cost generating unit despite the installation of more than $597 mil lion in state-of-the-art pollution control
investments for Scherer Unit 4 between 2007 and 201 2, with JEA's share being $141 million. Commenters said Georgia faces the further penalty o f including new nuclear plants under construction in EPA's formula for setting Georgia's goal rather than as investments to help meet the goal, thereby eliminating the future zero carbo n benefit of Plant Vogtle when it comes online later this decade. Commenters said given the remain ing risks inherent in a construction project of this magnitude and the uncertainty around ultimate schedule and cost, including these units as if they are already on-line is punitive in a state tha t took proactive steps to reduce its carbon193

footprint ahead of any federal requirements. Commen ters indicated JEA entered a purchase power agreement for future Vogtle energy to increas e fuel diversity and help reduce its environmental impacts.

Stranded cost recovery/rate increases/economic impa cts. Commenters said they optimistically assume that Florida's state plan would include a st randed cost recovery mechanism that would fairly apportion these extraordinary costs across a ll Florida ratepayers. Commenters said with such a mechanism in place, and considering investme nts in replacement generating resources that would necessarily accompany the retirement of solid fuel resources, Florida ratepayers are facing average across the board rate increases of 2 5 to 50 percent which will be stifling to economic development in our state. Commenters said while some states can comply with the EPA's proposed rule at very low cost, simply by ret iring a single generating resource that was already slated for retirement (Washington), or cont inuing to operate substantially all solid fuel units with only heat rate improvements imposed (Ken tucky), Florida and other states face a true and extraordinarily expensive transformation in gen erating resources. Commenters said the resulting rate impact will make the entire state un competitive from an economic development perspective. Commenters said as large projects comp ete for location sites in the U.S., states with non-disruptive compliance costs will be clear winne rs in economic development at the expense of those with very high compliance costs. Commenter s said given the importance of attracting new business to Florida for its overall economic gr owth, this paints a bleak picture for the foreseeable future, potentially increasing unemploy ment and handicapping economic prosperity
for citizens of our state.

Applicability of Building Blocks. Commenters discu ssed the applicability of each of the four building blocks to their facilities.

Building Block 1: All possible cost effective heat rate efficiency improvements have been made -
additional investment would not be economic and wou ld result in 1.5% HRI at best. Investing additional capital in units that under BB2 may only run at 10% of capacity, or be subject to early retirement, would be truly noneconomic.

Building Block 2: JEA currently utilizes optimal ec onomic dispatch for the generating fleet - therefore any change in current dispatch decisions will result in more expensive power generation

Building Block 3: Renewables practical for FL have much higher cost per MWh than traditional units and do not provide base load capacity. There fore, replacing solid fuel generation with RE would increase cost and decrease reliability.

Building Block 4. JEA has embraced EE over past de cade and has achieved a cumulative 3.3% reduction in energy sales (2004 to 2013). Each JEA residential customer, on average, is using 13% less than 10 years ago, and commercial customer s are using 19% less electricity, on average. By using base year of 2012 the CPP gives no credit for EE improvements already made. Because their EE/DSM program is mature, sign ificant additional investment in demand side EE will likely not economically achieve result s.194

Comment 12: Building Block 2 redispatch will cause shutdown of coal units that APCD have been recently put on for other regulations; causes stranded costs; EPA did not account for

Response 12: See response to comments 1 and 2 in this section ( 4.7.2) . See also section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response to this comment . Additionally, see section V.D. of the preamble and the GHG Mitigation Measures TSD.

The following are summaries of the specific public comments under this comment:

Commenters stated BB No. 2 is designed to force loa d shifting from coal to gas-fired generation for compliance and most of the reductions are front -loaded to the 2020-2022 time period. The commenters said such a proposal creates winners (ga s plant owners) and losers (coal plant owners) without regard to the real cost borne by co nsumers. The commenters said utility specific analysis shows that the shift to natural gas would result in the premature closing of many coalfired units; recently, utilities have spent billion s of dollars for "state of the art'' air pollution control systems to meet the emission limits of the Clean Air Interstate Rule (CAIR) and the utility MATS rule. The commenters said EPA's propos al does not take into account the billions
in stranded costs for those units that will fall on consumers if those units are forced to prematurely shut down.

Commenters stated EPA's failure to account for, and appropriately adjust states goals to reflect these commitments, is especially troubling since EP A provided no guidance to utilities that undertook the significant investments required by U MATs that it contemplated forcing the closure of these plants in the near term. The comme nters said the Federal government, which dictated that utilities build coal-fired generating units and recently adopted rules that required massive investment in pollution controls for these plants, is now proposing a regulation that will assure their premature closure at great cost to con sumers in a manner that threatens electric reliability. The commenters said failure to assess this cost impact is contrary to EPA's own guidelines which require the cost impact of a Secti on 111 proposal be assessed.

Commenters stated EPA recognizes in the NODA releas ed October 28, 2014, that stranded costs associated with existing fossil fuel electric gener ation projects is an appropriate and necessary component of a rational transition toward a lower c arbon electric generation fleet. The commenters said unfortunately, EPA's nod to this is sue in the NODA is limited and fails to provide adequate guidance as to how EPA might propo se to imbed into a 111 (d) program a
mechanism to address this critical issue.

Commenters stated even as EPA is proposing a rule w hich establishes a state-by-state reduction goals based on modeled closure of existing coal uni ts, it is, at the same time, approving emissions control projects for plants it presumes w ill close. The commenters said EPA cannot have it both ways; Utilities must be allowed to uti lize investments for their full economic life in order to pay back financial obligations associated with these facilities and to capture appropriate
economic return on that investment. The commenters said given the massive investment occurring nationally to meet new, stringent emissio ns limits for EPA regulations, it would be appropriate for EPA to rerun modeled reductions for states in a building block approach imbedding into the model economic return for these investments.195

Commenters rejected the illusory flexibility EPA to uts States have in this Proposed Rule. The commenters said after extensive analyses, discussio ns with state regulators, and participation in a variety of industry group discussions, the commente rs have concluded the real effect of this rule is a shift in generation away from the one and only coal-fired plant that the commenters own and operate to natural gas combined cycle ("NGCC") unit s. The commenters said this inevitable shift in dispatch will result in a dramatically decreased capacity factor at the Charles R. Lowman Plant ("Lowman"). The commenters said as a result, additi onal capital investment at Lowman (to meet other capital-intensive mandates such as the antici pated Effluent Guidelines and Coal Combustion Residuals rules, as well as normal inves tment in the upkeep and reliability of any power facility) would not be economically feasible or justifiable. The commenters said the prospect of abandoning a well-maintained electric g enerating resource featuring state-of-the-art air pollution control equipment as a result of a ru le that will not have any effect on the global climate is nonsensical. The commenters said ruining the viability of a well-controlled, wellmaintained coal plant under the auspice of setting guidelines for existing sources is certainly reason enough to abandon the rule.

Commenters stated KMU's largest member, Kansas City BPU, is currently committed to a $250 million emission control project at its baseload co al-fired power plant; similarly, the other five largest coal-fired power plants in Kansas have made and continue to make huge investments in criteria pollutant emission reduction equipment ove r the last several years. The commenters said the investments have largely been made to comply wi th a variety of other EPA regulations such as the Cross State Air Pollution Rule, the Mercury and Air Toxics Rule, and Kansas City ozone maintenance plans; more than three billion dollars has either already been or will be spent. The
commenters said due to the fact that investments of this scale are made over long periods of time, there exists a significant risk of stranded costs d ue to redispatch to non-coal power supply
sources under the Clean Power Plan. The commenters said this change in redispatch would result in the under-utilization of power plants that have recently undergone costly updates. The commenters said the proposed 111(d) rule would forc e upon utilities, wholesale customers, and
Kansas citizens the burden of these stranded invest ments. The commenters said municipal utilities are entirely consumer owned; as such, any stranded investments of a municipal utility come 100% out of the pockets of the utility custome rs and not from shareholders. The commenters said in addition, stranded costs are a h uge issue for smaller municipal utilities. The commenters said if existing units cannot operate, i t will no longer be cost effective to customers to keep the machinery; municipal utility customers invest millions every year to guarantee reliability and quality service.

Commenters stated if a utility chooses to retrofit a coal plant to burn natural gas, the associated
reduction in CO2 emissions should count towards mee ting the EPA's proposed regulations; for example the City of Ames Electric Service is conver ting its 109 MW coal fired power plant to burn natural gas to comply with other EPA regulatio ns, including the Mercury and Air Toxics Standards rule. The commenters said as acknowledged by the EPA, the cost of this conversion is considerable; if the City of Ames does not receive credit for the associated reduction in CO2 emissions, the utility would be forced to seek addi tional carbon reductions elsewhere, thus making the existing plant a stranded asset. The com menters said this would place a significant burden on the utility's rate payers. The commenters said Cedar Falls Utilities' Streeter Station Unit 7 has been a dual fuel, natural gas and coal, generator; however, in early 2014 Cedar Falls196

Utilities declared the unit a natural gas unit to c omply with the EPA's Mercury and Air Toxics
Standards rule.

Commenters stated re-dispatching Mississippi's natu ral gas, combined cycle fleet of 70 percent, would force the shut down of Mississippi's existing coal fleet. The commenters said this would severely restrict fuel diversity and leave customer s at the mercy of ever-volatile natural gas prices. The commenters said it would force the reti rement of the two large coal units at Plant Daniel in Jackson County, which is currently underg oing $660 million in investments to comply with the recently finalized mercury rules. The comm enters said stranding these assets, would only further increase the cost for customers.

Comment 13: Investments made in coal-fired EGU and environment al compliance projects, would result in stranded assets; customers punished

Response 13: See response to comments 1 and 2 in this section (4 .7.2) . See section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the fina l rule preamble of the CPP for the EPA’s response to this comment

.
The following are summaries of the specific public comments under this comment:

Commenters said that as a municipal utility, JEA is tasked with the need to provide the community with the least cost electrical supply pos sible while still meeting all environmental regulations, and to that end, JEA has slowly and me thodically updated its generating fleet, transitioning from oil fired steam units to gas con versions, to its first (modern) coal-fired units, to gas fired CTs and one NGCC unit, and to (modern) petroleum coke (petcoke) and coal-fired circulating fluidized bed (CFB) units.

Northside 1, Jacksonville, FL upgrades. Commenters said in good faith JEA's customers invested $630M to re-power two oil-and-gas fired units to co al and petcoke-fired CFB boilers, including
modifications to meet EPA rules. Commenters said JE A's total investment in Northside 1 and 2 is currently almost one billion dollars. Commenters said this project, which entered commercial operation in 2002, was a DOE sponsored Clean Coal p roject which demonstrated the first large
scale CFBs and set a new standard for BACT. Commen ters indicated that the project resulted in a 170% increase in electricity production, while re ducing total emissions of NOx, SO2 and
PM. Commenters said the DOE established the techni cal requirements for this project, and supplied $72M toward construction, and the EPA has now drafted a rule that will prevent JEA from operating these units and receiving the value of the money that our customers (and Federal taxpayers) invested in good faith.

St. Johns River Power Park, Jacksonville, FL upgrad es. Commenters said furthermore, to comply with the Clean Air Interstate Rule (CAIR) regulatio ns JEA and FPL invested $278 million to install Selective Catalytic Reduction (SCR) systems at St. Johns River Power Park (SJRPP), the largest local coal units (these SCR systems became operational in 2010). Commenters said CAIR and the Clean Air Mercury Rule (CAMR) were later re placed with CSAPR and MATS, and it was ultimately determined that with these upgrades the units were expected to be capable of CSAPR and MATS compliance. Commenters said the EPA has now drafted a rule that will197

prevent JEA from operating these units and receivin g the value of the money that our customers invested in good faith to meet other environmental rules.

Schere 4, Juliette, GA upgrades. Commenters said fo r the same reasons as above, between 2007 and 2012, JEA participated in comprehensive environ mental control upgrades to the Scherer 4 coal-fired generating unit, co-owned by JEA (23.64% ) and FPL (76.36%). Commenters said the unit is located within Georgia Power service territ ory, and operated by Georgia Power. Commenters said the scope of these upgrades , at a total cost of over $597 million, included installation of a wet scrubber, a n SCR system, a fabric filter, and PAC injection for mercury control. Commenters said the EPA has n ow drafted a rule that will prevent JEA from operating these units and receiving the value of the money that our customers invested in good faith.

Commenters said in all three cases above, JEA has p roceeded in good faith to implement costly upgrades to its fleet, including Northside 2 repowe ring, partially funded by the DOE, in order to comply with new EPA regulations. Commenters said n ow, in a case of extreme over-reach, EPA is proposing regulations that will void these capit al investments that recent EPA regulations required, and render five fully modern clean coal-f ired generating units totaling 2,700 MW 4 capacity to be stranded assets. Commenters said tha t in 2020 JEA and its customers will have $795 million in debt outstanding on these three pro jects, and that debt will have to be repaid without the benefit of use of the underlying assets due to BB 2 and the interim goal date. Commenters said the CPP unnecessarily makes JEA cus tomers' investments in costly environmental rules obsolete, exceeds EPA's authori ty, and requires JEA's customers to bear a disproportionate burden of the cost of compliance.

Missouri. Commenters stated that own portions of th ree coal fired power plants, all of which were built in the last three years at a cost of app roximately $1.5 billion, and which comprise well over 50% of its generation capability. The commente rs said the process to build these plants was begun in 2004, well before the current regulations were first proposed; further the bonds sold to finance the construction will not be paid off until well after 2040. The commenters said these electric plants are among some the low emitting pow er plants in the entire U.S. fleet; prohibiting the use of these plants as contemplated in this rul e, will force Missouri's municipal electric utility customers into the financially untenable position o f having to pay for unusable plants for over 30 years while having to compete in the open marketpla ce for increasingly unavailable electric power. The commenters said essentially EPA's propos ed guidelines force this class of customer to pay for electricity twice during a period when t he agency predicts that rates will increase anyway. The commenters said the ultimate impact is a death spiral for small-town middle
America as small manufacturers are forced to flee e scalating electric power bills, and as
residential customers have fewer and fewer dollars to spend at local stores to keep them solvent. The commenters suggested to allow existing plants w ith bonded indebtedness to continue to operate for the life of the plant or 40 years which ever comes first.

Florida- Gulf Power Crist. Commenters stated in 200 9, a $600 million scrubber system began operation at Gulf Power Plant Crist in Pensacola, F lorida. The commenters said EPA's modeling shows Crist units 4 and 5 retiring in the base case , and Crist units 6 and 7 retiring in the main compliance case. The commenters said the unrecovere d cost of Plant Crist's scrubber system are thus stranded, negatively impacting Gulf Power's cu stomers. The commenters said EPA must198

reassess its stringent proposal to specifically avo id stranded investments and existing generation

assets.

Georgia. Commenters stated the proposal assumes tha t existing generation units will be retired. The commenters said Georgia has already certified t he retirement of over 3,000 megawatts of coal resources, largely in response to environmenta l requirements. The commenters said the proposal assumes that Georgia will retire another 3 ,900 megawatts by 2025. The commenters said retiring these additional megawatts will stran d the significant investment Georgia has already made in the existing coal fleet, billions o f dollars to reduce environment footprint.

Commenters stated over the past two decades, Georgi a Power and Southern Company have gone to extreme measures to upgrade and implement enviro nmentally friendly components to their existing facilities; these are goals that are impor tant to them and ensure a fair, better quality of
life for all here in the South.

Mississippi. Commenters stated this rule is very fl awed when it looks at states like Mississippi
and doesn't take into account the investments that people have already made and the life expectancy of plants that have already been environ mentally controlled because the rules
continue to shift. The commenters said for one set of rules $600 million were spent to comply with it and now the rules change.

Comment 14: Nebraska is only state in US with wholly publicly owned utility power sector, this means the CPP presents unique challenges to their p ower sector, and makes Nebraska public power districts more susceptible to hardships assoc iated with stranded assets

Response 14: See response to comments 1 and 2 in this section ( 4.7.2) . To elaborate further, the flexibilities that the emission guidelines provide for all states to choose different plan designs help address the unique attributes of the Nebraska power system. Nebraska public power representatives were among the stakeholders and sta te representatives who expressed interest in the possibility of power companies engaging in inte rstate trading -- without Nebraska joining with other states in a multi-state plan. The final emission guidelines provide for mass-based and rate-based interstate trading for states that would prefer to develop individual state plans., See also section VIII.H and section I.A, II.F-G, V.A-C, VIII.G, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response to this comment

.
The following are summaries of the specific public comments under this comment:

Commenters stated that Nebraska is the only state i n the U.S. with a wholly publicly owned utility power sector. Commenters said while this al lows Nebraska to deliver efficient, low-cost, reliable electricity to over 1.8 million people, it also means that the Clean Power Plan presents unique challenges to Nebraska’s power sector. Comme nters said Nebraska’s non-profit public power utilities are statutorily-created entities wi th limited control and authority, and are required by law to provide least-cost electricity generation

. Commenters said as a result, Nebraska public power utilities have less financial flexibility tha n private entities, relying solely on bonds and ratepayer fees to finance investments in new facili ties, retrofits to existing facilities, operating and maintenance costs, and other expenses. Commente rs said this makes Nebraska public power districts more susceptible to the hardships associa ted with stranded assets.199

Commenters said Nebraska public power districts hav e already invested millions of dollars in upgrades and retrofits to bring existing units into compliance with other air quality regulations such as the Mercury and Air Toxics Rule, Regional H aze, Cross State Air Pollution Rule, and the sulfur dioxide (SO2) National Ambient Air Quality S tandard regulations. Commenters said the Clean Power Plan puts these investments made for co mpliance in other air regulations at risk, forcing utilities to choose between investing in ad ditional capital improvements and shutting down existing units prematurely, resulting in stran ded assets. Commenters said due to the public power structure of Nebraska’s utilities, the only w ay to address the escalation in costs is to raise electricity rates on customers – the 1.8 million ci tizens of Nebraska – and these increases may be significant for those public power utilities with s maller service areas.

Comment 15: Significant investments have been made to upgrade coal-fired EGUs to comply with federal and state regulations, and these asset s would be lost if units are forced to retire or operate less. Proposed regulation could force facil ity currently undergoing $384 million upgrade to retire. Rule does not consider time and money re quired for infrastructure upgrades. Extensive plant retirements as result of MATS and CPP are exp ected to exacerbate resource adequacy concerns unless additional replacement capacity can be built in timely fashion; G&T impacts will disproportionately impact rural cooperative cu stomers

.
Response 15: See sections VIII.G.1, VIII.H, I.A, II.F-G, V.A-C , VIII.G, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response to this comment . See the “Stranded Assets Analysis” MEMO in the docket from July 2015.

The following are summaries of the specific public comments under this comment:

Several commenters indicated that the proposed rule will cause significant stranded costs from previous investments made to upgrade coal-fired EGU s for environmental compliance.

Georgia. Commenters said that Georgia Power has inv ested $4.3 billion through 2013 to install environmental controls mandated by prior EPA rules in order to limit other pollutants with $1.1 billion still slated for future improvements includ ing $543 million in 2014 alone. Commenters said that approximately $2.5 billion has already be en invested in environmental control equipment at one of Georgia’s coal facilities, Plan t Scherer, in addition to several other coal plants.

Big Stone Plant. Commenters said they have made sig nificant investments in environmental control upgrades and efficiency improvements at the ir various plants, and are approximately 80% through a $384 million air quality control syst em (AQCS) upgrade at Big Stone plant to reduce emissions to comply with the Regional Haze R ule and Mercury and Air Toxics Standards. Commenters said before the AQCS project began, the EPA reviewed it through the promulgation of the State of South Dakota’s Regiona l Haze State Implementation Plant, and it was reviewed and unanimously approved by public uti lity commissioners in Minnesota and North Dakota, the states in which most of their cus tomers are located. Commenters said the project represents the largest single investment th eir company has ever made. Commenters said that if the proposed rule is finalized as written, it would likely force retirement of Big Stone Plant shortly after the installation of the $384 million air quality control system that will make it one of
less than 10% of coal-fired units nationwide to use similar state-of-the-art technology to control200

SO2, NOx, and particulate matter emissions. Commen ters said that if the plant is forced to retire early, rates for Otter Tail’s rural, low-income and elderly customers would increase by as much
as 20%.

Virginia. Commenters said that the proposed rule un fairly strands and penalizes those states and coal-fired power plants that invested in costly env ironmental upgrades. Commenters said for example, the Virginia State Corporation Commission (“VSCC”) recently commented that Virginia may need to retire coal plants prematurely in order to reach its emissions target, which would result in the loss of many recent coal-relate d investments, including: the Virginia City Hybrid Energy Center, opened in 2012 at a cost of $ 1.8 billion; the Chesterfield Power Station scrubbers, installed in 2011 at a cost of $275 mill ion; and the Clover Power Station, opened in 1996 at a cost of $1.2 billion, and with a planned service life of over 50 years.93 The VSCC also noted that “Virginia and West Virginia ratepayers h ave only recently begun paying for more than $2 billion in environmental controls necessary for Appalachian Power Company to comply with
a 2007 EPA Consent Decree.”

Florida – Seminole. Commenters described past and o n-going upgrades that have been made to the Seminole Generating Station (SGS). Commenters discussed various environmental control upgrades that have been added to the facility at a cost of more than $530 million. Commenters indicated that additional environmental control pro jects are planned in 2015. Commenters indicated that Seminole Electric Cooperative is a n ot-for-profit cooperative, and its costs are directly reflected in its rates. Commenters said i f SGS were to be decommissioned prior to the end of its useful life, the net book value will hav e to be retired, written off, and collected from our Members, along with the interest expense on deb t that was borrowed to match the expected
useful life.

Wisconsin. Commenters said they estimate a cost of compliance for the proposed regulation to be $3.3 to $13.4 billion for Wisconsin alone. Comm enters said that this cost estimate does not include any costs related to additional infrastruct ure needs associated with the rule, such as natural gas infrastructure necessitated by increase d gas use contemplated under the proposal, or
the need for new transmission lines. Commenters sa id Wisconsin currently does not have the infrastructure in place for this conversion, and it would take years to build. Commenters said furthermore, the EPA’s plan does not consider “stra nded costs,”, which are those investments that have been made in coal-fired power plants that may need to be retire earlier than anticipated due to rule requirements.

HRI investments would be stranded. Commenters indic ated that any investments made to improve heat rate (BB1) would be stranded to the de gree that the coal sector capacity factor is
diminished due to the forced increase of NGCC secto r capacity factor (BB2). Commenters stated that an unintended consequence would be that the lowest cost tons of CO2 reduction will have been displaced by the highest (among the build ing blocks), thus highly compromising the
BSER cost effectiveness criterion.

Kentucky Cooperative. Commenters indicated that the y rely on rate revenue from the high capacity factor operation of its 1,400 megawatt Spu rlock Generating Station to service its substantial RUS debt, maintain infrastructure, pay for increasing maintenance expenses, expand its natural gas generation while struggling to main tain low rates. Commenters indicated they201

have invested well over a billion dollars to instal l state of the art emissions controls to comply with numerous other regulations issued by EPA under the CAA: its New Source Review (NSR) Consent Decree, Title IV, NAAQS, CAIR, CSAPR, NSR, MATS, the Clean Water Act, and various solid waste regulations. Commenters said th eir coal-fired units are among the lowest emitting units in the country. Commenters said now the EPA is proposing to restrict the ability of these well-controlled units from operating and will leave these investments as stranded assets and result in dramatic, unprecedented and dangerous increases in electricity rates. Commenters said one of their EGU’s (Spurlock) potential strand ed cost is nearly $1.4 Billion. Commenters indicated this amount will potentially be even high er as they continue to invest in projects to meet additional non-CPP environmental regulations a nd other operating enhancements.

G&T Cooperatives. Commenters stated that the CPP im poses extraordinary costs on the operation of Generation & Transmission Cooperatives (G&Ts) which will disproportionately impact rural cooperative customers. Commenters sai d most G&Ts rely on high capacity factor operation of coal generation, and reducing this ene rgy source will result in some G&Ts potentially having difficulty remaining financially viable and servicing debt, which will also adversely impact reliability. Commenters indicated that G&Ts have invested billions of dollars
to install state of the art emissions controls to c omply with numerous other regulations issued by EPA under the CAA: Title IV, NAAQS, CAIR, CSAPR, NS R, Regional Haze Rules and MATS. Commenters said now the EPA is proposing to restric t or eliminate the ability of these wellcontrolled units from operating which will leave th ese investments as stranded assets and result in dramatic, unprecedented and dangerous increases in electricity rates.

General. Commenters said that across the country MA TS is forcing the retirement of approximately 47-75 GWs of coal units, and the CPP is estimated to force the retirement of an additional approximately 40-48 GWs of coal capacity . Commenters said these extensive retirements are expected to exacerbate resource ade quacy concerns unless additional replacement capacity can be built in a timely fashion.

Commenters said that the EPA does not include provi sions to avoid stranded costs and it is not
clear that the EPA considered stranded costs when d etermining the cost and impact of the rule. Commenters said that prior to finalization, the EPA should analyze this issue, estimate the potential costs, and provide provisions for states to avoid stranded assets when complying with
this rule. Commenters said that some sort of cost recovery mechanism should be provided to ensure electricity customers or utility investors a re not left servicing the cost of investments stranded by the EPA and state regulatory measures. Commenters said the EPA should give consideration in its CPP target setting for states to delay CPP requirement implementation until
after the costs for these EPA-mandated investments have been recovered.

Commenters indicated the stranded asset costs would most likely be imposed on consumers in addition to the higher cost of natural gas generati on. Commenters said that for merchant generating companies, the forced retirement of coal -fired generation likely would mean bankruptcy and dissolution, since the coal-fired as set would have no salvage value. Commenters
said that the EPA must consider these costs before finalizing the Proposed Rule. Commenters said utilities are currently investing significant amounts of money in coal-fired EGUs to comply with EPA regulations, and if these investments are prematurely lost due to forced retirement or reduced operation, there will be a public outcry.202

Comment 16: Investment made by utilities to comply with other EPA regulations; result in
stranded assets

Response 16: See response to comments 1 and 2 in this section (4 .7.2), including especially the reference to the July 2015 docket memo titled “Stra nded Assets Analysis.” See also section VIII.H and sections I.A, II.F-G, V.A-C, VIII.G, X.C , XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response to this comment

.
The following are summaries of the specific public comments under this comment:

Commenters stated the CPP did not consider the inve stment made by utilities to comply with other EPA regulations including the Mercury and Air Toxics Standard (MATS), National Ambient Air Quality Standards (NAAQS), Cross State Air Pollution Rule (CSAPR) and that impact on the remaining useful life of a plant.

Several commenters stated approximately $2.5 billio n of state-of-the-art environmental control equipment has been installed at Plant Scherer to co ntrol emissions of NOx, SO2 and mercury in response to various EPA and State of Georgia regula tions. The commenters said this extensive, ten year effort was only just completed in 2013; ho wever, based on EPA's own State Option 1 IPM modeling, which shows Scherer Units 1 and 2 shu tting down before 2020, this significant investment in clean energy in fact becomes a strand ed investment.

Several commenters stated in addition to the closin g of Plant Scherer, EPA's IPM modeling also projects that Plant Wansley - located in Heard Coun ty, Georgia - will operate at a capacity factor significantly reduced from historical levels. The c ommenters said similar to Plant Scherer, significant capital has been invested in control eq uipment at Plant Wansley - selective catalytic reduction, flue gas desulfurization and activated c arbon injection - for a total cost of about $800 million. The commenters said given other EPA rulema kings under way - like the Steam Effluent
Limitations Guidelines and the Coal Combustion Resi duals Proposal, significant additional expenses for continued operation of coal-fired powe r plants may be incurred, potentially increasing the amount of stranded investment due to curtailed or halted operations.

Commenters stated EPA noted that prior to release o f its proposal, stakeholders expressed concerns that the proposed GHG existing source guid elines could potentially result in stranded investments in existing generation assets to comply with other EPA rules. The commenters said EPA states that the proposal includes features that are intended to avoid the creation of stranded
assets. The commenters said based on its own modeli ng, EPA's attempt to avoid creating such
stranded assets is insufficient. The commenters sai d for example, in 2009, a $600 million scrubber system began operation at Gulf Power's Pla nt Crist in Pensacola, Florida; EPA's modeling shows Crist Units 4 and 5 retiring in the base case scenario and Crist Units 6 and 7 retiring in the Option 1 - State compliance scenari o. The commenters said Gulf's investment in the scrubber is therefore clearly stranded in EPA's modeling. The commenters said since 2000, Gulf Power has invested over $1 billion in environm ental controls; these environmental controls would be retired under the EPA's Option 1 - State c ompliance scenario. The commenters were very concerned about these stranded investments and the associated negative customer impacts.203

Commenters stated a concern is the potential strand ing of costs (those which the company is unable to recoup because of changes in regulations) incurred to satisfy other environmental regulatory requirements.

Commenters stated these rules, as proposed, have a detrimental effect to Mississippians as they stand today; based on several investments that Miss issippi has made to try to, one, comply with existing rules of the Environmental Protection Agen cy and also to bring about diversity to Mississippi's electric mix and electric generation mix. The commenters said as of today, the State of Mississippi has invested in just two projects al one, well over $850 million in increased projects and generation; one is to comply with EPA regulations at Plant Daniel for Mississippi
Power. The commenters said the Public Service Commi ssion approved $600 million in cost to clean up the environmental controls on Plant Daniel that serve the Gulf Coast region of Mississippi, which caused a rate increase for those customers, and based on the rules as they are presented today, that $600 million isn't worth a pe nny; that $600 million is lost. The commenters
said that doesn't count into the fact that that Pla nt Daniel and the upgrades that were done there have a 25 year life expectancy that can provide goo d electricity to the people of South Mississippi who have been faced not only with Hurri cane Katrina but with the BP oil spill and with an economy that is struggling to get up and ru nning in Mississippi. The commenters said that $600 million, it's lost because these rules us e a 2012 benchmark, so that is the first problem and error that just jumps out with this.

Commenters stated with $2.7 billion already spent o ver the last decade by the largest utility company in Alabama and another billion dollars in p rojects already underway to comply with current federal mandates, the commenters were oppos ed any new mandates coming out of Washington.

Commenters stated a primary concern relates to the potential for stranded costs from early investments made to comply with EPA's Clean Air Int erstate Rule and Clean Air Mercury Rule. The commenters said the ESPS's proposed depends pri marily on load shifting from coal to natural gas generation for compliance. The commente rs said the shift in natural gas would likely result in premature closing of the ESPS's coal unit . The commenters said while EPA recognizes the increased cost to consumers with load shifting to natural gas, it does not consider the stranded cost for those units that still carry cons iderable debt.

Commenters stated EPA's rule for existing power pla nts assumes that the coal-fired Plant Morrow, located in Purvis, Mississippi would no lon ger dispatch due to economics. The commenters said since 2010 alone, $65 million has b een spent in pollution control equipment at Plant Morrow to address previous EPA regulations, a nd additional pollution control equipment tests are currently in process to comply with the M ATS rule. The commenters said if coal is eliminated from the resource mix, as proposed by th e Clean Power Plan, these investments will become stranded costs, borne by Mississippi residen ts without any corresponding benefit.

Commenters stated Kansas is in the midst of a perio d of great transition for its large coal-fired electrical generating units; the six largest coal f ired units in Kansas have made and continue to make significant investments in criteria pollutant emission reduction equipment in the last three to four years to comply with the regional haze prog ram. The commenters said in addition, the Cross State Air Pollution Rule, Kansas City ozone m aintenance plan rules, and the Mercury and204

Air Toxics rule have also contributed to massive in vestments in pollution control equipment at Kansas' largest coal plants in recent years. The co mmenters said more than three billion dollars is earmarked for these projects that have either just been completed or are still under construction. The commenters said paying off the bonds and other credit instruments used to fund controls installed in 2015 cannot be expected to be complete d by the early compliance period starting in 2020. The commenters said investments of such magni tude are typically financed for much longer periods of time; the result is a large poten tial for stranded investments in the State of Kansas as a result of re-dispatch to non-coal gener ating units. The commenters said although not new facilities, the investments made in pollution c ontrol equipment are significant and should be allowed to be amortized over a greater time period than allowed under the proposal.

Commenters stated this is a fundamental issue that EPA must address at the front end of the 111 (d) process by incorporating adjustments for plants with recently installed or to be installed controls into the state goal calculations or in the compliance periods. The commenters said the
solution should take into consideration the amount of funds spent on controls as a proportion of the value of the generating unit and the generally accepted time frame used by utilities to retire
the financial instruments used to fund the control devices installed. The commenters said facilities that have recently installed or are inst alling new scrubbers comprise 84% of Kansas' 2012 generation; this is a far greater impact than the flexibility contained in the Ill (d) process can reasonably be expected to account for in the sh ort time between the plan submittal deadline and the first year of the compliance period.

Commenters stated that little thought was given to how the Proposed Guidelines interact with other CAA rules. The commenters stated that, for ex ample, Arizona will have to close all coal units to achieve its interim and final targets unde r the Proposed Guidelines, but utilities in the state recently invested $500 million to comply with the Regional Haze Program. The commenters stated that the Proposed Guidelines will require the ramping up of units located in nonattainment areas, which would violate NAAQS requ irements. The commenters stated that section 111(d) explicitly requires that considerati on of the remaining useful life of sources be considered when designing performance standards for existing sources and that contrary to that requirement, the Proposed Guidelines will lead to t he stranding of assets if finalized, especially given its interaction with other CAA rules.

Commenters stated that the pollution control upgrad es required by MATS and other rules are in many cases substantially lowering the operating eff iciencies of existing units that are covered by the Proposal. The commenters stated that in some ca ses, significant investments that have been recently made due to MATS and other rules will beco me stranded by the Proposed Guidelines if they are finalized. The commenters stated that unde r EPA's analysis, the Proposed Guidelines will result in the closure of all coal-fired power plants in Mississippi. According to the commenters, TVA has the right to purchase all of th e output of the 440 MW lignite-fired Red Hills Power Plant in Choctaw County, Mississippi, t hrough a power purchase agreement and has historically purchased most of the facility's outpu t. The commenters stated that the plant began operating in 2002, is currently installing dry-sorb ent injection in order to comply with MATS and, if Red Hills is required to be shut down due t o the Proposed Guidelines, the cost of this injection system would be stranded.205

Commenters stated that EPA has not adequately consi dered how implementation of the Proposed Rule will impact sources that are already complying with other federal requirements, including EPA rules. The commenters stated that, for instance , EPA projects that that the Proposed Rule will require Arizona to shut down all coal-fired ge neration by 2020 to achieve the state's interim target and the final target in 2030 even though EPA 's regional haze rule is resulting in three utilities investing hundreds of millions of dollars to install controls that limit emissions of NOx at units that would have to cease operation less th an three years after those projects must be completed.

The commenters stated that, in addition, the Propos ed Rule will require ramping up generation
from facilities that are located in current nonatta inment areas, which would violate NAAQS requirements and as EPA revises the NAAQS, the numb er of nonattainment areas will grow, causing even greater problems.

Commenters stated that investments well in excess o f $100 billion dollars have already been made to comply with previous requirements to reduce sulfur dioxide, nitrogen oxides, and particulate matter, and that these primary emission s have been reduced by approximately 90 percent since 1970; furthermore, tens of billions o f dollars of additional investments are being made to comply with EPA's MATS and other regulation s. The commenters stated that these new air quality investments may, in fact, become strand ed investments if EPA's proposed new rule is implemented and coal units are shut down prematurel y.

Commenters stated some sort of cost recovery mechan ism should be provided to help assure that Minnesota electricity customers or utility investor s are not left servicing the cost of investments stranded by EPA and state regulatory measures. The commenters stated that EPA should give consideration in its CPP target setting for states to delay CPP requirement implementation until
after the costs for these EPA-mandated investments have been recovered.

Comment 17: RTOs take market-based approach to direct construc tion of new capacity, and when existing efficient units with remaining book l ife are available doesn't support building NGCCs. Deregulated states like IL have no authorit y to require such construction. EPA should allow continued base-load operation of EGUs with su percritical technology - such units should be exempt from re-dispatch

Response 17: The EPA maintains that the final emission guidelin es provide ample flexibilities to states to design plans that fit special state circu mstances and achieve the subcategory-specific emission performance rates or state goals. See sect ions V and VIII of the final CPP preamble for more information. EPA does not require or assume r e-dispatch from any particular unit, and believes the final CPP rule provides significant fl exibility for any source to comply with BSER without curtailing operation. See GHG Mitigatin Me asures TSD.

The following are summaries of the specific public comments under this comment:

Commenters discussed the market-based approach that regional transmission organizations (RTOs) take in terms of incenting the construction of new capacity. Commenters said for the sake of clarity, let us say here that the one-year forward voluntary capacity market in MISO and the three-year forward mandatory capacity market in PJM do not provide sufficient economic206

incentive to construct dispatchable resources in th e state. Commenters said and, as a deregulated state, Illinois itself has no authority to interced e and require sufficient levels of generation to
meet native load.

As a real world example of the issues facing the us e of Block 2 as a compliance tool and the interaction of Block 2 and the lack of generation i ncentives in the RTOs markets, commenters described their attempts to build a natural gas-fir ed generator as a part of its dedicated resource mix. Commenters said they conducted an exhaustive a nd expensive study with the goal of building a new natural gas-fired power plant inside the PJM RTO. Commenters said the first two steps of the three-step generation interconnection study itself, which is a requirement of PJM, took over 4.5 years; adding an additional 3 years t o finance and construct would bring the effective start date well beyond 2020. Commenters s aid the interconnection study process, consisting of a feasibility study, system impact st udy and facilities study, is intended to show what improvements may be needed to the transmission system to accommodate the proposed generation project, and how those improvements will be funded. Commenters said that parallel with, and in support of this study effort, IMEA spe nt approximately $1 million to develop preliminary plant design, secure a purchase option on the site and conduct an extensive feasibility assessment that included consideration of the adequacy and access to natural gas and groundwater supply, environmental impacts on air an d water quality, and sound attenuation and other local government zoning requirements.

Commenters said that in the end, the three-year for ward capacity market in PJM did not provide sufficient revenue for IMEA to build and operate th is facility and the interconnection study process itself was burdensome and slow. Commenters said in light of this real-world experience, the EPA should seriously consider how it expects Il linois, which has no mechanism in place to order or incent new generation, to meet the aggress ive schedule of its Block 2 goals as provided in the proposed rule, given the failure of PJM to p rovide by itself sufficient incentives for such development and provide timely response to intercon nection study requests for new gas-fired generation.

Commenters said given these realities, the EPA shou ld provide for the continued base-load operation of units with supercritical technology (o r which operate at an equivalent emission rate) and exempt such units from re-dispatch under Block 2. Commenters said this will maximize the
value of these units under Block 1 and avoid issues related to stranding these units' outstanding economic investments. These new supercritical units already have the most strict environmental compliance permit obligations and can and will prov ide significant environmental benefits for the long term vs. other resources.

Comment 18: Premature retirement of Healy units would result i n rate increases equal to roughly six times greater than the rest of the nati on.

Response 18: The EPA is not including emission performance goal s for Alaska in this final rule. See section VII of the preamble for discussion of t his issue.

The following are summaries of the specific public comments under this comment:207

Commenters said that in any scenario requiring Gold en Valley Electric Association (GVEA) to generate or purchase power from a source other than the Healy Power Plant would increase the cost of electricity. Commenters said first, retirin g the Healy units prematurely would involve nearly $450 million in stranded capital costs and r emaining loan principal payments. Commenters said second, because coal is GVEA's leas t expensive power, replacing Healy coalfueled generation would also result in significant additional annual variable costs between $47.4 and $60.7 million per year. Commenters said upgradi ng the Alaska lntertie to transport more natural gas generation north would also result in a pproximately $30.2 - $41.4 million of
additional annual costs to consumers.

Commenters said that GVEA residential ratepayers ra tes are already much higher than anywhere else in the nation, except other parts of Alaska an d Hawaii. Commenters said just the annual cost increases of $90.9 million related to shutting down the Healy units identified above would result in rate increases for GVEA consumers of between $0. 05 and $0.07/kWh. Commenters said the EPA indicates that implementation of the Proposed R ule will result in rate increases of approximately $0.01/kWh nationwide. Commenters said that there is no justification for making Fairbanks consumers bear a burden roughly six times greater than the rest of the nation, particularly when the carbon emissions at issue are minimal.

Comment 19: Because the decision to construct nuclear electric generating stations in SC and GA were made prior to the proposal, the EPA is view ing the incremental cost associated with the emissions reduction available from completion of th ese units as zero, even though construction is on-going

Response 19: See section XI.D of the final rule preamble of the CPP for the EPA’s response to this comment.EPA is not including the nuclear gener ation from these units in its final quantification of BSER.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA's proposed rule and computa tion of the state goal does not recognize the significant investment which is continuing to b e made by the rate payers and utilities in South Carolina and our neighboring state of Georgia, in z ero carbon nuclear electric generation. Commenters said the estimated cost for completion o f the 2 units at the V.C. Summer Station is $ 11 billion and the estimated cost for the 2 units in Georgia is $ 14 billion. Commenters said in South Carolina, the Base Load Review Act allows Sou th Carolina Electric & Gas Company (SCE&G) to recover the financing costs for the V.C. Summer Station units through filing with the South Carolina Public Service Commission (PSC), and as recently as May 30, 2014, SCE&G filed a request of $70 million for this reason.

Commenters said the EPA states in the preamble, "Th e EPA believes that since the decisions to construct these units were made prior to this propo sal, it is reasonable to view the incremental
cost associated with the CO2 emissions reduction av ailable from completion of these units as zero..." Commenters said to date, less than one hal f of the cost of the UCN units in South208

Carolina has been incurred, so a significant cost r emains to support the completion of these units. Commenters added further, only the financing costs are currently being paid and the principal will be paid over the estimated 60 year lifetime of the new nuclear units - there is clearly an
incremental cost that continues to be incurred for this construction.

Comment 20: Rule will result in stranded assets; change in ope ration (not just retirement) causes stranded assets; debt service on loans will continu e after facilities are retired early, and many loans contain significant prepayment interest penal ties; advanced retirements and curtailed operations should be avoided, EPA failed to conside r competitive impacts of CPP

Response 20: See response to comments 1 and 2 in this section ( 4.7.2), including the reference to the July 2015 docket memo titled “Stranded asset s analysis.” See also section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the fina l rule preamble of the CPP for the EPA’s response to this comment..

The following are summaries of the specific public comments under this comment:

Several commenters said there is potential for stra nded assets under this plan and the EPA did
not consider these costs. Commenters said the EPA failed to take the remaining useful life of existing facilities into reasonable account. Comme nters said that the EPA has improperly conflated the legislative history related to techno logy forcing under section 111(b) of the CAA with the facility preserving useful life requiremen ts of 111(d).

Commenters noted that forcing changes in the operat ion of coal plants will create stranded costs. Commenters said for example, at Laramie River Stati on (LRS) in Wyoming, because there is no practical way to reduce the heat rate under buildin g block 1, the only option remaining at the
source is a drastic one: the owners are faced with the requirement to run the plant less or shut
down one or more units. Commenters stated that the first option, running the plant less, will reduce the efficiency of the plant (and the heat ra te, contrary to EPA's objective) and cause an increase in the operating costs - wholesale cost in creases that will have to be passed on to their
customer-owners. Commenters added that it is unlike ly, however, that simply running the plant
less will be sufficient to meet the CO2 emission re duction required of LRS, whether under the rate-based or mass-based approach. Commenters indic ated that if, instead, the owners are forced to shut down a unit prematurely, it will cause sign ificant stranded costs and will run afoul of the directive of 111(d) to take into account remaining useful life. Commenters said that in EPA's NODA, it asks if it should consider such issues in adjusting timeline and compliance requirements. Commenters stated that at a minimum, the EPA should allow all stranded costs to be considered in adjusting timelines and targets ac cordingly to allow recovery of costs.

Commenters stressed that the guidelines should supp ort cost-effective, achievable reductions that do not advance retirements, strand assets, or curta il operations of the current fleet.

Commenters said Seminole, as a rural generation and transmission cooperative, has primarily relied on capital borrowed from the Federal Financi ng Bank and loan guarantees from the Rural Utilities Service ("RUS") for the construction of i ts generation fleet and capital improvements to its facilities, primarily involving environmental c ontrols. Commenters said currently, loans209

related to SGS account for more than 75 percent of Seminole's total outstanding debt, and these loans are secured by Seminole's Trust Indenture. Co mmenters said if SGS were to be retired prior to the end of its useful life in order to com ply with EPA's Existing-Source Proposal, the
debt service related to these loans would continue to impact the electricity rates paid by our
Members. Commenters stated most of Seminole's loans also contain significant prepayment interest penalties, so a strategy to prepay the deb t would only further increase the cost paid by
our Members.

Commenters said the EPA also fails to consider the competitive impacts of its proposed rule. Commenters said in Florida, some utilities have a f ar greater dependence on coal-fired plants than natural gas plants. Commenters said that those utilities that would be required to prematurely shut down viable coal plants with years of remaining operating life, and given the limited time period for re-dispatch, would be force d to purchase energy from other utilities.
Commenters said their consumers would lose the inve stment in the capital intensive coal plants and at the same time be forced to pay for new trans mission lines and pipelines to other utilities to buy electricity from gas generation plants they do not own while their own generating units sit
idle.

Comment 21: Stranded Cost & Replacement Cost

Response 21: See section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C -E, and XII.E of the final rule preamble of the CPP for the EPA’s response to this comment. See the “Stranded Assets Analysis” MEMO in the docket from July 2015.

The following are summaries of the specific public comments under this comment:

Commenters stated the Proposed Rule and the applica tion of additional requirements on existing generation resources will result in a number of ser ious cost and compliance issues, particularly as it relates to stranded assets and obtaining financi ng for replacement power. The commenters said the cost impacts resulting from the Proposed R ule will ultimately be borne by the cooperatives' end use retail members; unlike invest or-owned utilities, due to the not-for-profit nature of cooperatives, cooperatives cannot shift c osts to shareholders or reduce profit margins as a means to mitigate the final rate impacts of the r ule.

Commenters stated cooperatives, their member cooper atives, and ultimately the retail consumers will be hit particularly hard by stranded costs. Th e commenters said the EPA's model anticipates shutting down baseload generation; there is uncerta inty about biomass and whether it will be viewed as carbon neutral; if it is not viewed as ca rbon neutral, it will likely be retired resulting i n stranded costs. The commenters said cooperatives wi ll then have to expend additional money to replace the plants that will be shut down.

Commenters stated the rule will result in the closu re of some of the cleanest base load generation facilities in operation today; for example the Plum Point Energy Station located in Mississippi County, Arkansas ("Plum Point"). The commenters sai d this project became commercially operational in August, 2010; as one of the newest c oal generation facilities in the country, it was constructed using state-of the-art emissions contro l technology-a fact the EPA either did not210

consider important or ignored. The commenters said although the Plum Point facility is one of the cleanest coal plants generating power today, it would be shut down if the Proposed Rule is implemented in accordance with EPA's IPM model. The commenters said the proposed standards would require Plum Point to reduce its output to a level such that the operation of the facility is no longer economically viable. The commenters said the Plum Point facility was financed in 2011 with two thirty-year-term loans, both having s ubstantial prepayment penalties in the event prepayment is required as a result of the closure. The commenters said the closure of generation facilities such as Plum Point will cost the coopera tives and their members millions of dollars in prepayment penalties in addition to the cost of acc elerating payment of remaining principal. The
commenters said rural Americans will see substantia l increases in their energy costs as the cooperatives must recover funds to pay the costs as sociated with these stranded assets. The commenters said cooperatives will encounter decommi ssioning costs associated with projected coal retirements. The commenters said on top of the stranded cost issue, cooperatives will need to acquire replacement power for the lost generatio n.

Commenters added the combination of stranded costs coupled with further expenditures necessary to replace the lost generation could have devastating consequences on the ability of cooperatives, to meet certain financial covenants c ontained in their existing loan documents - the failure of which would trigger defaults under those documents. The commenters said this could potentially result in the acceleration of outstandi ng loan facilities which would only serve to compound the financial crisis and, in a worse case scenario, could lead to the ultimate bankruptcy of the cooperative. In the least populat ed and poorest service territories, no other electric utility would be expected to step-in and p rovide electric service.

Comment 22: Use of glide path and/or phasing in of BB1 and BB2 does not prevent stranded

assets

Response 22: The EPA is revised the timing of building block 2 to be gradually phased in over the interim period. See section V.D. of the final r ule preamble of the CPP for more information about Building Block 2. See the “Stranded Assets Analysis” MEMO in the dock et from July
2015.

The following are summaries of the specific public comments under this comment:

Commenters stated that the glide path discussions i n the NODA do not prevent the potential for stranded assets. Commenters said that even phasing in of Building Blocks 1 and 2 during the interim period of 2020-2029 is not adequate to prev ent stranded assets.

Commenters indicated that the use of "book life" of 40 years discussed in the NODA does not reflect reality of the actual life of coal-fired po wer plants, and that 65 years is a much more
realistic time frame. Commenters also noted that th e assumed "book life" of retrofits of 15 years is also not reflective of the reality of the estima ted life of these capital intensive projects. Commenters indicated that a more realistic assumpti on for retrofit book life is on the order of 30 years. Commenters said therefore, application of bo ok life is inadequate for consideration in determining the impact on stranded assets.211

Commenters indicated that utilities have made inves tments in power plants to meet other EPA regulations, and these investments will cost ratepa yers billions of dollars. Commenters warned that stranding these assets will lead to higher ele ctricity rates as new generation resources are built to replace those prematurely retired power pl ants.

Comment 23: Interim goals and 10 year glide path creates stran ded assets

Response 23: In the final guidelines, the EPA has postponed the start of the interim goal period from 2020 to 2022, and has revised its goal-setting methodology and goals. The CO2 emission performance rates and state goals in the final emis sion guidelines, including the emission performance levels for the interim period, are achi evable considering cost. The EPA is allowing states to define their own emission improvement tra jectory, or glide path, to meet the interim goal for 2022-2029 and the final goal starting in 2 030. The EPA also is defining illustrative emission performance levels for three interim step periods -- 2022-2024, 2025-2027, and 2028- 2029 – and a state may choose to use these levels i n its plan.

Additional response to this comment is provided in comments 1 and 2 in this section (4.7.2), including especially the reference to the July 2015 docket memo titled “Stranded assets analysis.”

The following are summaries of the specific public comments under this comment:

Commenters stated the proposed compliance period be ginning in 2020 will burden rate payers with unnecessary costs. The commenters said the int erim requirement as proposed requires too high of a compliance burden by 2020. The commenters said EPA should remove the interim requirements and the 10 year glide path; at a minim um, the states should be free to develop a compliance path that is the most efficient and cost effective for their state. The commenters said the potential 2020 "cliff" could require the commen ters to retire one or both of its coal fired units
which would result in the stranded costs for these units to be paid by the ratepayers. The commenters’ analysis shows that ESGS Unit 2 existin g coal fired unit is the most economical option for our ratepayers for the next 20 years. Th e commenters said ESGS Unit 1 remains the most cost effective option for at least another ten (10) years. The commenters said this proposed rule could force premature retirement of these unit s while they have significant remaining useful
life. The commenters stated their customers bear th e economic costs of ownership, but also realize the economic benefits; as long as the going -forward variable costs of producing electricity with the coal plant are less than the a ll-in costs (fixed and variable) of viable replacements (market purchases, or resource acquisi tions), the plant will yield economic benefits for customers. The commenters said if the plant cea ses operation during its economically useful life, customers will suffer an economic loss from e lectric rates that will higher than they would have been had the plant continued to operate.

Commenters stated compliance with interim goals by 2020 is not technically feasible for the commenters; it may well require the retirement of t he ESGS units and the purchase of power from the open market; however, market participants are not willing to provide firm pricing of electric energy and capacity in 2020 and beyond due to regulatory uncertainty. It is imprudent to the commenters to rely on the markets and thus self -build or contract with asset backed energy and capacity. The commenters said such "clean" capa city and energy does not exist in Kentucky212

and must be constructed. Commenters sais that to th e extent that the commenters must build replacement generation capacity for the ESGS units prior to maturation of the current long-term bond debt and the incremental capital required to m aintain the units in a reliable manner, ratepayers will be burdened with payment of debt an d interest expense associated with new generation as well as stranded debt on ESGS. The co mmenters said a longer compliance period would allow the commenters to plan routine and capi tal maintenance in a manner to minimize the amount of stranded investment to be required fr om ratepayers, thus lowering the economic cost of compliance with the proposed rule.

Comment 24: By forcing significant reductions in operation and retirements, the CPP is a regulatory taking of these units requiring governme nt compensation.

Response 24: See section VIII.G. of the final rule preamble of the CPP for the EPA’s response
to this comment. See the “Stranded Assets Analysis” MEMO in the dock et from July 2015.

The following are summaries of the specific public comments under this comment:

Commenters said without relief for remaining useful life, many older EGU's will be forced to significantly reduce operations or retire. Commente rs said by forcing significant reductions in operation and retirements, the CPP is a clear regul atory taking of these units requiring government compensation. Commenters stated that the test for a regulatory taking is easily met - when determining if a regulatory taking has occurr ed, courts consider (1) the economic impact of the regulation on the property owner, (2) the ex tent to which the regulation interferes with distinct investment-backed expectations, and (3) th e character of the government's invasion of the property interest. Commenters stated the propos ed rule violates the Fifth Amendment because uncompensated takings of property will resu lt.

Commenters said that the CPP would require that cus tomers pay both for the stranded cost of retired coal-fired power plants as well as their re placements, including new capital investment and/or increased market power costs. Commenters sa id this is harsh, avoidable and unnecessary in light of other available options, including stru ctural flexibility and timing options, both of which could service to mitigate the adverse impacts associated with the rule and avert what is potentially a regulatory taking.

Commenters stated that Rule 111(d) mandates the mov e from least-cost generation dispatch to carbon dioxide-based dispatch, drastically diminish ing the value of many coal plants and rendering many of them uneconomic to run during all but the peak summer months. Commenters indicated that because coal plant owners built thei r plants under one regulatory construct, only to have those plants rendered uneconomic by the federa l imposition of a different construct (command and control resulting from Rule 111(d)), t hey may credibly argue for compensation
for the value of their lost investment or stranded cost. Commenters said it is therefore possible that both state and federal takings laws may be imp licated by Rule 111(d), and the EPA has failed to address this potential cost of implementi ng Rule 111(d).

Commenters stated that as part of the legislation c reating the competitive retail electric market in ERCOT, the Texas Legislature allowed investor-owned electric utilities (IOUs) to recover "all of213

[their] net, verifiable, non-mitigable stranded cos ts incurred in purchasing power and providing electric generation service." Commenters stated tha t stranded cost claims from coal plant owners resulting from Rule 111(d) are not addressed in the proposed rule. Commenters indicated that if Rule 111(d) is adopted as proposed, the Texas Legis lature would need to determine whether to change Texas law to allow recovery of stranded cost s resulting from the rule, and if recovery of such costs were allowed by the Texas Legislature, t hese costs would ultimately be borne by all Texas electricity customers.

Commenters said that if as EPA's IPM compliance mod el predicted, the EPA's proposal forces SGS to completely shut down before its useful life has run, Seminole's enormous, undepreciated
investment in SGS will be rendered worthless. Comme nters said that result will leave Seminole and its Members with a "stranded asset", with signi ficant remaining economic value and debt, and Seminole and its Members arguably will be legal ly entitled to recover the costs incurred under this proposed government regulation. Commente rs said if EPA finalizes the existing proposal as currently written, it effectively amoun ts to a regulatory taking, entitling Seminole to
recover the hundreds of millions of dollars of rema ining value of SGS from the total loss of the remaining economic value of these units. Commenters said yet, the EPA's economic impact analysis fails to consider the real costs associate d with the forced closure of existing, useful power plants resulting directly from its proposal a nd how these costs must be recovered following the adoption of any final rule. Commenter s said pursuant to the regulatory takings provision in Article V of the United States Constit ution, Seminole arguably will be entitled to recover the value of its investment-backed expectat ions. Commenters said the EPA should carefully consider this issue as it finalizes the p roposal and its effects on the future cost and reliability to generate and transmit electricity.

Commenters stated because the proposal as it stands would likely result in the premature closure of existing power plants, the proposal's requiremen ts amount to a regulatory taking requiring compensation because of the premature closures and uneconomic curtailment it will require.

Commenters stated as issued, the Proposal may be su bjecting companies to one or more regulatory takings, in the form of forced retiremen ts or diminished operating capacities of stateof-the-art units. The commenters said courts consid er three factors in determining whether the effects of a government regulation constitute a reg ulatory taking in violation of the Takings Clause: (1) the character of the government's invas ion of the property owner's property interest; (2) the economic impact of the regulation on the pa rticular property and property owner; and (3) the extent to which the regulation interferes with the property owner's distinct investment-backed expectations with respect to the property. See Penn . Central Transp. Co. v. New York City, 438 U.S. 104 (1978); see also Tahoe-Sierra Pres. Counci l v. Tahoe Reg'l Planning Agency, 535 U.S. 302 (2002); Palazzolo v. Rhode Island, 533 U.S. 606 (2001). The commenters said courts have applied these factors in relation to the nature and extent of a regulation's interference with an owner's rights in a whole property, rather than a s pecific part of the property. The commenters said based on these standards, the effects of EPA's proposed rule would meet the definition of a regulatory taking in regard to Plant Scherer and po ssibly Plant Wansley.214

Comment 25: States should have the flexibility to allow multi- state electrical systems to demonstrate compliance. Restricting compliance to a state-by-state basis significant increases compliance costs and results in additional stranded assets.

Response 25: The final rule provides ample flexibilities to sta tes to design their plans, which in turn allows states to establish flexible requiremen ts for affected EGUs. Although the emission guidelines call for state plans and include state g oals, they do not “restrict compliance to a state by state basis.” The guidelines take into account i nterstate effects as explained in final CPP preamble section VIII.L. The guidelines also provid e for multi-state plans, and for individual state plans that allow rate-based and mass-based em ission trading across state lines. Regarding the means of reducing emissions, states are allowed to use the BSER measures, or other measures in their state plans to comply with the go als; there are flexibilities within the BSER measures and how they are executed; and states also have non-BSER measures at their disposal. Regarding the form of regulation, states have a bro ad range of options under different plan designs. See, for example, sections V., VIII.A. and VIII.C. of the final rule preamble of the CPP
for more information.

For additional response on the flexibility provided on state plan design by the guidelines and stranded assets concerns, see the response to comments 1 and 2 in this section ( 4.7.2), including the reference to the July 2015 docket memo titled “ Stranded assets analysis.”

The following are summaries of the specific public comments under this comment:

Commenters support the EPA's intention to grant sta tes flexibility on methods to allow multistate electrical systems to demonstrate compliance. Commenters indicated this should include a broad suite of options including bi-lateral agreeme nts, trading of clean energy, renewable energy
and avoided CO2 tons from EE.

Commenters said TVA plans and dispatches its genera ting assets on a system basis across seven states to minimize cost and maintain reliability. C ommenters said restricting compliance to a state by state basis significantly increases compli ance costs and results in additional stranded assets. Commenters indicated that under EPA's analy sis, the proposed guidelines will result in the closure of all coal-fired power plants in Missi ssippi. Commenters said that the TVA has the right to purchase all of the output of the 440 MW l ignite-fired Red Hills Power Plant in Choctaw County, Mississippi through a power purchase agreem ent, and has historically purchased most of the facility's output. Commenters said the plant be gan operation in 2002 and is currently installing dry-sorbent injection in order to comply with MATS. Commenters indicated that if Red Hills is required to be shut down as a result o f this rulemaking, the cost of this injection system would be stranded. Commenters said that to a void situations like Red Hills, TVA supports EPA's intention to grant states flexibilit y on methods to allow multi-state electrical systems to demonstrate compliance.

Comment 26: Binding plant closures could allow emission reduct ions to be counted immediately, while delaying the actual closure unti l the end of the remaining useful life215

Response 26: The commenters’ suggestion is creative but it woul d have the effect of increasing emissions. The final CPP, which allows facilities to purchase and sell emissions allowances or ERCS, can achieve the stated objective of the comme nters without have the effect of increasing
CO2 emissions.

See responses 1 and 2 in this RTC Chapter (4.7.2) f or more explanation of the agency’s view that the final emission guidelines enable states to take into account stranded asset concerns and the remaining useful life of particular affected EGUs i n designing their state plans.

The following are summaries of the specific public comments under this comment:

Commenters suggested the use of binding plant closu re orders would alleviate the impact of early closure on ratepayers and would facilitate pl anning for the grid and state agencies.

Commenters indicated the October 27 NODA requested comment on how book value may be
used to address stranded investment concerns. Comme nters suggested that a binding plant closure order be deemed to count immediately toward a state target, but closure would be deferred until the end of a remaining useful life e stablished by the closure order. Commenters explained that if a binding closure order were issu ed for Dave Johnston in 2019, the compliance calculation for 2020 would eliminate that plant's e missions and megawatts, but the plant could continue to operate until the plant was fully depre ciated in 2027 as provided in the closure order. Commenters said such a process incents a state to s eek closure orders earlier rather than later, alleviates the devastating impact of premature clos ure on ratepayers, eliminates near term investment uncertainty, and facilitates planning fo r the benefit of the grid. Commenters said that the EPA's proposed rule does none of those importan t things.

Comment 27: Need adequate time for transition to avoid strande d assets. Should subcategorize and develop separate standards for facilities that have made significant investments in pollution control equipment since 2010, and should reaffirm S tate's established variance authority and expressly identify variance mechanisms states can u se. Recommended variance-based options are presented

Response 27: In the final guidelines, the EPA has postponed the start of the interim goal period from 2020 to 2022, and has revised its goal-setting methodology and goals. The subcategoryspecific emission performance rates and state goals in the final emission guidelines, including the emission performance levels for the interim period, are achievable considering cost. The EPA is allowing states to define their own emission improv ement trajectory, or glide path, to meet the interim goal for 2022-2029 and the final goal start ing in 2030. The EPA also is providing illustrative emission performance levels for three interim step periods -- 2022-2024, 2025-2027, and 2028-2029 – and a state may choose to use these levels in its plan. See section VII of the preamble for further information.

The CO2 performance rates and state goals in the fi nal guidelines are achievable considering cost, and give states the flexibility in practice t o consider facility-specific factors such as216

remaining useful life and stranded assets in design ing their plans. As a result, the national emission guidelines do not need to include special provisions for facilities that have recently invested in pollution control projects, variances, or alternative compliance schedules. Among the state plan options that are permissible under the g uidelines are mass-based federally enforceable standards on EGUs, which could encompass the commen ters’ suggestion for facility-specific emissions caps, if properly designed. The EPA belie ves that the agency’s approach to subcategorization, -- distinguishing between -- fos sil steam generation and gas-fired combustion turbines – is appropriate for these final guideline s.

Additional response to this comment is provided in comments 1 and 2 in this section (4.7.2), including especially the reference to the July 2015 docket memo titled “Stranded assets analysis.”

The following are summaries of the specific public comments under this comment:

Relief needed for facilities that have recently inv ested in pollution control projects. Commenters
said that an essential element for a reasonable and cost-effective climate program is an adequate time period for the transition to a lower carbon ec onomy, and the EPA must make every reasonable effort to avoid stranding assets. Comme nters said they believe that provision must be
made in the final rule to address the issue of stra nded assets, particularly with respect to coalfired units that have recently installed expensive pollution control equipment to meet other environmental requirements such as the Mercury MATS and CSAPR. Commenters believed that Section 111(d) of the Clean Air Act requires the EP A to provide relief for such facilities either directly in its guidelines or indirectly by authori ze states to do so in state implementation plans. Commenters said allowing such relief will a lso help lessen the costs of this program on consumers of electric power in regions served by su ch facilities.

Alternatives to avoid stranded assets. Commenters s aid that in the NODA the EPA discusses and requests comment on potential alternative options t o enable coal-fired facilities to recoup their pollution control investments. Commenters said GE echoes comments of its Homer City subsidiary and strongly urge the EPA to consider su bcategorizing and creating separate standards for sources that have made recent capital investmen ts to comply with MATS and CSAPR, and reaffirm states' established variance authority and expressly identify variance mechanisms by
which facilities that have made substantial investm ents to comply with the EPA's recently promulgated MATS or CSAPR requirements may obtain t he relief they need.

Commenters said:1) the EPA could use its authority under CAA section 11 to "distinguish among classes, types, and sizes" and to consider co sts when establishing standards of performance, to develop separate 111(d) standards f or existing facilities that since 2010 have made substantial investments in pollution control t echnologies to comply with CSAPR and
MATS. Commenters indicated standards for this subca tegory of sources could take several different forms. Commenters said the EPA could adop t an emission rate standard that it determined sources within the subcategory could rea sonably achieve, or, consistent with one of the variance options discussed below (cap-based var iance), the agency could establish an annual CO2 emissions cap for such facilities, or criteria for states to use to develop such a cap, that reflects a reduction (e.g., 20%) from 2005 levels. Commenters said this type of an approach217

would balance the EPA's dual goals of reducing CO2 emissions and not prematurely stranding assets, particularly those just recently installed to comply with other EPA programs.

Variances - General. Commenters strongly recommende d that the EPA acknowledge and/or endorse variances, and emphasized that at the same time, states must be given the ability to adjust its emission target to account for any varia nces issued. Commenters said that Homer City strongly recommends that the EPA acknowledge and, i n certain scenarios endorse, states' authority to issue variances from the EPA emission guidelines and to adopt alternative compliance standards and deadlines for facilities m eeting certain conditions. Commenters said CAA section 111(d) (1) provides that EPA "shall per mit the State in applying a standard - to take into consideration, among other factors, the remain ing useful life of the existing source." Commenters said similarly, 40 C.F.R. Section 60.24( f) provides that states may apply less stringent standards and longer compliance schedules to individual facilities or "class of facilities"
if the state demonstrates:

• Unreasonable cost of control,

• Physical impossibility, or

• "Other factors specific to the facility (or class o f facilities) that make application of a less stringent standard or final compliance time signifi cantly more reasonable."

Commenters said it is worth noting that the varianc e authorized by 40 C.F.R. Section 60.24(f) (3)
is distinct from and broader than the other two cat egories, including the concept of a facility's remaining useful life. Commenters said they believe that the EPA and Pennsylvania should readily rely on this specific regulatory variance a uthority to allow facilities that have recently made substantial capital investments time to recoup their investments before being subject to the entirety of a state 111(d) plan.

Commenters said the EPA should embrace this authori ty, not shunt it aside. Commenters said in the preamble to the proposal, EPA takes the positio n that "no relief for individual facilities would be needed" because EPA's proposed emission guidelin es happen to take the form of "state emission performance goals for the collective group of affected EGUs in a state," rather than a "presumptive standard of performance that must be f ully and directly implemented by each individual existing source within a specified sourc e category." Commenters disagreed with the
EPA's conclusion.

Commenters said however, the form of the emission g oal has nothing to do with the ability of a state, under CAA section 111(d)(1) to grant varianc es which "take into consideration, among other factors, the remaining useful life of the exi sting source to which such standard applies."
Commenters said the EPA cannot circumvent this stat utory provision merely by changing how it may choose to prescribe state guidelines. Commenter s said moreover, we cannot accept the premise that the claimed flexibilities in EPA's por tfolio approach obviate a state's need to adjust its emission target in account for any source-speci fic variances granted. Commenters said unless states have the ability to adjust their emission ta rgets, variances would be of little utility, since any relief granted to one source would have to be m ade up by another. Commenters said to provide meaningful relief and to help address the s tranded asset issue, states must have the218

ability to grant variances and to adjust state emis sion targets commensurately. Commenters said for its part, the EPA could codify criteria for whe n it would be appropriate for state targets to be adjusted to reflect a variance. Commenters said for example, the EPA could make clear that it supports the issuance of variances to avoid strandi ng assets and the adjustment of state emission targets to such variances. Commenters said states c ould grant general variances to other sources, but they would not be able to adjust their emission limits in response to variances that do not satisfy the EPA's criteria (e.g., when a source has not made a capital expenditure since 2010).

Specific Variance-based Options. Commenters set for th two specific variance-based options that
the EPA should authorize and endorse:

Option 1: Alternative Compliance Schedule

Commenters said the EPA should specify in the final rule that states should grant variances pursuant to 40 C.F.R. Section 60.24(f) to coal-fire d facilities that made substantial investments in pollution control technology since 2010 to comply w ith CSAPR or MATS. Commenters said a variance under this option would exempt the facilit y from a state's base 111(d) program for 20 years from the start of the program. Commenters ind icated that during the variance period, the EPA could adjust their applicable emissions target to exclude emissions from those sources operating under the variance, then at the conclusio n of the variance period, the state would have to readjust its emission target to account for the source and the facility would be required to meet all applicable state plan requirements.

Commenters said that such an alternative compliance schedule is consistent with discussion of potential ways to consider of the "book life" of ma jor upgrades to a facility in EPA's recent
NODA. Commenters said the assumed book life for lar ge environmental retrofits, such as the dry scrubbers being installed at Homer City, has tradit ionally been 30 years. Commenters said regulatory analysis underlying both CAIR and CSAPR used a 30 year life for FGDs, as did the
MATS Rule. Commenters said while the EPA has more r ecently used 15 years for evaluating book life under CAA section 111(d), the EPA can cer tainly consider the "book life" of major pollution control equipment to be 30 years given th e large capital outlays required and substantial operation and maintenance costs.

Commenters said the EPA's endorsement of a 20-year alternative compliance schedule for qualifying sources like Homer City is plainly consi stent with the statute and EPA regulations. Commenters said as discussed above, states may impl ement alternative compliance schedules pursuant to their Section 60.24(f) variance authori ty, as supplemented by EPA guidance setting forth specific eligibility criteria. Commenters add ed that moreover, allowing variances for those facilities that meet reasonable eligibility criteri a is consistent with the EPA's own authority to "distinguish among classes, types, and sizes within categories of new sources for the purposes of establishing such standards." Commenters said altho ugh there is not an explicit corollary to this language in CAA section 111(d), such may be fairly implied in light of the EPA's express power to make such distinctions in establishing standards of performance under section 111(b). Commenters said accordingly, the EPA should conside r such an alternative compliance option and expressly allow states to (1) grant eligible fa cilities 20-year variances, and (2) implement corresponding adjustments in their state emission t argets over the variance period.219

Option 2: Emission Caps

Commenters said a second option would be for the EP A to authorize and endorse states to use their variance authority to subject sources to site -specific, annual CO2 caps in lieu of the base 111(d) program. Commenters said under this option, facilities would be subject to a CO2 emissions cap that reflects a 20% reduction off of the source's 2005 emissions. Commenters said qualifying facilities would again be those faciliti es that have made substantial capital investments since 2010 and need time to recoup those investment s. Commenters said since many coal plants have and will retire after 2005, the emission reduc tions from those plants is 100 percent. Commenters said therefore, coal plants as a group w ill contribute significant CO2 reductions to achieving supportable reduction targets. Commenters said the capped facility could operate pursuant to whatever schedule it chooses, provided it stays below the cap. Commenters added the facility would also be able to run under a cap in a ny year and utilize the "headroom" under the emission cap in subsequent years. Commenters said t he obvious benefit to the source is that it would have the flexibility to comply with state pla n requirements through a permit and operate at full load (when the plant has the lowest heat rate) during select periods of time, as opposed to being subject to a rate. Commenters said the benefi t to the state is that it would obtain a guaranteed mass reduction of CO2 and would maintain the viability of EGUs within the state.

Commenters said they believe that this approach wou ld be permissible under the CPP as proposed, as well as under the variance authority o f 40 C.F.R. Section 60.24(f). Commenters said however, we believe it important for the EPA to eli minate any confusion by specifically recognizing this in the final rule or accompanying materials as a viable option to avoid stranding assets. Commenters said states are likely to have m ore comfort adopting such a measure if the EPA speaks to it directly in the final rule.

Commenters stated that to provide relief and to avo id stranding assets prior to the end of their normal useful life, EPA has two options: (1) EPA co uld use its CAA authority to create a separate subcategory consisting of existing coal-fi red facilities that have recently made sizable capital expenditures, and then develop standards fo r those sources that balance CO2 reductions and the ability recoup recent investments; (2) EPA and states could exercise variance authority provided by the CAA and EPA's 111(d) implementing r egulations to establish alternative compliance standards and deadlines for qualifying f acilities. The commenters provided details on each of the options and described two specific vari ance-based options (alternative compliance schedule and emission caps) that EPA should adopt.

Comment 28: The Proposed Regulation fails to recognize signifi cant and recent investments that have substantially reduced carbon dioxide and other emissions; which if stranded, will contribute to higher rates and higher bills for customers.

Response 28: See response 1 of this section (4.7.2), including the reference to the July 2015 docket memo titled “Stranded assets analysis”. See also section VIII.H and section I.A, II.F-G,220

V.A-C, VIII.G, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA appears to recognize that the Proposed Regulation is likely to result in "stranded costs," but fails to offer any quantifica tion of such costs. The commenters said the Proposed Regulation does not provide states with "t he flexibility to make exactly the kind of judgments necessary to avoid requirements that woul d result in stranded assets."

Commenters stated in regulated States like Virginia , costs of such stranded investments or "stranded assets," as EPA characterizes them, are o ften ultimately borne by customers. The commenters said the Proposed Regulation fails to re cognize this basic concept by inexplicably asserting that impacts on electricity prices "would likely be less" if a State were to implement new resources "on a more aggressive time-frame." Th e commenters said a more aggressive displacement of existing resources will increase st randed costs, which is almost certain to contribute to increased, not decreased, electricity prices in regulated States.

Commenters stated a compliance strategy of replacin g all coal-fired generation facilities in Virginia with comparable amounts of state-of-the-ar t natural gas combined cycle facilities would not satisfy EPA's Mandatory Goals for Virginia, man y recent investments in power plants, including significant expenditures for environmenta l controls, are at risk of being stranded. Investments in the coal-fired fleet located in Virg inia, which is used to provide Virginians with reliable service at just and reasonable rates, incl ude:

• Virginia City Hybrid Energy Center ("VCHEC"), place d in-service in 2012, at an initial capital cost of $1.8 billion;

• Chesterfield Power Station scrubbers placed in-serv ice in 2011 and 2008, at an initial capital cost of $275 million; and

• The Clover Power Station constructed and placed in- service in 1995 and1996, at an initial capital cost of $1.2 billion, and with a planned se rvice life of over 50 years.

The commenters also recognized that the Virginia ra tepayers served by Appalachian Power Company, whose generation facilities are located pr imarily in West Virginia, face stranded costs
associated with the carbon emission rates that the EPA proposes for West Virginia. The commenters said Virginia and West Virginia ratepaye rs have only recently begun paying for more than $2 billion in environmental controls nece ssary for Appalachian Power Company to comply with a 2007 EPA Consent Decree; these recent environmental compliance projects include flue gas desulfurization ("FGD") systems, f or all four units at the Amos and Mountaineer Power Stations, which were placed into service betw een 2007 and 2011. The commenters said
other recent environmental investments for West Vir ginia facilities funded by Virginia ratepayers include scrubbers and FGD systems at Dom inion's Mount Storm generating facility.

Commenters stated Virginia is unable to take advant age of the 10-year averaging allowed by the Proposed Regulation to meet the Interim Mandatory G oal, which may provide some flexibility221

for States with coal-fired fleets expected to retir e "after 2020 but before 2029." The commenters said only the VCHEC, Chesterfield, Clover, Amos, or Mountaineer - has an estimated retirement date before 2030, and none before 2020; thus, a Man datory Interim Goal of 884 pounds/MWh beginning in 2020, and a Mandatory Final Goal of 81 0 pounds/MWh beginning in 2030, means that billions of dollars of useful plant in Virgini a (and West Virginia) are likely to be stranded, with a cost to Virginia residents and businesses th at is not accounted for by the Proposed Regulation. For this reason, the commenters urged t he EPA to reconsider its proposal "that the remaining useful life of affected EGUs, and the oth er facility-specific factors identified in the existing implementing regulations, should not be co nsidered as a basis for adjusting a state emission performance goal...."

Commenters stated in Arizona the closure of coal pl ants means the state utilities will be closing plants before the end of their usable life; however they must continue to pay the remaining debt all the while investing in new generation. The comm enters said according to Ruben McBride, a member of the Graham County Electric Cooperative Bo ard of Directors, the Proposed Rule will mandate they serve the same number of customers wit h twice if not three times the amount of debt. ("EPA Carbon Plan Detrimental to Arizona,")

Commenters stated this ruling is a little too aggre ssive and that it's going to drive up costs in South Carolina disproportionately for Berkeley Elec tric Cooperative members. The commenters said by restricting the use of coal, this rule will change the power supply infrastructure that members have already paid for, for the coal pl ants that are there for the past decades.

Comment 29: Closures on units that have debt obligations; loan obligations; allow unit to operate for remaining useful life.

Response 29: See response 1 of this section (4.7.2). See also section IX.D. of the CPP final preamble for the EPA’s response to this comment. Se e also the responses to comments 1 and 2 in this RTC chapter (4.7.2), including the reference t o the July 2015 docket memo titled “Stranded assets analysis.”

The following are summaries of the specific public comments under this comment:

Commenters stated many electric cooperatives financ e fossil generation projects using capital from the U.S. Department of Agriculture-Rural Utili ty Service (RUS). The commenters said the CPP in the proposed plan will force the closure or de-rating of coal units that currently have debt obligations. The commenters said to assist electric cooperatives to meet these loan obligations we propose allowing units with RUS financing to con tinue to operate for the remaining useful
life to ensure the fulfillment of the RUS debt obli gation.

Commenters stated recently, Dairyland made substant ial investments to the existing coal fleet to reduce air emissions; these investments were also i n accordance with government regulatory policies, but now are potentially significant stran ded costs going forward with the CPP. The commenters said the CPP will mean a major and expen sive transition to other generation resources, while simultaneously paying the debt ass ociated with recently installed pollution control equipment. The commenters supported a diver se mix of generation fuel sources and222

technologies which will reduce emissions and believ es it is wise to avoid any policy or regulatory mandate which could result in an overdep endence on any single fuel source for power generation.

Commenters stated because of the rural nature of th e service territory, Dairyland qualifies for construction loans from the U.S. Department of Agri culture's Rural Utilities Service (RUS). The commenters said RUS is a credit agency that finance s and administers loan and grant programs which assist rural electric utilities to improve th e quality of life and promote economic development in rural America, made under authority granted by the Rural Electrification Act. The commenters said Dairyland has relied on these l ow-interest, long-term loans to construct the generation and transmission facilities necessary to provide affordable and reliable power to rural consumers. The commenters said at present, nearly a ll loans for Dairyland are made through the Federal Financing Bank and are guaranteed by RUS; t hey carry a loan term of up to 35 years, depending on the projects, and the remaining useful life of the facility involved. The commenters said the loans are made for specific projects; when a loan is approved for a generation project, the term of the loan generally reflects the remaini ng useful life of the facility. The commenters said if the generating facility is prematurely reti red, as could potentially happen due to the CPP,
the debt on those facilities still remains and stil l requires payment over the remaining life of the loan. The commenters said the shuttered plant will no longer generate revenue that would be used to pay that plant's debt.

Comment 30: The EPA should provide guidance for managing stran ded asset debt in the proposed rule

Response 30: The EPA is not including emission performance goal s for Alaska in this final rule. See section VII of the preamble for discussion of t his issue.

The following are summaries of the specific public comments under this comment:

Commenters stated the proposed rule includes no pro visions that address stranded assets. The commenters stated they are currently investing $187 ,000,000 in Healy Unit 1 and Healy Unit 2 based on successfully executing the Consent Decree with EPA; given this investment and the lack of affordable generating alternatives, the com menters intended to operate Healy Unit 2 beyond 2030. The commenters said depending on futur e energy availability, the commenters may need to operate Unit 1 beyond 2030 as well. The commenters said as a practical matter, any plan to meet the proposed Alaska CO2 Performance Go als will likely include the shutdown of Healy Unit 1 and Healy Unit 2 because these two EGU s are the only Subpart UUUU-affected coal-fired EGUs in Alaska; if so, then the investme nt in these two units will become stranded assets that would be an unreasonable liability for the commenters to absorb. The commenters said customers simply could not afford to pay for t his liability while, at the same time, pay for the cost of whatever generation could replace Healy Unit 1 and Healy Unit 2, if available. The commenters said to avoid this situation, EPA should provide guidance for managing stranded asset debt in the proposed rule, including a provis ion for full compensation for utilities that would face absorbing the sunk costs for bringing He aly Unit 2 out of warm layup in reliance on the Consent Decree, the costs of retiring the base- load coal plants, and the costs of acquiring223

reliable replacement power. The commenters said if not already done, EPA should also include stranded asset debt in the economic impact analysis for this proposed rule.

Comment 31: Coal-fired EGUs are at a disadvantage; have made i nvestments; but re-dispatch
will leave stranded

Response 31: See response 1 of this RTC chapter (4.7.2) regardi ng stranded assets concerns. In addition, see section I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA's proposed "building blocks" put coal-fired EGUs at a distinct economic disadvantage, asking for heat rate efficiency impro vements while at the same time driving dispatch away from coal and towards NGCC and renewa ble energy generation. The commenters have made significant environmental inve stments in its FPP coal fired EGUs, adding scrubbers at the cost of approximately $400 million and adding mercury emissions control technology in order to meet the MATS rule. The commenters said EPA does not consider the economic harm caused to FPP by the potential re -dispatch, which, would strand these significant investments at the expense of the owner and its wholesale power customers.

Comment 32: To avoid increased stranded assets, the EPA should not allow any upgrades to coal-powered EGUs. Because utilities should have k nown climate change regulation was coming they should not be able to recover full cost of their investment in new coal powered power plants.

Response 32: See response 1 of this RTC chapter (4.7.2) and sec tion I.A, II.F-G, V.A-C, VIII.GH, X.C, XI.C-E, and XII.E of the final rule preambl e of the CPP for the EPA’s response to this

comment.

In addition, the agency observes that the emission guidelines give states flexibility regarding the mix of emission reduction methods to require or inc entivize through their state plans. States may
choose a different mix of emission reduction method s than the EPA assumed in calculating CO2 performance rates and state goals, and may achieve reductions through non-BSER strategies. Thus, states can take into account concerns about l ocking in investments in fossil generation as they design their plans, and design their plans wit h incentives that they think appropriate.

The EPA is determining in this rulemaking that heat rate upgrades at coal-fired affected EGUs are part of the BSER. The commenter does not provi de a legal rationale for barring efficiency upgrades that reduce the emission rate at an affect ed source.

The agency and others have observed that a growing number of electric utilities include projections of the expected costs associated with g reenhouse gas emissions in their resource224

planning. The likelihood of future carbon regulati on has been publicly recognized by many in the U.S. power sector for many years.

This rule does not make decisions about cost recove ry by utilities for particular investments; these typically are matters considered by public ut ility commissions.

The following are summaries of the specific public comments under this comment:

Commenters submitted the report "Pathways to Deep D ecarbonization in the United States" as a different way to think about how to reach carbon em ission reductions. Commenters said the report talks about stock lifetimes and replacement opportunities of various technologies.

Fuel switching locks in emissions for many years. Commenters said the graph illustrates a very important point - that in order to cut carbon emiss ions now and put the US onto a decreasing curve of carbon emissions, we must be very careful about making the right investments now. Commenters said if we prioritize natural gas now th en we decrease emissions when the technology is installed but then we are locked in t o that level of carbon emissions. Commenters said switching fuels, i.e., coal to natural gas, lo cks in natural gas emissions for the next 40-50 years. Commenters said the report states, "For som e kind of long-lived infrastructure - for instance, power plants - there is likely to be only one opportunity for replacement in the time period. Commenters said adding new high carbon gene ration creates infrastructure inertia . . . that puts investments at risk - otherwise known as stranded costs/assets.

Stranded costs. Commenters said in Louisiana, stran ded costs have been a significant part of the conversation. Commenters said they define stranded costs in this context as utility costs that are currently part of the Utility's revenue requirement and are authorized to recover through their rates, but whose recovery may be impeded or prevent ed by the new EPA regulations. Commenters said as an example, take a 20 year-old c oal plant with a 30-year depreciation schedule. Commenters said assuming the plant will n ot be able to meet emission reduction targets and is decommissioned, the Utility would ha ve 10 years of stranded costs. Commenters said in this example, it seems prudent to allow a r ider to the utility to recover those costs that were authorized but will no longer be able to colle ct. Commenters indicated coal plant capital upgrades would also fall under this definition.

Commenters said that utilities may try to claim boo k value or fair market value of the coal plants in their portfolio but this should be discouraged i f the power plants have been fully depreciated.

EPA should not allow coal plant upgrades and new co al plants should not be allowed to recover
full cost of investment. Commenters said because o f the stranded cost issue, the Alliance strongly advises that the EPA not allow for coal pl ant upgrades. Commenters said admittedly,
this will not lower emissions in the short term but will guarantee emission reductions over the long term and decrease the start-up cost of impleme nting the Plan.

Commenters said for new coal plants, they do not be lieve that utilities should be allowed to
recover the full cost of the investment because of a lack of prudency. Commenters said that U.S.
utilities have had the same access to climate scien ce information and carbon emission data as the rest of the country and should have better predicte d the need to safeguard the climate system.225

Commenters said it begs the question that any new c oal or natural gas plant is actually prudent. Commenters said experts from Clemson Unive rsity stressed that "Scientific economic analysis cannot be used to make the call on whether [stranded costs] should or should not be recovered because if they are not recovered, there will be no economic efficiency effect. However, if the process decides that stranded cost recovery is to be the rule of the day, then these costs should be recovered efficiently via a two-par t, access-charge tariff or a general tax levy and subsidy that does not disturb the relation between the price of electricity and its marginal cost of production."

Comment 33: The EPA's Specific Authorization of State Options to Conditionally Exempt, Subcategorize by Utility Type, or Allow Alternative Compliance Mechanisms

Response 33: The EPA recognizes that each state has differing p olicy considerations – including varying emission reduction opportunities and existi ng state programs and measures – and that the characteristics of the electricity system in each s tate (e.g., utility regulatory structure, generatio n mix and electricity demand) also differ. The final rule gives states the flexibility to implement a broad range of approaches that recognize that the power sector is made up of a diverse range of companies that own and operate fossil fuel-fired EG Us, including vertically integrated companies in regulated markets, independent power p roducers, rural cooperatives and municipally-owned utilities, all of which are likel y to have different ranges of opportunities to reduce GHG emissions while facing different challen ges in meeting these reductions. By expressing the application of the final BSER as a s ource-specific performance standard, and by providing a translation of that to statewide rate- and mass-based CO 2 goals based on each state’s particular mix of sources, the rule allows states t he flexibility to determine how to achieve the

CO 2 reductions (i.e., greater reductions from one buil ding block and less from another, as well as the adoption of other measures that lower carbon in tensity), and to adjust the timing in which reductions are achieved, in order to address key is sues such as cost to consumers, electricity system reliability and the remaining useful life of existing generation assets.

Regarding stranded assets, see the response to comm ents 1 and 2 in this RTC chapter (4.7.2) including its reference to the July 2015 docket mem o titled “Stranded assets analysis.” For additional information see section I.A, II.F-G, V.A -C, VIII.G-H, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters stated CWLP is the only municipal utilit y with generation in Illinois and is vital to the City's economic health, employing over 600 empl oyees, many of whose jobs may be at stake
with the GHG Rule. The commenters said due to the e conomic downtown, CWLP has over 130 fewer employees today than in 2010; further, with s uch small stand-alone units, generation flexibility is limited, while the early investment by citizens in APCs has been substantial, undertaken to meet or exceed the environmental regu lations in place at that time, well before a GHG Rule was contemplated; the debt service on thes e investments will continue into the future.226

Commenters stated CWLP faces obligations to pay deb t service on investments made to improve efficiency at existing plants, to implement polluti on control projects to meet EPA standards and to add additional generation necessary to assure su fficient capacity through 2037. The commenters said based on analysis of the current pr oposal, the commenters fear the citizen's sunk costs will become stranded investments, with l ittle or no opportunity to generate revenue to pay back the debt, unless appropriate adjustments a re made to the rule. The commenters said given that CWLP's four (4) coal-fired units burn le ss than 3% of the coal burned in Illinois for fuel, that CWLP meets existing emission limits for traditional pollutants (including Illinois' mercury emission standard, a more stringent mercury emission limit than the USEPA's Mercury Air Toxics Standard, or MATS), that the four (4) "a ffected units" emit less than 2.6% of the total carbon emitted by Illinois' fossil-fuel EGU's, that have (and have had) and expect to continue to have aggressive renewable energy and energy efficie ncy programs, and so as to avoid stranded investments by the citizens of the City of Springfi eld, Illinois, the commenters requested the USEPA adjust its GHG Rule to provide guidance to st ates for the provision for small not-forprofit municipal utilities like CWLP, which meet th e unique factors that distinguish them from other affected entities subject to the plan.

Commenters stated the Missouri River Energy Service s (MRES), a regional utility, is unique in many ways. The commenters said MRES relies on a sin gle, base load coal plant located in Wheatland, Wyoming called the Laramie River Station (LRS). The commenters said the three units of LRS began commercial operations in 1980, 1 981 and 1982, and produce 1,710 megawatts (MW). The commenters said MRES, through i ts financing affiliate Western Minnesota Municipal Power Agency (Western Minnesota ), owns 16.5% of LRS, and is entitled to approximately 282 MW. The commenters said LRS ha s six owners, all of which are consumer-owned entities located throughout the regi on. The commenters said LRS is the only MRES resource that qualifies as an "affected unit" under this rule that emits CO2; however, MRES has no sales in Wyoming. Commenters stated LRS provides 70% of the energy that MRES supplies to its members; most members of MRES have allocations of federal hydropower that supply a portion of their needs, and MRES serv es the balance of their community's need over and above the allocation; as a result, on aver age, MRES member communities rely on LRS for 40% of their power. Commenters stated LRS is pr esently subject to an order of EPA regarding Regional Haze which requires the installa tion of Selective Catalytic Reduction (SCR) technology on all three units of LRS by 2019; the r emaining life of LRS is about 20-30 years; the cost to install the three SCRs at LRS is approximat ely $750 million in total, $125 million for
MRES and Western Minnesota alone. The commenters sa id when EPA's Regional Haze order is considered in light of EPA's Clean Power Plan under 111(d), this newest proposal will cause stranded costs and force 61 member municipal utilit ies and their consumer-owners to pay for air quality control measures for which there is no valu e. The commenters said the 111(d) proposal is premised on an assumption that all utilities own mu ltiple and diverse plants and can shift generation within their portfolios to lower emittin g generation; however, that option is not available to most small utilities, like MRES, that rely on a single base load coal plant to meet
their needs.

Comment 34: Clean Power Plan threatens to strand interests in renewable and nuclear resources227

Response 34: EPA’s approach to determining the subcategory-spec ific emission performance rates and state goals that are achievable consideri ng cost is a forward-looking approach that starts from the state of the electricity system in 2012. Under the final emission guidelines, zeroemitting generation that existed in 2012 is not inc luded either in the BSER or as an eligible measure for credit in rate-based state plans. Howev er, new capacity and incremental generation after 2012 can contribute toward meeting the CO2 em ission rates and state goals. With respect to recent and future investments, we expect that th e treatment of interstate effects in the BSER and state plan accounting in the final guidelines w ill help to address the types of concerns raised by the commenter.

For purposes of state plan accounting, in the final rule, to the extent qualifying RE generation measures and nuclear, are tied to a state plan, the MWh impacts of the measures may be used by an affected EGU or state to adjust a CO2 emission r ate, regardless of whether the RE generation occurs inside or outside the state or territory. Fo r more information about specific methods to adjust the CO2 emission rate of an affected EGU to reflect RE and the eligibility requirements renewable resources must meet, see section VIII.K.1 of the final rule preamble.

Under the final guidelines, additions in nuclear ca pacity are treated in similar fashion to the

addition of new RE. As described in Section VIII.K of the preamble to the final rule, new nuclear power generating capacity installed after 2012 and incremental generation resulting from nuclear uprates after 2012 also are measures eligible for a djusting a CO2 emission rate. However, existing nuclear units (i.e., those that originally commenced operation in 2012 or earlier years) that receive operating license extensions are not e ligible for use in adjusting a CO2 emission rate, except where such units receive a capacity uprate a s a result of the relicensing process. Only the incremental capacity from the uprate is eligible fo r use to adjust a CO2 emission rate. The final rule allows for multi-state coordination among stat es retaining individual state goals under ratebased and mass-based emission trading programs. Det ails can be found under section VIII.C of the final rule preamble.

See also the response to comments 1 and 2 in this R TC chapter (4.7.2) including its reference to the July 2015 docket memo titled “Stranded assets a nalysis.” Additional information relevant to these concerns is in section I.A, II.F-G, V.A-C, VI II.G-H, VIII.L, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters stated the Clean Power Plan threatens to strand MRES contractual interests in
renewable and nuclear resources. The commenters sai d MRES has contracts for the output of over 117 MW of clean, non-emitting resources locate d in Iowa, Minnesota, North Dakota and
Wisconsin. The commenters said MREW is also in the process of constructing a 36 MW hydroelectric power plant at the Red Rock Dam in ce ntral Iowa. The commenters said together, this totals more than 153 MW of clean power that sh ould be available to MRES for use in offsetting emissions from its only coal plant in Wy oming; however, the way the Clean Power Plan is detailed in the preamble and the technical support documents, there is no assurance that
these assets will not become stranded investments.228

Commenters said the proposal does not clearly ackno wledge the fact that non-emitting resources are the property of the utility that owns it or has the rights to the output and environmental attributes. The commenters said under building bloc k 3, the Clean Power Plan provides that states are free to develop state plans that give to the states themselves - not the utility owners - the right to count RE located within the state's bo rders or even located in another state if the RE can be said to have been built to comply with the R E policy of the first state. The commenters added such plans are not required to honor the non- emitting energy or credits generated in another state. The commenters said this approach th reatens to strand MRES non-emitting generation and related credits; these investments h ave an established value under each of the respective contracts, and that value is likely to i ncrease substantially under a regulatory regime where those resources can be used to offset CO2 gen eration. The commenters said a regulatory
scheme which restricts the interstate use of this e nergy and credits will prevent MRES from effectively managing its resources to reduce its ca rbon footprint, and will strand those assets. The commenters said the stranding of both coal and clea n energy resources creates a direct cost impact on MRES and its member municipal utilities.

Comment 35: CPP results in opting for energy sources outside o f economic dispatch and increase energy prices

Response 35: The EPA acknowledges the comments regarding Georgi a’s nuclear and renewable resources. The agency has determined that the BSER for the final rule will not include the provisions we had proposed for under-construction u nits in the setting of state goals, and will allow incremental generation from new nuclear units to be applied towards compliance. Please see section V.A of the preamble for further discuss ion of the treatment of new nuclear plants, and section VIII.K and VIII.L of the preamble for furth er discussion of provisions in state plans of allowable actions that result in an adjusted CO2 em ission rate of an affected EGU, the accounting approach for incremental generation, and how states can address interstate effects in their plans. We appreciate commenters’ concern rega rding crediting issues. We believe that changes made in the final rule resolve these issues

.

The following are summaries of the specific public comments under this comment:

Commenters stated historically, Georgia has had low er than average electricity prices, because GA relied on a diverse generation mix to provide fu el flexibility and reliability to achieve consistent low prices. The commenters said simply b y responding to market conditions and Public Service Commission-directed adjustments, Geo rgia has reduced its carbon dioxide emissions by more than 33 percent in the last decad e. The commenters said Georgia has been proactive in adopting nuclear and other renewable e nergy sources, including one of the first nuclear plant expansions in the nation since the 80 s. The commenters said GA has invested tens of billions of dollars to expand Plant Vogtle nucle ar plan, to produce new carbon-free energy; however, the timeline chosen in the proposed rules does not appropriately credit Georgia for these proactive actions; rather, EPA's guidelines w ould force Georgia to make further229

investments. The commenters said it will make Georg ia opt for energy sources that are outside of the economic dispatch and again increase energy pri ces in the state.

Comment 36: Early reductions; stranded assets

Response 36: The EPA appreciates the importance of early action s by states and utilities to reduce fossil electricity use and CO2 emissions. EP A’s approach to determining the CO2 emission performance rates and state goals that are achievable considering cost is a forwardlooking approach that starts from the state of the electricity system in 2012. In part to maintain
incentives for near-term actions that will continue to reduce emissions in 2022 and beyond, the agency has significantly revised the proposal with respect to the eligibility date for emission
reduction measures -- such as incremental renewable energy generation and demand-side energy efficiency measures -- that can be used to adjust t he CO2 emission rate under a rate-based state plan. S tates adopting rate-based plans may award ERCs to q ualified providers that implement any eligible projects from 2013 onward for the quan tified and verified MWh of generation or savings those projects provide in 2022 and subseque nt years. See section VIII.K for an explanation of the final rule provisions and ration ale. In addition, the removal of building block 4 from the BSER calculation helps to concerns that co mmenters raised about treatment of states that had been leaders on state energy efficiency re quirements.

The EPA has also developed the Clean Energy Incenti ve Program, an optional program designed

to reward investment in certain RE and demand-side EE projects that commence construction after the effective date of this rule and that gene rate MWh or reduce end-use energy demand during 2020 and 2021. For more details on this prog ram, see section VIII.B of the preamble to
the final rule.

With respect to stranded assets, see the response t o comment 1 in this RTC chapter (4.7.2). See also section I.A, II.F-G, V.A-C, VI, VIII.B., C, G- H, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters stated TECO and their customers have mad e a substantial investments to make early reductions; EPA's proposal for existing sourc es neglects to account for this bold and early
action. The commenters said “if Florida limits outl ined in this proposal are finalized in their current form, our customers will be paying twice fo r the same reductions many other companies deferred until now. Projects that are part of the b illion-dollar reductions we recently completed are amortized over the remaining life of the coal p lant beyond 2030”. The commenters said to minimize the impact of the customers' bills in this proposal would create stranded assets; the benefits of these reductions, 5 million tons of CO2 per year, have been realized for each of the last 10 years.

Commenters stated EPA's proposal also directly pena lizes Tampa Electric Company customers; in addition to paying for substantial emission redu ctions, they've been participating in energy efficiency programs that TECO has incentivized sinc e 1979. The commenters said indeed,230

participation in the programs has been diminishing as the energy efficiency opportunities have been depleted in the 35 years of this already-succe ssful program. The commenters said the EPA proposal penalizes these proactive and forward-thin king customers who are now benefiting from a lower bill, because these customers would undoubt edly see a substantially higher bill due to the additional costs this proposal would bring. The com menters said EPA should recognize that the decades of early action, as well as new appliance a nd building codes, are already reducing load demand, and EPA should work with states to adjust t he goal if the remaining reductions are found to be too expensive or simply not practical.

Comment 37: The EPA should take remaining useful life into con sideration of this flexibility.

Response 37: See the response to comments 1 and 2 in this RTC c hapter (4.7.2) for the response to this comment. States have the flexibility under the emission guidelines to consider remaining useful life of individual affected EGUs, for exampl e, through emissions trading systems that enable a facility to comply through purchasing cred its or allowances, or through differentiating requirements for individual EGUs or classes of EGUs . For reasons explained in VIII.G.1.d, the required CO2 emission rates or equivalent state goa l would not be changed based on remaining useful life or other facility-specific consideratio ns.

With respect to concerns about stranded assets, see the response to comment 1 in this RTC chapter (4.7.2), including the reference to the Jul y 2015 docket memo titled “Stranded assets analysis.”

The following are summaries of the specific public comments under this comment:

Commenters stated that EPA should take remaining us eful life into consideration of this flexibility. The commenters noted that they have ha d two studies performed by highly respected engineering firms to assess remaining useful life a t their plant, and both studies indicated the plant should be able to operate reliably through 20 37. The commenters noted that EPA's IPM indicates the plant will be retired prior to 2020, which is well before the end of its useful life.
The commenters stated that if the Clean Power Plan becomes finalized and the EPA IPM is correct, their plant will be prematurely retired, a nd these costly investments will become stranded assets and leave over 350 power plant and coal miners without jobs. The commenters stated that considerations such as remaining useful life and stranded assets with units are precisely the types of factors that Congress expect ed States to be able to consider in determining what standard of performance to apply to each speci fic facility within their individual borders, yet the Proposed Rule deprives States of that abili ty.

The commenters requested flexibility for small busi ness entities and cooperatives - which may be in the form of allowing the State flexibility in smaller emission reductions to small business without punishing the larger entities by increasing their reductions. The commenters noted that this would lead to a minor slippage in the State's goal and could take the form of a set percentage decrease in CO2 emissions from the generating stati on - an example would be, a 10% reduction in CO2 mass emissions based on the average over the high five year emissions during the period
between 2005 and 2012. The commenters stated that t his reduction could be made by either231

reducing the megawatt output and/or improvements in efficiency and could be incorporated with a specific time frame based on the useful life of t he generating station. The commenters noted that this would allow the small entity to continue to operate and pay off its debt over the remaining life of the unit - not become a stranded asset, resulting in a significant cost increase to
its members.

Comment 38: The EPA asked for comment about whether generating units that have been
retrofit with emission controls should be allowed t ime for cost recovery of those controls before the EPA CPP provisions are assigned against the uni t.

Response 38: The agency appreciates the input of commenters on this issue. The guidelines do not dictate that states use a particular definition of “remaining useful life.” The EPA interprets the provision as primarily concerned with facilitie s that have short remaining useful lives, and

with retrofit costs. States also are free to consi der stranded assets concerns in designing their plans. The EPA will consider the reasonableness of the way in which a state considers remaining useful life and other factors in applying a standar d of performance to a particular EGU in the context of evaluating state plans to determine whet her they are satisfactory, i.e., whether they meet the requirements of the guidelines.

With respect to concerns about stranded assets, see the response to comment 1 in this RTC chapter (4.7.2), including the reference to the Jul y 2015 docket memo titled “Stranded assets analysis.” See also sections I.A, II.F-G, V.A-C, VI II.G-H, X.C, XI.C-E, and XII.E of the final preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters agreed with EPA's notion that EPA CPP ta rgets should not be rendering as stranded investment the recently deployed environmental cont rol retrofits that EPA has stipulated as being both suitable and required for compliance with EPA regulations. The commenters said it is noteworthy that EPA's own cost and feasibility anal ysis when establishing stringency of these environmental regulations now in force gave conside ration to factors such as the technology performance achieved by EPA examination of the best performing units and other measures as appropriate for the regulation.

Commenters noted that cost recovery measures for Mi nnesota electric utilities are regulated by the Minnesota Public Utilities Commission, who give s consideration to how the environmental measure is satisfying applicable regulatory require ments and gives consideration to tax and accounting regulations and standard practices. The commenters also acknowledged that the CPP targets being considered by EPA can have the functi on of negating state regulatory authority decisions for cost recovery of measures that EPA co mpelled for deployment to comply with new EPA regulations such as the CSAPR and MATS that hav e pending compliance dates between 2015 and 2017. The commenters said new CPP target r equirements imposed by 2020 or even 2030 (just five to fifteen years from EPA's CPP pro posed rule comment input timing) might compel a unit with recently deployed significant an d expensive environmental controls to curtail232

or cease operations. The commenters said in additio n to Federal regulations, Minnesota has also provided for control retrofit and cost recovery for compliance with the Minnesota Mercury Emission Reduction Agreement (MERA), the Arrowhead Regional Emissions Abatement Program (AREA), the Metropolitan Emission Reduction Program and measures like the Minnesota Renewable Portfolio Standard, the stringe ncy of which was set with consideration to how existing generation resources can serve to prov ide for system reliability as intermittent renewable energy and energy efficiency improvements are deployed. The commenters said ideally, some sort of cost recovery mechanism would be provided to help assure that Minnesota electricity customers or utility investors are not left servicing the cost of investments stranded by EPA and state regulatory measures. The commenters s aid EPA should give consideration in its CPP target setting for states to delay CPP requirem ent implementation until after the costs for
these EPA-mandated investments have been recovered.

Comment 39: T&T - Besides the costs directly related to the ex isting coal-fired EGUs that will be retired (as a consequence of complying with othe r regulations), Navajo Nation also made investment in purchasing Navajo Mine, and there hav e been significant job losses and decreased

revenue.

Response 39: The EPA acknowledges the economic concerns of the Navajo Nation. In designing the final emission guidelines the agency has revise d its approach to establishing CO2 performance rates and state goals, and has provided broad flexibility for states and eligible tribes, if they choose, to design plans that address their unique circumstances. See sections I.A, II.F-G, V.A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the fina l rule preamble of the CPP for the EPA’s response to this comment. See comments 1 and 2 in this RTC section (4.7.2), including reference to July 2015 docket memo titled “Stranded assets analysis.”

In addition, we would like to call the commenters’ attention to the POWER Initiative. The initiative is a coordinated federal multi-agency ef fort to assist communities negatively impacted by changes in the coal industry and power sector.

The following are summaries of the specific public comments under this comment:

Commenters said that in the Proposed Supplemental R ule the EPA sated that it does not expect any additional emission reductions from areas of In dian country with affected EGUs because the EGUs in the Navajo Nation's area of Indian country are already expected to meet the proposed goals through compliance with other regulations (BA RT). Commenters said that the EPA correctly recognized that the participants in NGS a nd FCPP have made significant investments to
achieve emission reductions under other EPA rules.

Commenters said the Navajo Nation has also made inv estments to assure future operation of the plants, including purchasing the Navajo Mine to ens ure a continued supply of coal to FCPP. Commenters said additionally, these other EPA rules have negatively affected the Navajo Nation in terms of job losses and decreased revenue to the Navajo Nation government. Commenters said annual losses to the Navajo Nation due to the three -unit shutdown at FCPP will be $86233

million. Commenters said NGS and its associated min e (Kayenta Mine) were estimated to contribute $13 billion to the Navajo Nation economy between 2020 and 2044. Commenters said however, that contribution will be significantly di minished as a result of EPA's Regional Haze
Rule for NGS.

Comment 40: Concerns describing stranded assets and costs and early retirements

Response 40: With respect to concerns about stranded assets, se e the response to comment 1 in this RTC chapter (4.7.2), including the reference t o the July 2015 docket memo titled “Stranded assets analysis.” See also sections I.A, II.F-G, V. A-C, VIII.G-H, X.C, XI.C-E, and XII.E of the final rule preamble of the CPP for the EPA’s respon se to this comment. In response to the
comment that retirements should count toward the st ate goal, the baseline inventory relies on historical data and does not incorporate anticipate d future retirements. Therefore, planned retirements have the potential to assist the state in meeting its state goal. See VIII.C for discussion of planned retirements under rate-based or mass-based plans.

The following are summaries of the specific public comments under this comment:

Commenters cited that "concurrent increases in the operating costs of coal plants are often related to the required installation of environment al control technologies. The commenters stated that before these capital investments are made, pla nt owners must consider the future life of the unit(s), current and future fuel costs and revenues compared to other fuel types, and the impacts of additional environmental regulations. Accordingl y, 20.2 GW of mostly smaller coal-fired units were retired between 2011 and 2013, while an additional 20.8 GW are projected to retire by
2024."

The commenters cited that "according to the 2014 LT RA reference case, an additional 44.2 GW of fossil-fired and nuclear capacity is projected t o retire between 2014 and 2024 ...... The commenters stated that these projections are based on the assumption that current environmental regulations will remain unchanged; it does not incl ude potential impacts of EPA's recently proposed Clean Power Plan (section 111(d) of the Cl ean Air Act)." The commenters stated that in the currently propose d CPP, the glide path required to meet the interim goal will drive large CO2 reductions by man y western states by 2020. The commenters stated that this is premised on EPA's assumptions t hat there will be numerous coal plant retirements in addition to the large-scale retireme nts identified in NERC's assessments cited above. The commenters stated that the changes to th e generation mix expected to occur by 2020 are illustrated by Figure 6. Commenters provided a Figure 6 showing Cumulative Fossil Fuel and
Nuclear Retirements between 2011 and 2024 Total 83 GW 17. The commenters stated that in fact, the generation mix will have to change substa ntially between the date of the final CPP rule and the start of program compliance in January 2020 . The commenters stated that the CPP does not give adequate consideration of the CO2 emission reductions expected to be achieved during this time period. The commenters stated that the pr oposed CPP also does not adequately consider the increased complexity of making further shifts i n the generation mix beyond those already "sunk" by start of the plan compliance in 2020.234

Commenters asked EPA to recognize that while consid eration of RUL of newer or upgraded assets is critical to some western states, to other western states it is just as critical that EPA provide the flexibility to fully recognize coal pla nt retirements in state plans, consistent with EPA's approach to compliance in other CAA programs. The commenters stated that CAA programs with a federal-state policymaking process similar to what is required under section 111(d) include the regional haze program and relate d BART emission standards.

Commenters stated that the Western U.S. fleet has n umerous affected power plants that have multiple, joint owners. The commenters stated that decisions regarding pollution control investments, operational changes or retirements of jointly owned plants are complicated and time-consuming efforts. The commenters stated that the Western U.S. fleet has many units that
were built after CAA Best Available Control Technol ogy (BACT) requirements were in place and have newer and more pollution controls than coa l-based generation built before BACT and
the Fuel Use Act. The commenters stated that in add ition, numerous units in the Western U.S. have recently completed, or committed to, significa nt new pollution controls or fuel conversions in response to other EPA regulations.

Commenters stated that a key aspect of EPA's Clean Power Plan proposal is that it will exert regulatory pressure in the same direction toward wh ich the utility sector is already swiftly moving. The commenters stated that indeed, it is di fficult to overstate the transformation that U.S. energy markets have undergone in recent years. The commenters stated that most significantly, the U.S. is decisively shifting away from coal as the primary generation source of base-load electricity, a trend that is evident in t he most recent data. The commenters stated that the U.S. has seen older and less-efficient existing coal-fired power plants continuing to retire since 2012 due to increased competition with other generating resources and impending environmental regulations. The commenters stated th at between 2008 and 2013, U.S. utilities retired approximately 20 GW of coal-fired capacity, with approximately 11.3 GW retired in 2012 alone. The commenters stated that as of November, 2 014, utilities had announced firm plans to retire some 75 GW of coal-fired generating capacity (or to convert it to natural gas) by 2021. The commenters stated that according to a recent market study, a further 17 GW is "at risk" of retirement due to competition with low-cost natural gas. The commenters stated that as coal-fired capacity has declined, so has generation from the c oal-fired fleet: in 2013, coal-fired EGUs accounted for 39.1 percent of U.S. generating outpu t - slightly higher than the low of 37.4 percent reached in 2012, but still representing a 2 0 percent decline in market share since 2006.

Commenters stated that looking ahead, forecasts ind icate that the shift from coal to cleaner sources of energy will continue. The commenters sta ted that for example, EIA predicts in its Annual Energy Outlook 2014 Early Release Overview t hat total domestic coal-fired capacity will decrease by over 15 percent from 2012 to 2040. The commenters stated that EIA attributes this trend to slower growth in electricity demand, compe tition from zero- and low-carbon resources, and economic changes resulting from more stringent environmental regulations. Similarly, commenters stated NERC anticipates that 31.5 GW of net coal-fired capacity will retire by 2023.

Commenters stated that it is well documented that t he U.S. coal-fired EGU fleet is aging and faces continued economic competition from renewable sources and gas-fired generation, as well as increasing public opposition to the use of high- emitting fossil fuels for energy. The235

commenters stated that there is little doubt that t he sector will continue to experience a large number of retirements and declining capacity factor s for those units that remain in the near
future. The commenters stated that due to a number of factors, including the changing economics of the energy sector, a large wave of coal retireme nts will occur in the coming years. The commenters stated that the Energy Information Agenc y ("EIA") projects 60GW of retirements in the next few years. The commenters provided Figure 15, titled: “Age of U.S. Coal-fired EGUs as
of 2015”. The commenters stated that as illustrated , the median age of a coal-fired unit in 2025 (assuming no retirements) will be 52 years, whereas the average design life assumed at the time of these units' construction was 30 to 40 years. Th e commenters stated that a review of approximately 300 coal units that retired between 1 993 and 2012 indicates that the average age at the time of its retirement is 53 years. The comm enters stated that this figure is comparable to the coal fleet that the Sierra Club's Beyond Coal C ampaign has actively tracked since 2010. The commenters stated that the average age of retiremen t for units tracked by the Sierra Club that have already retired is 54 years.

The commenters stated that this estimate of average retirement age is consistent with the prevailing engineering analysis. The commenters sta ted that the highly respected engineering text Steam, Its Generation and Use by Babcock &Wilc ox notes that unit availability sharply declines after 25 years and assigns a typical life of 25 years for the superheater, 30 years for the reheater, 35 years for the economizer, and 40 years for the lower furnace. The commenters stated that "Life extension" of a unit by replacing these major components is sometimes feasible, but is not "routine maintenance" and normally will (and sh ould) trigger the application of more rigorous environmental requirements. The commenters stated that U.S. coal-fired generation is expected to decline even more dramatically in the f ollowing decade, since there will be relatively few coal-fired units under 40 years old by 2025. Th e commenters provided a Figure 16, titled: “Age of U.S. Coal-Fired EGUs as of 2025 vs. Generat ion in 2012” and a Table 3, titled: “Age of
U.S. Coal-Fired EGUs as of 2025 vs. Generation in 2 012”. The commenters stated that Fig. 16 and Table 3 show that by 2025, the units responsibl e for 758 GWh in 2012 (47 percent of the coal-fired generation that year) will have retired or will be over 50 years old and nearing
retirement. The commenters stated that this assessm ent is consistent with several analyses by the Brattle Group154 and others.

Commenters stated that CWLP currently operates four (4) coal-combustion units; 3 of the units were placed into service in 1968, 1972 and 1978 for a total nameplate capacity under the U.S. EPA's Clean Air Markets of 388 megawatts (MW), whic h is comparatively small, and a fourth, virtually brand new unit. While many smaller units in the country have been targeted for closure, CWLP has maintained a continuous commitment to plan t maintenance and an aggressive program of plant investment to assure the most effi cient combustion of fuel economically justified while maintaining and exceeding current e missions control requirements. The commenters stated that as a result, these plants ar e cost effective and clean units that have substantial remaining economic value. The commenter s stated that this commitment to environmental end efficiency excellence required th e community to make significant capital commitments that are at unnecessarily and inappropr iately at risk under the CPP as proposed.

The commenters stated that CWLP's commitment to env ironmental excellence is demonstrated by its history. The commenters stated that as early as 1980, CWLP installed one of the first wet flue-gas desulfurization (WFGD) systems in the coun try to reduce SO2 emissions by more than236

90%. CWLP recently completed an upgrade of the orig inal 1980's WFGD at the cost of nearly $30 million and now all 3 WFGDs remove 98% or bette r of SO2. The commenters stated that Selective Catalytic Reduction systems for NOx remov al were installed in 2003. The commenters stated that in 2009, the SCR's began year-round ope ration to assist in control of other emissions. The commenters stated that the WFGD and SCR project s were funded through bonds, with a payback period through 2037 for our citizens. The c ommenters stated that additionally, these units utilize electrostatic precipitators, which ca pture approximately 99% of particulates. The commenters stated that these investments in air pol lution controls (APCs) demonstrate CWLP's commitment to meeting strict emission limits at the source, rather than paying to pollute through the purchase of emission allowances; these investme nts now may become stranded costs, depending upon the final GHG Rule. The commenters s tated that even our two smallest units, 31 and 32, have APCs beyond most of our larger neighbo ring investor-owned EGUs, but are still "affected units" under the GHG Rule as proposed. Th e commenters stated that these two units provide critical support during peak loads. The com menters stated that CWLP also operates a small natural gas turbine and two smaller black sta rt capable diesel-fired turbines, used primarily for peak demand

The commenters stated that in 2009, CWLP began comm ercial operation of a new coal-fired unit, Dallman Unit 4, with a nameplate capacity of 230.1 MW, replacing our Lakeside units, which lacked modern pollution controls and were ret ired in 2009. The commenters stated that Dallman Unit 4 won accolades from engineering and e nvironmental groups alike. The
commenters stated that it was constructed with a dr y ash handling system, and has some of the most advanced APCs of any power plant in the countr y, exceeding the controls of much larger neighboring investor-owned utilities. The commenter s stated that as one of the cleanest burning units in the country, Dallman Unit 4 is of the type new, efficient solid fuel plant USEPA should want dispatched before others.

Commenters stated that while CWLP's units 31 and 32 may be smaller than the average unit, these units have APCs beyond most units their size and larger, for which the citizens of Springfield are still paying the debt service for t hese upgrades. The commenters stated that therefore, while many units under 100MW capacity wi ll likely retire due to other air pollution regulations being implemented, CWLP has no plans to retire units 31 and 32 at this time since CWLP has already invested to comply. The commenters stated that these units provide critical support for the intermittency of our wind farms, op erating during peak loads when our wind farm outputs are near or at zero.

The commenters referred to a graph that indicated t hat CWLP's substantial investment in renewable energy and energy efficiency (EE) cannot be counted on during periods of peak demand for the utility. The commenters stated that CWLP faces summer and winter peak periods. The commenters pointed to a graph that ove rlays annual electric load against the availability of our renewable resources and as the graph demonstrates, during the summer, when our average load peaks, wind resources average very low capacity factors. The commenters stated that as result, CWLP has continued to rely o n our smaller coal units to fill the gap in the summer months when wind generation is not available

.

The commenters stated that while renewables are an important component of the GHG rule to reduce carbon emissions, coal-fired units such as u nits 31 and 32 are necessary for reliability,237

especially in high load periods (summer and recent winter load), as our data demonstrates. The
commenters stated that the benefit of these units t o the community is outsized and their impact on GHG emissions is negligible. Commenters provide d a Figure showing CWLP On-Peak Avg Hourly Load vs Hancock Wind Farm Hourly Capacity Fa ctors.

The commenters stated that as a vertically integrat ed municipal utility, providing not only generation, but also transmission and distribution to its customers, CWLP owns and operates 64
miles of 138kV and 66 miles of 69 kV transmission l ines for the 80 square miles of its service territory. The commenters stated that CWLP's origin al system and substations were all built on the 69kV transmission line, from which the majority of the CWLP load is served. The commenters stated that as part of the engineering a nd economic assessment of options to make APC and EE upgrades, CWLP concluded the cost to ret ire these units was disproportionate to any gain. The commenters stated that one notable co ncern is the impact early retirement will have on the CWLP transmission system. The commenter s stated that analysis of removal of 31 and 32 generation concludes reliability consequence s of sufficient magnitude to require significant transmission upgrades. The commenters s tated that to mitigate these reliability issues, CWLP would be required to install multiple new conn ections between the 69 kV to 138 kV system. The commenters stated that two engineering alternatives are available but costly. The commenters stated that the least expensive option t hat is deemed necessary but adequate is estimated to cost approximately $8,900,000 for upgr ades that include new transformers and a
new 138 kV line. The commenters stated that the oth er option, which provides greater benefits, is estimated to cost more ($12,216,800 in 2012 dollars ). The commenters stated that additional facility study would be necessary to determine a mo re accurate cost estimate, which would include a short-circuit analysis and stability anal ysis, and would also require a very coordinated outage schedule to complete any upgrades. The comme nters stated that additionally, these investments would have to be proposed analyzed and approved by the MISO, a time consuming and expensive process.

The commenters stated that other logistical and fin ancial issues arise with the concept of closing
units 31 and 32. The commenters stated that in addi tion to the transmission voltage step down costs, the building that serves units 31 and 32 als o houses unit 33. The commenters stated that during a unit 33 outage, heat that is currently pro vided by units 31 and 32 boilers to the building and would no longer be available. The commenters st ated that while this may seem inconsequential, the estimate to install building h eat is $1.5 million. The commenters stated that closing the plant is estimated to cost an additiona l $1M, to address closure issues such as hydrogen and oil removal and other closure expenses . The commenters stated that sales associated with units 31 and 32 provide significant income to the City's general fund by contributing 30% of revenue of sales from these uni ts. The commenters stated that revenue from
sales associated with units 31 and 32 are also dire cted to fund CWLP's energy efficiency programs. The commenters stated that therefore, ear ly retirement of units 31 and 32 would require the City to determine not only how to pay f or the transmission voltage step down, heating and closure costs, but also how to raise funds for the City services and CWLP energy efficiency

programs.

Commenters stated that taking a relatively lower co st means of production, i.e., existing coal resources, out of utility's resource mix and still having to pay for stranded costs due to the unrecovered assets only exacerbates the problem of trying to recruit industry to one of the238

poorest states in the union and that happens to ran k last or close to last in almost every category of well-being.

4.7.3 Other

Section 4.7.3 covers all other public comments rela ted to state flexibilities associated with the proposed goals.

Commenters have raised a number of issues related t o this subsection which are organized by topics (comments) below. Responses are provided for these topics.

Comment 1: Flexibility is very important and must be maintain ed by the rule. The EPA must address disparities in final rule

Response 1: The EPA agrees with the commenters that flexibilit y is important and must be maintained by the rule.

The following are summaries of the specific public comments under this comment:

Several commenters stressed the need for flexibilit y on the part of the states to develop plans appropriate to their regional situations. Several commenters emphasized the need to be able to incorporate and build on existing programs, and sev eral emphasized the need for flexibility to develop individual state or regional plans (such as RGGI). Commenters strongly supported the flexibility to use any number of building blocks, a s well as other measures such as renewable energy credits or emission credit trading with othe r states, system operator, or regions as necessary and appropriate to achieve compliance. C ommenters indicated the rule should allow states the flexibility to integrate a variety of to ols and compliance methods at their disposal and the flexibility to promote creative and effective m ethods of emission reductions, and develop new means of achieving the EPA requirements. Comme nters emphasized that the rule show allow both the necessary flexibility and time so th at all states can craft effective implementation plans. Additional concerns were also expressed, as described below.

Commenters stated that states should be allowed to meet the target goals using the same flexible strategies they have historically used to control c riteria pollutants under section 110 of the CAA, and stressed that states should be able to design c ompliance plans that minimize disruption to existing successful states programs (including, in California, the state's Cap-and-Trade Program, renewable portfolio standard, and energy efficiency programs). Commenters said that state planners must be given the discretion to capture co st effective reductions across the grid and continue to efficiently implement existing programs that can deliver reductions into the future. Commenters strongly encouraged the EPA to allow sta tes to choose among several compliance options, including a rigorous alternative version o f the state commitment approach on which it requests comment.239

Commenters stated that EPA must develop CAA 111(d) guidelines that foster both regional coordination and the option for states to submit in dividual plans. Commenters said that the EPA also must provide states multiple options for captu ring the benefits of state energy efficiency and renewable energy programs. Commenters stated that t he EPA must provide a workable mechanism for states to adopt either a rate-based o r mass-based approach to achieving state goals, as well as to modify their plans - such as t o continue achieving reductions cost-effectively by incorporating new technologies that become avail able. Commenters emphasized that the rule and the EPA's manner of implementation and approval must recognize that regional plans could appropriately take many different forms. Commenters said that the EPA must allow states flexibility to allocate credit for zero-carbon reso urces and to reach agreements allocating carbon
liabilities.

Commenters emphasized that the EPA also should supp ort the dialogue and standardization needed to promote state flexibility. Commenters sai d, for example, the EPA should work with states to ensure states receive proper credit for e nergy efficiency programs. Commenters said that the guidelines must account for the need for both a ccountability and flexibility in developing Estimation, Measurement and Verification protocols that work across states and will meet
federal standards.

Commenters stated that the Clean Power Rule guideli nes must recognize the primacy of States and rely on both State utility and environmental re gulators to lead the creation of emission performance system that reflect the policies, energ y needs, resource mix, and economic conditions of each State and region. Commenters st ressed that the guidelines must also be flexible enough to allow states individually or reg ionally to take into account the different makeup of existing power generation in each state a nd region. Commenters said further, the guidelines must allow States to avoid GHG emissions reductions that are not feasible, and must provide sufficiently flexible compliance pathways o r mechanisms that recognize State and regional variations to achieve the most cost-effect ive emissions reduction in each State.

Commenters said it is essential that states have th e flexibility to employ emissions rate goals in lieu of mass based goals and that East Kentucky Pow er Cooperative must be permitted to substitute new NGCC units in place of retired coal units in its emission rate calculations. Commenters said the CPP will only ha ve the potential of being achievable if states are provided with this flexibility in developing th eir plans.

Commenters said each state should have the opportun ity to determine for itself which carbon
reduction mechanisms make the most sense for its ci tizens, its workers and its economy, or for states to band together to submit regional implemen tation plans. Commenters said as a result, the final rule must permit each state to focus on ensur ing power reliability, fostering community stability, and encouraging economic growth-all whil e reducing carbon dioxide pollution.

Several commenters said the EPA should preserve as many options for state compliance as possible, and address any inconsistencies leading t o disparity. Several commenters said that flexibility is the strongest aspect of the proposed rule, even though it creates many complications. Several commenters said that the EPA 's efforts at consistency, while laudable, are not complete, leading to unintended disparities, an d these disparities must be addresses appropriately in the final rule.240

Commenters argued that states should have flexibili ty and discretion with regard to state plan development and source compliance. In comments subm itted prior to the proposal in April 2014, and resubmitted following proposal, the commenters offered the following as part of their response to the question, "What requirements should state plans meet, and what flexibility should be provided to states in developing their plans," in EPA's "Considerations in the Design of a Program to Reduce Carbon Pollution from Existing Po wer Plants." The commenters explained that states should be afforded maximum flexibility and discretion in developing their plans and determining how each EGU within the state may compl y, taking into account remaining useful life. The commenters explained that each state is d ifferent with all EGUs is not feasible, but state plans could justify source-specific standards and a best management practice approach, including heat rate improvements through operations optimizat ion and best available technology economically achievable.

The commenters stated that it is important to highl ight that 40 CFR 60.24(f) authorizes states, under certain circumstances and on a case-by-case b asis, to allow individual sources longer compliance schedules and to apply less stringent em issions standards than otherwise required by EPA's emissions guidelines. The commenters suggeste d that once the state has set achievable standards for each existing EGU, the state should m aintain discretion to enable source compliance through a variety of flexible mechanisms that may vary from state-to-state.

Commenters stated that as noted by U.S. EPA, Sectio n 111(d) gives states "the primary responsibility for designing their own state plans. " Commenters said it appears U.S. EPA is taking every opportunity to limit this role. Commen ters said Ohio EPA reiterates that states should have the flexibility to determine the best a pproach given their specific abilities. Commenters said U.S. EPA should not be limiting opt ions under this proposal. Commenters said RE and EE should not be components of BSER; however , Ohio EPA continues to believe states should have the flexibility to choose what measures apply to an affected EGU.

Comment 2: Rule is intrinsically inflexible

Response 2: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A.2., V.A.5., V.A.6. and VIII.A. of the final rule preamble of the CPP for more info rmation.

The following are summaries of the specific public comments under this comment:

Several commenters stated that the proposed rule is intrinsically inflexible.

Several commenters indicated that the EPA has state d repeatedly that there is flexibility in the proposed Clean Power Rule in that it allows states to develop their own compliance plans, and that those compliance plans may, but are not requir ed to, utilize any combination of the four "building blocks" identified in the proposed rule. Several commenters indicated, however, that the EPA established state CO2 emission goals based on aggressive assumptions about what each of the four building blocks can achieve. Several co mmenters said that although the EPA claims241

that states retain the flexibility not to implement each of the building blocks in the manner EPA assumed when developing state goals, in reality it would be difficult for a state to achieve the emission targets set by EPA without implementing al l of the building blocks. Several commenters indicated that accordingly, states do no t have the option of not implementing a building block or substantially deviating from EPA' s assumptions. Commenters added that even if states could manage to get more emission reducti ons from one building block to offset fewer reductions from another that would be considerably less flexibility than states must be afforded under Section 111(d).

Commenters said that despite the claim that the pro posal offers "maximum flexibility" to ensure the "best set of cost-effective reductions", the pr oposed rule contains elements that do not provide the flexibility needed to ensure cost-effec tive emission reductions that represent a state's preferred approach to meeting its 2030 target. Com menters said these elements of the proposed rule include, but are not necessarily limited to, t he timing for submittal of state implementation plans (SIPs), the estimation and enforceability of the interim target (i.e., the so-called "glide path"), the lack of appropriate credit for early ac tion, and the possibility of employing a massbased limit over a rate-based limit for the 2030 ta rget.

Several commenters stated that the proposed Clean P ower Plan provides no actual flexibility for
Arkansas. Commenters said that Arkansas Electric E nergy Consumers (AEEC), and Arkansas as a whole, will more than likely be unable to achieve compliance with any of the four building blocks in their own rights. Commenters said that a s a result, there is no real possibility that shortfalls in one building block can be satisfied o r negated by overachieving in other building blocks, and therefore no real flexibility is provid ed for Arkansas or AECC. Several commenters said that for states with a high amount of coal gen eration, the proposed emission reductions must be accomplished primarily be reducing coal-fired en ergy generation if such states can hope to meet the stringent requirements, and thus, in actua lity, the CPP's "flexibility" is non-existent when it comes to states that rely heavily on coal g eneration.

Commenters said that the EPA has indicated that eve n if a state can demonstrate that a particular building block is not feasible, the EPA will not ad just a state's emissions goal unless the state can
demonstrate that additional controls on the other b uilding blocks are not feasible. Commenters said this is a flawed interpretation of CAA Section 111(d) regarding what constitutes BSER and should be rejected.

Commenters indicated that the Proposed Rule states that its interim and final goals provide states with flexibility to design plans over the long term . Commenters indicated, however, that because the interim goals are so stringent, many states wil l have to take significant actions by 2020 in order to comply, limiting flexibility. Commenters s tated that due to the inflexibility of the proposed regulation, it would shut down the Arizona Electric Power Cooperative Apache Generating Station and potentially other small coop erative power plants. Commenters indicated that in the case of Arizona, the "flexibility" prov ided by the proposed regulation is illusory. Commenters said Arizona's target assumes that all coal-fired EGUs are shut down; therefore, there is no gain that can occur from Bui lding Block #1. Commenters said that if Arizona increases the allocation to Building Blocks #3 and #4, Arizona cannot comply with the interim goal. Commenters said that similarly, Arizo na cannot increase Building Block #2 because there is no "OG Gen" capacity left that has not already been redispatched to NGCC.242

Accordingly, it appears that under the Clean Power Plan as proposed, effective January 1, 2020,
AEPCO must shut down all of its affected EGUs.

Commenters felt the proposed rule is unlawful becau se the EPA proposes to establish emission goals that it says states have no authority to modi fy. Commenters said that because the EPA has simply assumed each Building Block can be implement ed fully without ascertaining whether that is in fact the case, the touted flexibility of the rule is illusory. Commenters indicated that in many cases, states cannot realistically implemen t one or more Building Blocks and do not have the flexibility to increase the stringency of other Building Blocks or measures to achieve their mandated goals. Commenters indicated that th e EPA analysis has already demonstrated that Pennsylvania will need to use all four buildin g blocks to achieve the required emissions reductions, and states that these goals cannot be a chieved solely by inside the fence line improvements at existing fossil fuel fired EGUs, wh ich is the only legal method to achieve these
CO2 emission reductions.

Commenters indicated that the rule provides limited flexibility because the proposal states that "once the final goals have been promulgated, a state would no longer have an opportunity to request that the EPA adjust its CO2 goal." Commente rs indicated the final state goals "would reflect any adjustments as appropriate based on com ments provided to the EPA to address any data errors in the analysis for the proposed goals" , and said that these statements contradict the assertion that the EPA has granted the states flexi bility within the Clean Power Plan. Commenters stated that the state goals have been se t without input from the individual states on the front end of determining state specific BSER po tential, although the role of the states according to Section 111(d) of the Clean Air Act (C AA) is to establish and apply standards of performance. Commenters said that the proposal also claims that states are given the "flexibility" to choose between rate-based and mass-based perform ance levels for each performance. Commenters stated that there essentially is no "fle xibility because the EPA sets the target goals have already been set - rate-based state goals in t his original proposal and in its November 6, 2014 supplement to the rule EPA has set the mass-ba sed state goals as well.

Commenters stated that rule does not give flexibili ty suggested by EPA.

Commenters stated that they are very cognizant of t he fact that the flexibility U.S. EPA advocates is limited to choosing the methods of emi ssion reduction and timeframe of plan development and implementation. Commenters said no flexibility is given in determining the total emission reduction figure.

Comment 3: Rule is not flexible due to the stringency of the building block targets

Response 3: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:243

Several commenters said that the proposed rule does not offer states flexibility due to the stringency of the targets.

Commenters said the flexibilities that the EPA insi sts the states have under the proposed rule are illusory given the stringency of the standards, pra ctical impediments, and the EPA's decision to disallow exceptions or a modification to the standa rds. Commenters stated that the "guidelines" proposed by the EPA are mandatory, extraordinarily stringent and, once established in the final rule, will not be subject to modification. Comment ers said that the proposed "anti-backsliding provision" specifically prevents modifications to a state goal after finalization of the rule that increases emissions under any circumstance. Commen ters stated that such a provision, if retained, serves as a constraint to addressing unan ticipated developments and increases the potential for negative economic impacts from the ru le.

Commenters indicated that although the EPA has repe atedly emphasized the flexibility provided in the proposed Clean Power Plan, the "portfolio of options" (aka "building blocks") that comprise the foundation of the proposal are clearly designed to increase the stringency of the rule, rather than assist states and affected source s' compliance efforts. Commenters indicated that by incorporating reduction measures beyond aff ected sources, the EPA was able to tighten individual state targets substantially. Commenters said that while the EPA's "mix and match" messaging implies otherwise, if the emissions reduc tions called for from one individual building block are not met, they must be made up for through even greater reductions in another building block (or by alternative measures that EPA does not specify). Commenters stated that because individual building block targets were set at aggre ssive levels, there is little to no "wiggle room" between options and as a result, unless EPA incorpo rates true flexibility into the rule, they expect states will face major compliance challenges.

Several commenters said that the stringency of the targets remove any flexibility that may have been intended. Several commenters said, for exampl e, the EPA's assumptions for replacement of coal generation with natural gas generation under b uilding block 2 constrain the state's ability to rely on building block 1 (heat rate efficiency in c oal plants) for any movement towards the state's interim or final goals. Several commenters said add itionally, Arizona's goals represent an emissions rate for existing natural gas that is muc h lower than what the Agency says is achievable for brand new natural gas units. Several commenters said consequently, Arizona is forced to construct new renewable generation source s on unrealistic timelines and accelerate energy efficiency without the time to rationally co nsider what programs are most cost-effective
and achievable within the state.

Commenters said the EPA must provide true flexibili ty to the states by allowing them to consider unit specific realities, including the remaining us eful life of the source, when assessing the reasonableness of the standard and the compliance s chedule as applied to any single facility.

Commenters said although EPA claims that state have flexibility to determine how to meet EPA's goals, the magnitude of the emission reductio ns in the proposal leaves most states little
alternative but to follow EPA's mandates laid out t hrough building blocks 1 through 4. The commenters said EPA has proposed to substitute its judgment for that of public utility commissions, utility companies, grid operators, and consumers across the nation by presuming244

the appropriate amounts of electricity from coal, n atural gas, nuclear, and renewables, as well as presuming how much electricity consumers should use in each state.

Commenters said the EPA attempts to address the 202 0 interim limit by requesting comment in the NODA on two proposals designed to provide suffi cient flexibility, but the EPA's proposed fixes won't solve the problem. Commenters said the EPA provides the option of meeting the deadline by 2020 while receiving credit for "certai n pre-2020 reductions" (without further elaboration on what those might be), or implementin g the goal earlier than 2020 by taking into consideration reductions currently under developmen t. (79 Fed. Reg. at 64,545-46). Commenters said neither of these options change the unrealisti c nature of the 2020 goals, nor do they provide states with true flexibility in determining how to structure the reductions needed by 2030. Commenters said the EPA should (1) eliminate the ma ndatory nature of the interim emission limit, and (2) allow states to assess a reasonable performance standard for individual units, or at a
minimum allow states to determine how to structure their own glide path to meet the 2030 goal.

Comment 4: Rule is not as flexible as EPA claims because all of the individual building blocks reflect relatively stringent assumptions. EPA shoul d re-evaluate its assumptions to ensure each one of its building blocks is achievable, rather th an relying on assumption that any flaws in one BB can be offset by the flexibility associated with another BB. BB2 may not be achievable in New England due to early action

Response 4: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters said EPA claims that any errors in the c alculation for only one building block will not warrant a change in the goals because of the ad ditional flexibility provided by other building blocks. Commenters said for example, EPA claims tha t "a state's inability to meet the level of emission reductions anticipated through use of one building block may free up resources that the state could then devote to more stringent implement ation of another building block." 79 Fed. Reg. at 34,893. Commenters said as such, EPA asks s tates that have concerns about one or more building blocks to "explain why the application of the other building blocks would not result in greater emission reductions than are reflected in t he EPA's quantification for that state."

Commenters said however, since all of the building blocks are based on relatively stringent assumptions, the flexibility EPA may intend to prov ide is simply not available. Commenters said the inability to achieve one building block will no t necessarily "free up" resources because the state will likely have already expended those resou rces even if, in the end, the desired level of improvement cannot be fully achieved. Commenters sa id the EPA also incorrectly assumes that the building blocks are fungible because each compl iance option will result in different costs in different states-even if a trade-off is possible, i t could also be far more expensive than EPA245

assumes. Commenters said in addition, the generatio n resources covered by the building blocks are not fungible in a practical sense because diffe rent resources provide different services to the electric power grid that must be considered in dete rmining the potential impact of a trade-off between energy resources, such as frequency and tra nsmission support. Commenters said however, EPA's analysis does not appear to take tho se ancillary grid services into account in assuming that efforts under one building block can substitute for another. Commenters said the timing of the building block assumptions also rende rs the proposal inflexible, since EPA assumes some building blocks will be achieved by 2020 while others can only be achieved over the entire compliance period ending in 2030. Commenters said a s a result, states may be forced to employ more expensive options if the cheaper options are s imply impossible to achieve at the levels EPA assumes in its nationwide analysis by the deadline required.

Commenters said that the proposed regulation does n ot actually provide flexibility because the states are provided with a narrow range of costly p olicy choices, which most of the state did not
choose for themselves. The commenters said this do es not provide any actual flexibility and still produces the same outcome, higher electricity price s and decreased generation.

Commenters asked EPA to re-evaluate its assumptions to ensure each one of its building blocks is achievable, rather than relying on the unsupport ed assumption that any flaws in one building block can be offset by the flexibility associated w ith another building block.

Commenters also said the EPA's claim that a state h as the ability to increase remaining building blocks to make up for a state's inability to implem ent a particular building block is misleading. Commenters said for example, if a state cannot meet its goal for re-dispatch to new renewable generation (presumed zero-carbon) under Building Bl ock 3, an increase in re-dispatch to NGCC under Building Block 2 would not offset the state's shortage under Building Block 3. Commenters said since the building blocks are funda mentally different, states have very little
room to deviate from the exact combination and leve l of intensity prescribed by the EPA in the goal-setting formula to achieve compliance.

Commenters said by design, the magnitude of the car bon intensity reductions varies significantly across the building blocks. Commenters said while i t may be theoretically feasible for New Hampshire to increase implementation slightly acros s other building blocks to account for an inability to meet demand-side energy efficiency goa ls, the same cannot be said if New Hampshire is incapable of meeting re-dispatch goals since they account for the bulk of the carbon intensity reductions required in the state. Commenters said for example, New England as a whole - and specifically New Hampshire, has alrea dy implemented Building Block 2 to the maximum extent possible prior to the 2012 reference year given the natural gas availability constraints of the region. Commenters said this is evidenced by the shift of coal- and oil-fired EGUs to targeted operation primarily during times o f elevated demand. Commenters stressed that for this reason, additional re-dispatch under Building Block 2 is not feasible for New Hampshire - which renders the state goal entirely u nattainable due to the unrealistic magnitude of carbon intensity reduction that would be required o f the remaining building blocks that are unequipped to handle such increases.

Commenters stated, EPA established state emission r ate goals in the Proposal by considering CO2 emissions reductions available through four bui lding blocks that EPA found make up the246

best "system" of emissions reductions or BSER. Comm enters said, EPA claims that, by not mandating that states adopt any of the measures con sidered in the building blocks, EPA is providing states with "flexibility" in how they ach ieve their goals. Commenters said, however, the unrealistic assumptions that EPA used in each b uilding block are unreasonable and not achievable for many states. Commenters said, as a r esult, the state goals are so stringent that states will have little to no flexibility in the pr ograms and limits they must adopt to meet both the interim and final emission rate goals. Commenters s aid, many states will be able to do so only through the precise adoption of the measures that t he IPM assumed would result in compliance. Commenters said, other states will not even be able to meet the state goals using the IPM modeling results due to the limits of the modeling and the failure of the model to take into account reliability constraints, permit limits, tra nsmission constraints, infrastructure needs and other factors that will restrict a state's ability to comply with its goals; particularly the interim goals that will apply beginning in just five years. Commenters said, EPA's use of unreasonable assumptions, its failure to consider numerous const raints that impact EPA's conclusions in each building block, and its reliance on measures that E PA does not have the authority to mandate render the BSER determination arbitrary and caprici ous. Commenters said, EPA must eliminate consideration of Building Blocks Two, Three and Fou r in determining BSER and must revise its analysis of Building Block One.

Comment 5: In reality, the proposed regulation does not provi de states with the flexibility to maintain additional coal-fired generating capacity because of the unrealistic levels of RE and EE that would be required to offset the emissions.

Response 5: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA must provide states with the flexibility to address reliability, cost, and remaining useful life. But commenters sai d that in reality states cannot preserve sources that Building Block 2 otherwise would retire throug h greater implementation of other building blocks or other measures. Commenters said, however , that under the Clean Power Plan, states cannot preserve power plants for reliability purpos es, cost, or remaining useful life because the EE or RE required to offset the emissions of a sing le preserved power plant are wholly unrealistic. Commenters said that for many Southeas tern states, it will be impossible to meet even the projected level of RE under the Proposed R ule, let alone tripling or quadrupling that would be required to avoid massive coal unit retire ments.

Commenters provided a scenario in Arkansas to demon strate the unrealistic growth in RE and/or EE that would be required to maintain coal-fired ge nerating capacity. Commenters indicated that the EPA IPM modeling projects that four of Arkansas ' seven coal-fired EGUs would retire or cease operating by 2020. According to commenters, retaining either the White Bluff or247

Independence generating stations would require a 32 2 percent increase in EE from the amount assumed in BB4 and the IPM analysis, or a 335 perce nt increase from BB3-assumed RE levels (i.e., an additional 5,000 NW wind or 9,000 MW sola r). Commenters noted that the IPM did not project compliance through wind or solar generation in Arkansas because of the complete lack of RE potential in the state.

Commenters also provided an example using Arizona's goals. Commenters said that in Arizona, the EPA's Goal Computation TSD and the IPM predict that meeting the state's interim emissions goal will require the retirement of all Arizona coa l-fired capacity by 2020. Commenters stated that if Arizona does not, or is unable to, retire e ven 1,000 MW of coal generation (approximately the size of the Cholla power plant), meeting Arizon a's CO2 emission rate goal would be impossible. Commenters indicated that under EPA's theory Arizona could make up for retaining the coal-fired capacity by expanding RE and EE. Co mmenters indicated that this would require a 489 percent increase in RE from IPM projected lev els or a 140 percent increase in EE from the level assumed in building block 4 and the IPM analy sis. Commenters indicated that this equates to an additional 4,000 MW of wind or 7,000 MW of so lar. Commenters added that utilizing existing NGCC generation at higher levels also woul d not help with compliance because Arizona's 735 lb/MWh interim goal is more stringent than the state's average NGCC emissions

rate.

Comment 6: Interim goal makes rule inflexible. The EPA shoul d eliminate, or adopt a different approach to, the interim goal

Response 6: The EPA has modified the interim goals in response to comments and our further consideration. The interim period covers the years 2022-2029 and includes illustrative interim emission values for the periods of 2022-2024, 2025- 2027, and 2028-2029. States have the flexibility to use different steps than those inclu ded in the final rule if the state demonstrates in its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the interim goal included in the final rule for the 202 2-2029 period. See section VII of the final rule preamble for discussion of the statewide goals.

The following are summaries of the specific public comments under this comment:

Commenters said that throughout the Notice of Propo sed Rulemaking and technical support documents and in discussions with stakeholders, if any potential impediment to implementation of the proposal is raised, the EPA's answer is, alm ost inevitably, flexibility. Several commenters said however, the interim goal limits the flexibili ty available to states. Commenters said incorporation of the assumed 2020 implementation da te for BB2 into the interim goal calculation will have the opposite effect and will interfere wi th a state's ability to shift from BB2 to measures, such as BB3 and BB4, whose effectiveness tends to grow over time. Commenters said because the interim goal reflects an average of ann ual values from 2020 to 2029, states cannot shift reductions in generation on an MWh-for-MWh ba sis from BB2 to BB3 or BB4 without violating the interim goal.248

Commenters attached the spreadsheet that the Arizon a Department of Environmental Quality mentioned on the August 14, 2014 conference call be tween Region 9 states and EPA. Commenters said the spreadsheet illustrates the fun damental inconsistency between the proposed interim goal and the EPA's stated objective of allo wing states flexibility in choosing how to comply with the guidelines. Commenters said the fol lowing table provides a summary of the
results of our calculations.

Commenters stated that as the table shows, the more Arizona relies on Building Blocks 3 and 4 to achieve compliance with the final goal, the fart her it gets from compliance with the interim goal (scenarios 2-4). Commenters added conversely, if Arizona designs its program to comply with the interim goal, it ends up with a final rate that is far lower than necessary to comply with the final standard and ends up preserving a much sm aller portion of its existing coal-fired generation resources (scenario 5).

Commenters said that in fact, Arizona has no flexib ility to shift from one Building Block to another to meet its rate-based goal under the progr am as proposed. Commenters indicated that the state cannot increase reliance on Building Bloc k 1, because the rate-based goal assumes zero coal generation, and the interim goal, as explained above, prevents Arizona from increasing reliance on Building Block 3 or 4 to preserve coal generation. Commenters said that if no coal generation remains in 2020, increasing the efficien cy of coal units will obviously have no effect
on Arizona's rate. Commenters added that Arizona ca nnot increase reliance on Building Block 2, because the interim goal effectively requires the m aximum re-dispatch possible.

Commenters said that Arizona is not the only state in this predicament. Commenters said that the EPA's goal calculation spreadsheet makes it clear t hat a number of other states have goals that presume re-dispatch of all or a substantial portion of coal and OG generation to NGCC by 2020. Commenters added that moreover, for some states, th e presumption of 2020 implementation of Building Block 1 may present a similar impediment t o flexibility.

Commenters said therefore the EPA should eliminate, or adopt a different approach to, the interim goal. Commenters said that if an interim go al is included in the final rule, it should provide a reasonable phase-in period for all Buildi ng Blocks - otherwise the EPA will deny Arizona and many other states the flexibility it in tended to include in the program.

Commenters noted that the scenarios presented in th e spreadsheet are offered solely to illustrate the problems with the EPA's proposed interim goal, and that ADEQ has not evaluated the technical or economic feasibility of any of the RE or EE alternatives included.

Comment 7: The interim goal stringency and timing deprives Ok lahoma of any flexibility to implement alternative compliance measures, and effe ctively mandates the closure of coal-fired power plants.

Response 7: The EPA has modified the interim goals in response to comments and our further consideration. The interim period covers the years 2022-2029 and includes illustrative interim emission values for the periods of 2022-2024, 2025- 2027, and 2028-2029. States have the flexibility to use different steps than those included in the final ru le if the state demonstrates in249

its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the interim goal included in the final rule for the 202 2-2029 period. See section VII of the final rule preamble for discussion of the statewide goals.

The following are summaries of the specific public comments under this comment:

Commenters said the interim goals require such sign ificant emission decreases in such a short amount of time that they effectively mandate the cl osure of coal-fired power plants. Commenters said in additional to overestim ating the emission reductions achievable through re-dispatch, EPA also assumed that all "ava ilable" emission rate reductions from redispatch could be achieved at the start of the ten- year interim goal compliance period. Commenters said as a result, the interim goals in s tates with electric generating companies that have invested in low-emitting NGCC, like Western Fa rmers, are so stringent that almost all of the emission rate reductions required by the Propos ed Rule must be achieved in the first year in the ten-year compliance period. Commenters said the EPA assumes that by 2020, Oklahoma can achieve 80 percent of the total emission rate reduc tions required in 2030.

Commenters said Oklahoma cannot comply with the pro posed interim emission rate goal without making drastic changes to generation very early in the compliance period. Commenters graphed the proposed emission rate reduction trajectory for Oklahoma and said it resembles a cliff: emissions decrease sharply early in the compliance period and then remain largely unchanged through 2030. Commenters said as a result, Oklahoma will have no choice but to prematurely close existing coal-fired generating units early in the compliance period. Commenters said the stringency and timing of the proposed interim goals deprives Oklahoma of any flexibility to implement alternative compliance measures and effec tively mandates the closure of coal-fired power plants.

Comment 8: The EPA's claims of state flexibility and control are a false promise; states should be given flexibility to develop the elements of a p lan that works best for the state, should be allowed extensions, should be allowed to change pla ns based on changed circumstances, and should be allowed to adopt a "rate of progress" app roach

.
Response 8: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

States have broad authority. Commenters said that t he state goal is the standard of performance
and the means to achieve that end should be left to the states. Commenters said states have broad authority to develop a state plan for existin g sources, and EPA only has authority to deem that a plan is satisfactory or not. Commenters said as long as the state plan is "satisfactory" and demonstrates that the state will attain, maintain, and enforce the emission guideline (42 U.S.C. section 7410(a) (1)), EPA should not be allowed to second-guess the state's means of achieving250

the objective. Commenters said in the proposed regu lation, the EPA has taken away much of the flexibility by establishing its rigid Interim Goal.

EPA should allow states flexibility including exten ded target date as appropriate. Commenters said that in developing a plan, a state may choose the measures it will include to achieve its goal, and the EPA should allow states the flexibility to choose elements that work best for the state. Commenters emphasized that only the final state goa l needs to be federally enforceable, and said that planning and reporting already required by the CPP allow for correction and "penalty" if a
state fails to be on course. Commenters said in add ition, EPA should allow states to extend the 2030 target date upon a showing of a plan, like the Ameren Missouri IRP, that will cost effectively achieve comparable reductions within a reasonable time frame.

Several commenters said despite all the preamble di scussion of flexibility for states, in reality
states have no discretion. These commenters said t he proposal sets emission rate goals that cannot be adjusted by states, and all of the requir ements imposed on state plans allow states no
discretion. These commenters said the EPA must rev ise the proposal to allow states to submit plans to establish the performance standards consis tent with CAA Section 111.

Selling EE credits. Commenters said states should n ot be forced to implement a portfolio approach that would place a compliance obligation o n transmission and distribution utilities like
Ameren Illinois. Commenters said such utilities sho uld be able to sell energy efficiency "credits" to EGUs to assist with low cost compliance.

Change plans based on changed circumstances. Commen ters said states should be given the flexibility to change their plans based on changed circumstances. Commenters said for example, a breakthrough technology (like hydrofracturing) ma y change the whole energy system.

Adjust goals based on state-specific circumstances. Commenters said the EPA should give the states the flexibility to propose adjustments to st ate emission goals based on what is achievable
in each state.

Rate of progress approach. Commenters said the EPA should allow states to adopt a "rate of progress" approach in their state plans. Commenters said elements needed to implement a "rate of progress" approach are well-known to EPA and sta tes alike. Commenters said because the CPP proposes "beyond the fence line" measures, the state plans will require a unique level of cooperation among state legislators, administrators and regulators, and the EPA must provide sufficient time for the planning processes to be au thorized by state legislators. Commenters said
states must then be allowed the time to communicate and explore existing state policies and programs to determine what GHG-reducing mechanisms are already authorized and how those
reductions can be converted to verifiable reduction s attributable to the "affected EGUs."

Commenters said options to be considered include:

• Building codes,

• Energy efficiency changes,251

• Appliance standards and rebates and policies to enc ourage such changes;

• Offset programs;

• Policies to encourage energy technology innovation for an "all of the above" strategy that
includes nuclear, clean coal, renewables, and natural gas;

• Policies to encourage upgrades to transmission syst ems, including low loss transmission lines and smart grid;

• Tax policies to encourage efficiencies and new tech nology development

Commenters said while the innovation possibilities are endless, the CPP must allow states the time to develop a state plan, and one year to do so is simply insufficient. Commenters suggested that upon conclusion of the planning processes, a c omplete plan with timelines for achieving reductions can be presented to EPA for approval.

Comment 9: Proposed rule does not provide flexibility; BB2, B B3, and BB4 are outside the EPA's authority and cannot be remedied by the appro aches suggested by the EPA.

Response 9: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Stringency of goals limits flexibility. Commenters said that the four building blocks in the proposed regulation take away state flexibility rat her than provide flexibility. Commenters said the Proposed Guidelines lack flexibility because th e state goals that are its centerpiece are set assuming significant emission reductions resulting from the application of all four Building
Blocks. Commenters said the EPA claims that its "r easonable rather than maximum" approach to implementing the Building Blocks means that ther e is room for states to trade emission reductions among Building Block policies (and polic ies that were not included in the Building Blocks) to achieve each state's goal. Commenters s aid that the EPA's Building Block assumptions used to set state goals are so stringen t that there is no true flexibility in the proposed emission guideline.

Rule would encroach on areas that fall under exclus ive jurisdiction of states. Commenters said another reason the proposed emission guideline woul d limit rather than enhance flexibility for
states is that it would encroach on areas that fall under the exclusive jurisdiction of the
states. Commenters said most - if not all - of the programs in Building Blocks 2, 3, and 4 are the quintessential purview of state electricity regulat ors - not state environmental agencies. Commenters said these programs have been developed pursuant to well-established state252

sovereign powers over matters relating to electrici ty regulation, including determining the appropriate mix of generating resources within a st ate. Commenters said the EPA is barred by the Constitution and U.S. Supreme Court precedent f rom infringing upon a traditional state sovereign function unless Congress has adopted clea r statutory language expressly authorizing the Agency to do so, and nothing in the CAA express ly authorizes the EPA to regulate the generation of electricity or other such energy regu latory matters traditionally reserved to states. Commenters said further, the EPA's attempt to regulate electricity generation will adversely and inequitably harm the owners, investor s and rate-paying customers of individual electric generating facilities by setting mandatory emissions guidelines which the EPA acknowledges are based primarily on regulating the production of electricity, not based on the technological ability to control CO2 emissions from the affected source category. Commenters
said the rule creates winners and losers within a s tate as well as among states, and the disparities are unrelated to the relative ability of a regulate d facility to control its emissions. Commenters said such a program is clearly an expansion of the EPA's authority, in addition to the inequity, since nothing in the CAA or the Subpart B rules con templates such an expansive program of regulating the generation of electricity within a s tate's borders or beyond. Commenters said the Proposed Guideline acknowledges that interference w ith the sphere of exclusive state jurisdiction
is a considerable concern.

EPA proposal - not include RE and EE in state plans . Commenters said the EPA seeks comment on a proposal to remedy this situation by essential ly creating a technical loophole. Commenters said the EPA suggests that it can avoid entanglemen t in areas over which the states are sovereign simply by not including things such as RE and EE in state plans, preventing such requirements from becoming federally enforceable, while states i mpose the requirements directly to allow compliance with what would be otherwise unachievabl e emission limits contained in state plans. Commenters said this proposal mistakes formal feder al enforceability with the problem of federal interference in areas that are exclusively the states' domain. Commenters said the EPA's proposed solution, however, does not mitigate that problem. Commenters said the same problem exists even if the EPA were to adopt only Building Blocks 1 and 2, because the rule sets emissions guidelines that can only be met by regula ting how electricity production is managed within the state (or within a multi-state region if the state enters into such an agreement). Commenters said building block 2 is no t based on achieving CO2 emissions reduction, but on requiring changes in how electric ity is produced.

EPA proposal - state commitment approach. Commenter s said the EPA also proposes what it calls the "state commitment approach." Commenters s aid this approach would not make requirements for non-EGUs part of a federally enfor ceable state plan: "Instead, the state plan would include an enforceable commitment by the stat e itself to implement state- enforceable (but not federally enforceable) measures that would achi eve a specified portion of the required emission performance level on behalf of affected EG Us." Commenters said this approach clearly
does not avoid the EPA's interference in areas that are traditionally regulated only by the states - it merely seeks to avoid the appearance of such int erference. Commenters said in attempting to do so, it also creates state plans that otherwise w ould not meet the requirement of federal enforceability.

Commenters said therefore, Duke Energy's response t o the EPA's request for comment is that Building Blocks 2, 3 and 4 are all outside the auth ority of what the EPA can do within section253

111(d) and Subpart B, and those serious flaws canno t be remedied by the approaches the EPA has suggested to sidestep the legal requirements of the CAA.

Comment 10: States have little to no flexibility in their abil ity to meet the proposed state goals; the proposed guidelines are unlawful because the EP A doesn't have authority to establish
emission standards for states.

Response 10: See section IV of the final rule preamble of the C PP for the EPA’s response to this

comment.

The following are summaries of the specific public comments under this comment:

One-size fits all approach taken to establish goals . Commenters said in calculating the state goals, the EPA applied all four Building Blocks to each state's 2012 electric generation to
determine the extent to which the state could reduc e its CO2 emissions rate by 2030. Commenters said the EPA says that it will consider adjusting state goals if a state comments that one of the Building Blocks is technically infeasibl e or its costs "were significantly higher than that projected by EPA". Commenters indicated that t his implicitly acknowledges that the Agency adopted a one-size-fits-all approach to establishin g state-specific goals without adequately considering individual state characteristics. Commenters said however, the EPA also states that because it believes it is imposing "reasonable" lev els of each Building Block ("rather than the maximum") a state should be able to increase its us e of another Building Block to compensate for a limited (or lack of) use of another Building Block.

EPA doesn't have authority to establish emission st andards for the states. Commenters said Section 111(d) provides that states are to develop performance standards for individual sources as part of state plans, after considering state and local factors unique to individual emitting units, including the remaining useful life of individual u nits. Commenters said the Proposed Guidelines are unlawful because the EPA is establishing the em ission goals rather than allowing the states to do so, noting in the process that states have no au thority to modify.

Stringency of goals limits states' flexibility. Com menters said even if the EPA had authority to establish emission standards for the states, becaus e the EPA has simply assumed each Building Block can be implemented fully without ascertaining whether that is in fact the case, the flexibility the EPA claims to be providing is, in f act, illusory. Commenters said in many cases, states cannot realistically implement one or more B uilding Blocks at the level the EPA has assumed and they do not have the flexibility to inc rease the stringency of other Building Blocks or measures to achieve their mandated goals because contrary to the EPA claims, the level of stringency assumed by the EPA for each Building Blo ck is, in many cases, unrealistic and
unachievable. Commenters said this leaves the retir ement of coal-fired EGUs as one of the only options available to achieve the goals the EPA has proposed, and a standard that forces this
outcome cannot be described as flexible.

Multiple SIP submittals should be allowed. Commente rs said that states must have more than one chance to develop and acceptable SIP. Commente rs said considering the complexity of this rule, the large number of uncertainties, and the po tential impact on electric utilities and254

consumers within each state, the EPA must provide a vehicle that allows for states to have more than one chance at getting the SIP correct.

Comment 11: Flexibility is overstated. As proposal is written , application of the practical effects test proves that BB3 and BB4 are mandatory, the use of BB3 and BB4 is a rule within the meaning of the APA, and reliance on those building blocks is improper.

Response 11: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters said the flexibility of the rule is over stated because the use of building blocks 3 and 4 are essentially mandatory and therefore the use o f BB3 and BB4 is a rule within the meaning of the Administrative Procedures Act (APA), and relian ce on those building blocks is improper.

Commenters said that the proposal sets state goals that EPA claims are based on achievable emissions reductions by applying all four building blocks. Commenters said the EPA also proposed alternative, less stringent state goals ba sed on applying only Building Blocks 1 and 2: "We are also soliciting comment on application of o nly the first two building blocks as the basis for the BSER, while noting that application of only the first two building blocks achieves fewer CO2 reductions at a higher cost." (79 Fed. Reg. at 34,836). Commenters said because the state goals are premised on a BSER that reduces emissions from all four building blocks and actions at the affected EGUs would, alone, never achieve the s tate goal, reliance on Building Blocks 3 and 4 is essentially binding.

Commenters said Federal case law interpreting the A dministrative Procedure Act ("APA"), 5 U.S.C. Section 551 et seq., demonstrates how courts determine whether policies contained in EPA documents such as policy memoranda are consider ed binding rules. Commenters discussed one case, Appalachian Power Co. v. EPA, in which th e court did not rely solely on the Agency's characterization of the documents, but looked to th e language of the document and how it was practically applied in holding that:

[I]f an agency acts as if a document issued at head quarters is controlling in the field, if it treats the document in the same manner as it treats a legislative [formal] rule, if it bases enforcement actions on the polici es or interpretations formulated in the document, if it leads private parties or Sta te permitting authorities to believe that it will declare permits invalid unless they co mply with the terms of the document, then the agency's document is for all pra ctical purposes 'binding.' (208 F.3d at 1021)

Commenters said relying on Building Blocks 3 and 4 is really an obligation for states, not a flexible option. Commenters said the proposal as wr itten leads stakeholders to believe that state255

plans will not be approved unless they rely on emis sions reductions achieved by relying on all four building blocks. Commenters referred EPA to Se e National Mining Ass'n v. Jackson, 856 F.Supp.2d 150, 156 (D.D.C. 2012) (rejecting the age ncies' stated position that guidance was not binding and imposed no obligations, the court found that the guidance had "caused EPA field offices and the state permitting authorities to bel ieve that permits should and will be denied if its 'suggestions' and 'recommendations' are not satisfi ed."). Commenters said moreover, if states cannot meet their goals, legal consequences will fl ow.

Commenters said if allowed to go final as written, application of the practical effects test proves that Building Blocks 3 and 4 are, contrary to EPA's characterization, mandatory. Commenters said the use of Building Blocks 3 and 4 is a rule w ithin the meaning of the APA, and reliance on those building blocks is improper.

Comment 12: The EPA has overstated the degree of implementatio n flexibility available to

states

Response 12: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Several commenters indicated that the flexibility t he EPA claims is overstated.

Several commenters said that the EPA set each state 's goal assuming that each state completely adopts all four building blocks. Several commenter s said that for Florida each building block is unachievable and there is no margin to make-up unde r one building block the amount to which
the state falls short on another. Several commente rs said that absent this ability, Florida cannot meet the proposed goal. Several commenters also in dicated that the EPA's proposed state goals would be unachievable under a federal plan, since t he EPA lacks the legal authority to implement at least Building Blocks 2 through 4.

Commenters said that the EPA has overstated the deg ree of implementation "flexibility"
available to states. Commenters said that in reali ty, the purported flexibility is insufficient for developing any workable compliance solution and ind icated additional guidance on how alternative measures will be 'credited" if they are relied on is needed.

Commenters said that significant flaws have been i dentified in EPA's assumptions and goal
calculations for both blocks 1 and 2. Commenters s aid that correcting these assumptions should reduce the stringency of the state goals, as there are significantly fewer opportunities for heat rate improvements available, and significantly less NGCC capacity is available for re-dispatch. Commenters stated that similarly, the EPA's evaluat ion of the opportunities for increasing RE and EE are seriously flawed, and as a result, state s ultimately have very little flexibility in developing plans, and no guidance on how alternativ e measures will be "credited" if they are256

relied on. Commenters said that these omissions mus t be addressed if states are to be equipped to investigate and adopt alternative measures as part of their state plans.

Commenters also said that the flexibility relied on by EPA is illusory. Commenters said the EPA speaks of flexibility as if having eliminated one b uilding block as unworkable, a state could simply increase its use of another block - this kin d of flexibility could only be realized if each building block of the proposal had unrealized and u nlimited potential (which they do not).
Commenters said that because there are serious over estimates of what can be achieved in each of the four building blocks, meeting the goal in Texas would force significantly more coal retirements than the EPA suggests. Commenters said shutting down coal-fuel powered plants is not BSER, and fundamentally, the EPA's interpretati on of 111(d) is untenable.

Commenters expressed concern regarding the EPA's ov erall restriction of state flexibility. Commenters said despite EPA's claim th at it provides state's "broad discretion," states must factor several overbearing considerations into the development of their state plans (four state plan "approvability criteria" and twelve "com ponents"). Commenters said just as for the approval of SIPs under Section 110, the EPA must de fer to a states' plan under Section 111(d) so long as the state develops a satisfactory plan in l ight of its unique attributes. Commenters stressed it is important that EPA not limit the sta tes' authority, flexibility, or discretion in their development of state plans.

Commenters also said the flexibility in the propose d regulation is illusory. Commenters said given the building block approach employed by EPA, this imaginary flexibility is akin to telling a person to drive a car from point A to point B, us ing whatever route the person so chooses, as long as the person only uses the amount of gasoline required for a single, pre-prescribed route.

Comment 13: Proposed rule offers limited flexibility because n o other emission guideline promulgated pursuant to Section 111(d) has included such prescriptive plan elements and rate of progress determinations.

Response 13: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters said that the proposed emission guidelin e is so prescriptive that it offers states little flexibility and does not fulfill the legal requirem ents of the CAA.

Commenters said while EPA has stressed that states may choose their own program elements, the goals are so restrictive that most states will need a combination of direct emission controls, generator fuel favoritism, and end user incentives to reach both the interim goals and the final goal. Commenters said while EPA admits that this is the desired outcome, such policy goals do not fulfill the legal requirements of the CAA. Comm enters said states have discretion to choose257

the measures to come into compliance with Section 1 10 to attain NAAQS and the same discretion applies in the Section 111(d) context. ( Train v. Natural Res. Def. Council, 421 U.S. 60 (1975)).

Commenters said moreover, the previously enacted em ission guidelines make the standard of performance very clear while allowing states discre tion to implement the standard in various ways. Commenters said the EPA should do no more tha n to allow states to set forth the compliance plan that makes sense for the state's un ique circumstances.

Commenters said that despite EPA's claim that its p roposal provides states with broad discretion, EPA in fact severely limits state flexibility by co nstructing several factors and criteria that states must satisfy in developing their state plans. Comm enters listed EPA's four proposed approvability criteria (79 Fed. Reg. at 34,852), an d indicated that EPA has no basis to impose such criteria. Commenters said the CAA explicitly provides states with the ability to consider, among other factors, the remaining useful life of t he existing source to which such standard applies. (42 U.S.C. Section 7411(D) (1)). Commenter s also indicated the proposed rule trespasses on the states' ability to consider the n ecessary factors and to provide for the application of less stringent emissions standards o r longer compliance schedules than those otherwise required...provided that the state demons trate the necessity.

Comment 14: The EPA's assertion of flexibility is based on the false premise that each BB is attainable up to and above the amount established i n setting the goal - analysis suggests that is
not true. The EPA has failed to take into account state specifics by modeling the costs on a national basis and for RE, on a regional basis.

Response 14: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Several commenters said that the EPA's assertion of flexibility is based on the false premise that each BB is attainable up to and above the amount es tablished in setting the goal, but analysis suggests that reality is far different than expecte d by EPA.

Several commenters said that each of EPA's BBs cont ains a significant limitation that has both general and very specific applicability. Several c ommenters said for states with newer coal fleets BB#1 cannot be attained as those fleets generally a lready are more efficient than the national average. Several commenters said many states are id entifying serious constraints to increased dispatch of natural gas, such as limited pipeline c apacity or the need for new transmission lines, that calls into question the ability to meet the BB #2 earliest goals set by EPA. Several
commenters said for states with limited renewable r esource capabilities BB#3 cannot be adequately met, and for states that have already un dertaken aggressive EE programs, BB#4 presents a problem.258

Several commenters said for each state that encount ers a problem with any one of the BBs, EPA expects that the state must make up for that shortf all by increasing the usage of another
BB. These commenters said while each state will hav e unique problems, the most significant problems are likely to occur in those states that a re expected to make the majority of reductions through BB#2. These commenters said if BB#2 compli ance options are limited, states will have to find reductions through demand-side energy effic iency, heat rate improvements at existing plants or increased renewable energy generation. T hese commenters said given that the interim goal occurs as soon as 18 months after the state pl an is filed, even these options would seem unavailable as they could never be implemented in t ime to meet the interim goal.

Several commenters said it is critical that the pro posed rule take into consideration each state's unique energy and economic situation as well as the technological feasibility and most importantly, the cost of EPA's compliance BBs for e ach state. These commenters contended that the EPA has failed to do this by modeling the costs on a national basis and, for renewable energy, on a regional basis. These commenters added that each state should have a far greater role in the design of the standards than has been a fforded by EPA, particularly since EPA has designed standards for many states that are simply unachievable in the allotted timeframe. These commenters said further, EPA needs to allow states to exempt certain facilities on a case by case basis as provided by the statute.

Comment 15: The proposal conflicts with applicable regulations , and EPA is proposing to impose an emission standard rather than a guideline , and has eliminated the states' ability to
minimize the effects on its fleet of EGUs

Response 15: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information. See secti on III of the final rule preamble of the CPP for more information regarding the legality of the final rule.

The following are summaries of the specific public comments under this comment:

Commenters said that the EPA's proposal conflicts w ith applicable regulations, and indicated that EPA is proposing to impose an emission standard rat her than a guideline, and has eliminated the states' ability to minimize the effects on its flee t of EGUs.

Beyond the plant considerations. Commenters said th e EPA states in the 1975 preamble to its rule implementing CAA Section 111(d) that guideline documents must include "information pertinent to control of the same pollutant from des ignated (i.e., existing) facilities..." [40 Fed. Reg. 53340 (Nov. 17, 1975)]. Commenters said no dis cussion of reaching beyond the plant to take into consideration other factors and then impo se reductions on the designated facilities
based on those factors is mentioned in the rule or in the preamble.

Minimizing effect of regulation. Commenters said th e EPA's 1975 preamble also acknowledges that "States may apply less stringent standards to sources (or classes of sources) when economic259

factors or physical limitations specific to particu lar sources (or classes of sources) make such application significantly more reasonable " (40 Fed . Reg. at 53341; see 40 C.F.R. Section 60.24(f)) Commenters said although EPA's new propo sed regulatory language does not preclude use of 40 C.F.R. Section 60.24(f), it is clear EPA intends the 30% emission reduction to be binding on all EGUs and "no relief" will be afforde d under 40 C.F.R. Section 60.24(f). 79 Fed. Reg. at 34925. Commenters said the Proposed Rule th erefore effectively prohibits a state from minimizing the effect of the emission rate set by E PA on its fleet of EGUs.

Subcategorization. Commenters said the EPA's propos al does not acknowledge, despite its protestations to the contrary, the differing im pact of its proposal on states and facilities. Commenters said the 1975 preamble provides that the Administrator will specify different emission guidelines for different sizes, types, and classes of designated facilities when costs of control, physical limitations, geographical locatio n, and similar factors make subcategorization appropriate. Commenters said thus, while there may be only one standard of performance for new sources of designated pollutants, there may be several emission guidelines specified for designated facilities based on plant configuration , size, and other factors peculiar to existing facilities.(40 Fed. Reg. at 53341). Commenters said the EPA should take this approach, rather than combining all EGUs and applying an overall emi ssion rate for CO2.

Emission Standard versus Emission Guideline. Comme nters said the EPA stated in the 1975 preamble that it did not intend to impose a "legall y enforceable national emission standard." (40 Fed. Reg. at 53341). Commenters said instead, EPA e xplained that it would only issue "guidelines" for existing sources, so that its dire ction would not be binding on the states. Commenters said "Emission guideline" is defined by EPA as a guideline that "reflects the degree of emission reduction achievable through the applic ation of the best system of emission reduction which (taking into account the cost of su ch reduction) the Administrator has determined has been adequately demonstrated for des ignated facilities." (40 C.F.R. Section 60.21(e)). Commenters said "Emission standard," on the other hand, is defined as a "legally enforceable regulation setting forth an allowable r ate of emissions into the atmosphere, establishing an allowance system, or prescribing eq uipment specifications for control of air pollution emissions." (40 C.F.R. Section 60.21(f))

.
Commenters said in the proposed regulation, EPA is proposing to impose an emission standard rather than a guideline, by mandating a 30% reducti on in emissions from all fossil fuel existing sources by 2030 by setting state emission rate requ irements that cannot be changed, and by prohibiting states from using 40 C.F.R. Section 60. 24(f) when necessary. Commenters said the EPA expressly emphasizes that the state emission li mit is not a goal but a minimum mandate that cannot be changed once the rule is finalized. (See e.g. 79 Fed. Reg. at 34898). Commenters said rather than provide a "guideline," as required by t he rule, therefore, EPA is proposing to establish a legally enforceable emission standard and has eli minated the states' ability to minimize the
effects on its fleet of EGUs.

Commenters said the EPA's calculation of the state goals impermissibly limits the states'
discretion and is error-ridden.260

Comment 16: Flexibility is critical. Rule is not as flexible as the EPA implies (building block by building block discussion)

Response 16: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters stressed the importance of state flexibi lity in the rule, and indicated that based on an examination of each of the building blocks as they relate to Colorado, the rule does not offer the degree of flexibility EPA implies. Commenters said that increasing performance in one building block may have the unintended consequence of decrea sing performance in another block.

Commenters said that it is critical that a final ru le maintain and not further dilute state flexibilit y. Commenters said that among other considerations, un certainties associated with the calculations utilized to derive the proposed goals, and ambiguit y surrounding the distinctions between these plans and traditional State Implementation Plans (S IPs), support affording states maximum flexibility in plan development and implementation.

Commenters said that in establishing the four build ing blocks, the EPA recognized the operational differences between EGUs and explained that while states may not be able to achieve projected reductions in any given building block, s tates may be able to make up that difference by securing more reductions in another building blo ck. Commenters said that Colorado closely evaluated the state goal calculation methodology an d the reductions that would be needed for Colorado to meet its proposed 2030 goal. Commenters said that as a result of that analysis, Colorado is concerned that there may be less flexib ility for Colorado than the EPA believes. Commenters noted that for example, increasing perfo rmance in one building block may have the unintended consequence of decreasing performance in another building block.

Building Block 1 - due to past efforts difficult to attain, re-dispatch makes investment risky, parasitic load decreasing efficiency. Commenters s aid that under Building Block 1 - Coal-Fired Steam EGUs' Heat Rate Improvement (HRI), the EPA se ts a national average of 6% efficiency improvements, and cites technologies and work pract ices that can be used to realize this goal. Commenters said that on the whole, Colorado coal-fi red EGUs have already implemented a number of these technologies and work practices to realize energy efficiency. Commenters said that while there may be additional projects to purs ue, these would likely occur at some of our smaller units. Commenters said that the implication is that the larger units cannot secure 6% reductions on top of those already implemented prio r to 2012, and any projects at smaller units would not be enough to achieve an overall average o f 6%. Commenters noted that considering the drive to re-dispatch to lower carbon intensity generation by 2020 (or even 2030), coal-fired EGUs may not realize a reasonable return on such in vestments - this would make it difficult to financially justify additional HRI investments. Com menters noted that further, several coal EGUs will be installing additional pollution contro ls associated with the CACJA and Regional261

Haze requirements, and this will increase the paras itic load that reduces net generation at the EGU, which will work against HRI efforts.

Most decisions regarding additional resource throug h interim goal have already been made

. Commenters indicated that the Public Utility Commis sion (PUC) in Colorado has exclusive statutory authority to evaluate and approve additio nal generation and decommissioning of existing power plants through the resource planning process for Colorado's two investor-owned utilities, or about 60% of our state's electricity load. Commenters said that the PUC also has authority over demand side management (DSM), renewa ble energy standard (RES), transmission, and distribution. Commenters noted th at decisions regarding additional resources through the interim goal of 2020 have already been made. Commenters said that in the recently completed Electric Resource Plan (ERP), the PUC app roved an additional 450 megawatts of wind and 170 megawatts of utility scale solar to th e existing generation of the state's largest investor owned utility, and established DSM goals t hrough 2020. Therefore, commenters said, decisions about acquisition of zero-carbon sources, decommissioning of coal units, use of natural gas units, and energy efficiency for as the majorit y of resources have been made through 2020. Commenters said however, Blocks 2, 3, and 4 could i nterfere with PUC authority, and interrupt the carefully constructed CO2 reduction trajectory of Colorado's IOUs.

Building Block 2. Commenters said that under Build ing Block 2 - Re-Dispatch to Lower Carbon Intensity Generation, the EPA applies a national av erage capacity factor of 70%, to realize a shift from more carbon intensive coal-fired generation to less carbon intensive natural gas-generation. Commenters said Colorado has concerns relating to b oth the nameplate capacities used to determine the actual generation capacity, and the 7 0% capacity factor itself.

Shouldn't use nameplate capacity

. Commenters said that first, the capacity factors reported via the Energy Information Agency's Form 860 with respe ct to natural gas combined cycle turbines may not be representative of their actual operating capacity. Commenters said that the instructions for this form apparently require the r eporting of the highest nameplate capacity, and not the maximum operating capacity given operationa l limiting factors, such as the maximum output of equipment feeding steam turbines. Comment ers noted that it also appears that EGU's may have inconsistently reported these numbers to t he EIA. Commenters said that this leads to an overestimation of the potential generating capac ity from the start. Commenters said that to
address this issue and ensure that more realistic a nd accurate information is used, Colorado suggests that the EPA use the average of the report ed summer and winter generation reported on the same Form 860 to determine actual generating ca pacity.

70% re-dispatch is unrealistic. Commenters said th at second, 70% re-dispatch may be overly ambitious and not be technically feasible. Commente rs said that the growth of natural gas capacity has been necessitated in part by the growt h of renewable energy. Commenters stated that many existing turbines operate in standby mode to backup intermittent renewable energy sources when the wind dies down, or the sun is obsc ured. Commenters stressed that these turbines are critical to electric reliability. Comm enters noted that many existing turbines were never designed to operate continuously under load, as proposed in the EPA's rule, and this directly affects the remaining useful life of those existing turbines. Commenters said that in Colorado, many of these turbines were generally ins talled in proximity to current transmission lines. Commenters said, however, there are transmis sion line capacity limitations that may not262

support the power generated simultaneously from eff orts to re-dispatch to natural gas turbines and increase renewable energy generation. Commenter s stated that this may be an issue in supporting re-dispatch from existing units as well as transmission needs for new units post 2020. Commenters noted that installing additional transmi ssion lines is a resource intensive process that involves getting approval from multiple author ities and can take years, and noted that recent efforts to expand transmission in the West have bee n limited by Endangered Species Act requirements. Commenters stated that without the pr oper transmission lines, increased operation of turbines could cause reliability issues.

Non-attainment area operational limits. Commenters indicated that many of Colorado's existing
turbines are located in an 8-hour Ozone Nonattainme nt Area, and as such have accepted operational limits far below the maximum generating capacity. Commenters noted that renegotiating those permit limits or installing new turbines to increase operating limits may not be feasible. Commenters added that these challenges will only increase if, as expected, EPA
lowers the ozone standard. Commenters said that in those cases where the operator was able to renegotiate the permit limits, the modified permit would likely have to demonstrate compliance with the recent 1-hour NOx standard, which could in volve complex and stringent modeling.

Commenters indicated that for all of these reasons, it appears that it is not technically feasible for all existing turbines to be ramped up to 70% capaci ty factor, or to be significantly ramped up by 2020. Commenters said that to help address these co ncerns, Colorado supports the glide path approach discussed in EPA's NODA to phase in dispat ch changes over time, including those that occur prior to 2020. Commenters said that Colorado could also support a reasonable, "minimum floor" for natural gas dispatch as proposed in the NODA, in order to address equity issues amongst the states.

Commenters said that if Colorado cannot meet the pr oposed national average of 6% heat rate improvement and 70% re-dispatch to natural gas turb ines, it becomes more difficult to make up those differences by means of Building Block 3 - Re -Dispatch to Renewable Sources, and Building Block 4 - DSM/Energy Efficiency.

Use of regional average of RE effectively requires states that have invested heavily in RE to invest more. Commenters said Building Block 3 - Co lorado implemented a RES beginning in 2005, which increased Colorado's annual generation from non-hydropower renewable sources from 811,000 MWh to 6,192,082 MWh in 2012. Commente rs stated that renewable energy has grown in Colorado at a faster rate than many other states in the region. Commenters added that in terms of capacity, Colorado increased utility-scale renewable generation from 250 MW to 2,415 MW during that period. Commenters said, however, Co lorado is precluded from taking full credit for these reductions under the proposal. Com menters said that the EPA has stated that those reductions that have already or will occur pr ior to 2020 have been factored into the state goal computation. Commenters said however, the EPA uses a regional average of renewable generation in the West (a region already high in re newable generation) to arrive at an elevated renewable generation goal for western states. Comme nters stated that again, this approach effectively requires states that have already made significant investments in renewable generation to invest more. Commenters noted that mo reover, the significant CO2 emission reductions Colorado has realized through renewable sources may not be enough to offset the very real limitations of meeting other building blo cks.263

Don't get credit for early demand-side management p rojects; rate of return on newer projects is lower. Commenters said that under Building Block 4 - Colorado's EGUs have been and will continue implementing energy efficiency and DSM pro jects that reduce electric demand. Commenters said that investor-owned utilities (IOUs ) in Colorado have a statutory mandate through 2018 to conduct DSM with PUC oversight whic h has resulted in 1.7 million MWh of savings annually. Commenters said however, the EPA' s calculations do not provide credit for DSM programs until 2014, even though IOUs began ram ping up DSM programs as early as 2007. Commenters added that moreover, early efforts securing demand reductions may establish a de facto standard by 2020. Commenters said that C olorado's IOUs have noted that energy efficiency programs implemented since 2007 are matu ring such that the avoided energy per dollar appears to be declining. Commenters said tha t in response, the Colorado PUC recently flattened the energy efficiency targets for the sta te's largest IOU, establishing a 400 GWh per year goal for 2015 through 2018. Commenters said th at in addition, Colorado's IOUs are projecting lower retail sales growth than is assume d by EPA's model, and by 2020, this may make it more difficult to achieve the projected 1.5 % .annual reduction.

The EPA should provide flexibility to states to be able to take credit for voluntary EE programs and other measures outside traditional utility DSM projects. Commenters stated many of Colorado's municipal and electric coops have DSM pr ograms that are not mandated by state statute. Commenters stated these programs, as well as other statewide offerings, provide significant reductions in energy usage while outsid e of the traditional regulatory structure. For example, commenters added, Tri-State Generation and Transmission saved an estimated 580,174 MWh of energy in Colorado implementing DSM between 2005 and 2013. Commenters stated, the Colorado Energy Office also offers statewide en ergy efficiency programs, including managing a portfolio of energy performance contract s that produce energy savings of 141,779 MWh/yr. Commenters stated Colorado encourages EPA t o provide necessary flexibility to account for these and other voluntary DSM projects, including a broad range of efficiency measures outside of traditional utility DSM project s, such as locally adopted building codes, federal appliance standards, demand response, and d istribution system improvements.

Commenters said that collectively, the foregoing is sues call into question whether or not the state goals may be overly ambitious. Commenters added tha t regardless, there are undeniable constraints on the flexibility afforded Colorado in meeting the state goal. Commenters said that therefore, it is imperative that a final rule incre ase the flexibility afforded states in EPA's proposal.

Comment 17: The EPA should not include additional building blo cks as BSER - this would make the goals more stringent and reduce state comp liance flexibility.

Response 17: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.264

The following are summaries of the specific public comments under this comment:

Commenters said while not every element of the prop osed BSER is reasonable for a given state, the amount of flexibility offered in compliance pla ns may allow states to meet the overall goals by either over-achieving on other Building Blocks o r adding new elements not considered as
BSER. Commenters said if EPA considers additional e lements in defining the BSER, significant new analysis would be required regarding costs and benefits. Commenters said while it may be appropriate for a state to substitute one of the su ggested additional components for one of the original Building Blocks, it would not be appropria te for EPA to do so if the result is a more stringent goal than states had the opportunity to c omment upon. Commenters said the EPA correctly noted that carbon capture and storage is too costly to consider on a retrofit basis and should not be considered as BSER for existing facil ities, as control cost must be considered when determining BSER, in accordance with CAA section 11 1(a).

Comment 18: State regulatory reform will require plan flexibil ity

Response 18: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters indicated that the EPA should learn from some states that are already reinventing their utility sector. Commenters said that at the f orefront is the New York state effort called Reforming the Energy Vision (REV) creating regulato ry changes that promote more efficient use of energy, increase renewable energy generation fro m wind and solar, wider deployment of DERs such as microgrids, on-site power sources and storage. Commenters said that following
close behind New York are other Northeastern states redoing their regulatory framework for
electric utilities. Commenters indicated these stat e reforms may require greater flexibility and ability to quickly modify utility operations while the EPA rules might be less nimble and ready for change. Commenters suggested that the federal g overnment could learn a lesson from these
eastern states that have been clear that the new en ergy system must unlock markets, spur innovation, modernize the grid, empower customers, and have forward looking and outcome based regulation and rate structures. Commenters sa id the critical bottom line is that the federal rules not be an impediment to electrical utility en ergy sector reform.

Commenters said the proposed rule must allow broad flexibility in compliance measures allowed to achieve goals as well as enable states and utili ties to develop plans that best complement established regional energy market systems. Comment ers said another flexibility that EPA should provide to affected sources is the ability t o update state plans with changes with respect to the mix and amount of various compliance measures a pplied. Commenters said this will encourage technological innovation and creativity i n pursuing solutions that likely would result
in more cost effective and/or efficient carbon redu ctions.265

Comment 19: North Carolina illustrates how states could benefi t from the flexibility proposed in
the CPP

Response 19: The EPA agrees with the comments that the final ru le provides flexibilities to
states. States are allowed to use the BSER measures , or other measures in their state plans to comply with the goals; there are flexibilities with in the BSER measures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for m ore information.

The following are summaries of the specific public comments under this comment:

Commenters said North Carolina, home to the country 's largest electric utility, illustrates how states could benefit from the flexibility proposed in the Clean Power Plan. The commenters said the plan would allow North Carolina to get credit f or steps it already has taken to grow clean energy and invest in energy efficiency.

Commenters said North Carolina has an energy effici ency policy that allows utilities to earn a fair return when they make energy efficiency invest ments, rather than build new traditional power plants. The commenters said North Carolina al so has a renewables portfolio standard that requires investor-owned utilities to increase their mix of clean energy and energy efficiency resources to 12.5 percent by 2021.

Commenters said the proposed rule will give states the flexibility to design a plan that takes into account its unique strengths and challenges, and de scribes the options available to North
Carolina to illustrate. Commenters said for the sta te of North Carolina, the Congressional
Research Service has calculated that an increased u se of existing natural gas units, energy efficiency improvements and increases in renewable energy generation, respectively, will result in the greatest emission rate reductions. Commenter s said while some commenters may argue that difficulties in achieving emissions reductions particular to one specific building block will render the proposed rule flawed, the ability for st ates to design plans based on any measure or combination of measures provides the flexibility fo r states and utilities to meet emission reduction goals in the most efficient and cost-effe ctive manner.

Commenters said for example, any difficulty in achi eving reductions through efficiency improvements at fossil fuel-fired power plants can be mitigated by planning for and achieving greater reductions in the other building blocks or alternative programs. Commenters said efficiency improvements at fossil fuel-fired units in North Carolina are estimated to result in a five percent emission rate reduction - less than ea ch of the remaining three building blocks. Commenters said under the proposed rule, North Caro lina would have the flexibility to consider
this and other information and shift the focus of i ts implementation plan to the three remaining building blocks. Commenters said North Carolina has great potential for gains in renewable energy generation and energy efficiency, and allowi ng the state to incorporate that potential into its implementation plan will provide the flexibilit y needed to readily achieve, and likely exceed, the state-specific goal established in the proposed rule.266

Comment 20: The EPA must clarify in the final rule that states can satisfy their respective carbon emission reduction or target standards by se curing methane emission reductions from natural gas distribution facilities

Response 20: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Compliance measures can be outside BSER. Commenters said the EPA has repeatedly stated in the context of the development and publication of t he proposed CPP that states are not required to implement the four building blocks to satisfy th e GHG performance goals. (See, e.g., 79 Fed. Reg. at 34835 (states may "choose to include measur es (in their state plans) that were not part of the EPA's BSER determination, as long as the state achieves the CO2 reductions at affected EGUs necessary to meet the goal that EPA has define d as representing the BSER." (emphasis added))) Commenters said these statements properly distinguish between the factors considered by EPA in determining BSER for the source category and the alternative compliance methodologies available to the states in ensuring t he application of BSER-equivalent performance by the regulated sources.

Natural gas distribution system methane reductions to satisfy goals. Commenters said Section 111(d) allows the flexibility afforded to states in developing compliance plans to include measures that satisfy the performance standards ref lective of EPA's BSER determination, and this includes reducing methane emissions from natur al gas distribution systems. Commenters
said to the extent that a state can ensure that red uctions in GHG emissions (in this case, methane) accomplished through an aggressive program to limit leaks from natural gas distribution for onsite energy generation can meet all regulatory stan dards for creditable emission reductions, state plans must include provisions which authorize affec ted EGU sources to secure GHG reductions through such efforts. Commenters said in such case, the affected EGUs would be obligated to
ensure that methane emission reductions achieved in this manner, including by third party entities not subject to the Emission Guidelines, sa tisfy criteria for permanent, enforceable, surplus and quantifiable emission reductions.

Commenters said additionally, natural gas distribut ion facilities have a significant nexus to the regulated source category under this rulemaking - E GUs - as utilities in many states own or operate local distribution companies ("LDCs") and a re, therefore, in a position to implement
GHG emission reduction measures from such sources.

Emissions and emissions reductions from natural gas distribution systems. Commenters said controlling methane emissions from the natural gas distribution sector could result in significant
reductions in GHG emissions. Commenters said methan e emissions associated with natural gas transportation and storage accounted for about 130 million metric tons of U.S. GHG emissions in 2012, or roughly 2% of all U.S. GHG emissions. (See EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2012). Commenters said na tural gas distribution systems alone were267

responsible for nearly 26 million metric tons of GH G emissions. (Id). Commenters said the number of customers using natural gas has grown ste adily since 1990, with 600,000 miles of additional piping added since that time to accommod ate increased demand. Commenters said methane emissions from natural gas distribution sys tems are likely to increase, as consumer demand for natural gas is expected to continue to r ise as North American natural gas reserves are further developed. Commenters said further, the CPP itself will likely lead to greater demand for natural gas, thereby adding to the length of piping comprising the natural gas distribution system, and increasing the potential for methane emissions. Commenters said given the significant global warming properties of methane, the reduction in emi ssions from natural gas distribution systems may materially contribute to the reduction in GHG e missions sought through this rulemaking.

Commenters said PSEG's experience in reducing metha ne emissions from its LDC demonstrates the potential positive climate impacts of reducing GHG emissions from natural gas distribution systems. Commenters said PSEG has reduced its LDC m ethane emissions by 31% since 2000. Commenters said in 2013 alone, PSEG's efforts resul ted in a reduction of roughly 14,294 tons of CO2e from the PSEG-owned gas distribution pipeline network. Commenters said additional methane reduction opportunities exist within PSEG's distribution system, as methane emissions accounted for roughly five percent of PSEG's calcul ated 2013 GHG emissions.

EPA action required. Commenters said for the forego ing reasons, EPA should clarify in the final rule that states may include in their compliance pl ans opportunities for affected EGUs to satisfy their respective carbon emission reduction or targe t standards by securing methane emission reductions from natural gas distribution facilities , where such emission reductions can be demonstrated to be permanent, surplus, quantifiable and enforceable

Comment 21: The EPA must provide more guidance to States on sp ecific emission reduction options and various issues and flexibility

Response 21: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information. The EPA will work with the States and provide as much guidance in the state plan development as nece ssary.

The following are summaries of the specific public comments under this comment:

Several commenters requested additional guidance fr om the EPA regarding specific emission reduction options and issues as well as flexibility

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Commenters indicated that some state policies to en courage advanced energy, such as RPS and energy efficiency resource standards, are familiar to many states, and the Proposed Rule provides a clear signal that they will be approved if incorp orated into state compliance plans. Commenters said, however, that without additional guidance fro m EPA, states may be reluctant to adopt other creative, cost effective emission reduction policie s that take full advantage of advanced energy technologies. Commenters were concerned that withou t specific guidance as to how to268

incorporate these technologies, states may not do s o. Commenters also stressed it is important that the EPA provide guidance to ensure that regula tory uncertainty does not inhibit incorporation of combined heat and power into State plans.

Therefore, commenters indicated that to balance the need for flexibility with the benefits of certainty, EPA should provide as much specific guid ance as possible on approvable measures and policies, while reiterating and making clear th at additional measures and policies can be approved even if not specifically named in the Clea n Power Plan. Commenters stated this guidance should contain as many default approvable policies as possible and criteria on which additional state policies will be evaluated. In ad dition, commenters requested additional EPA guidance on how states may account for the emission reduction benefits of advanced technologies.

Commenters also stated that the EPA should give som e indication as to what would qualify as allowable compliance methods in addition to BB1 thr ough BB4. Commenters suggested that as an example, transmission and distribution projects that reduce system losses should be allowed as an option for compliance, and the EPA should inc lude this flexibility as part of the final rule.

Commenters stated that there are many readily-avail able clean energy technologies, resources, and practices that can be used by states to reduce GHG emissions. Commenters stated that the EPA should affirmatively indicate that technologies , resources, and practices that are not included in the Building Blocks can be eligible as compliance options for states. Commenters
said that this is essential to ensure that all viab le clean energy technology options are considered.

Commenters supported the flexibility that would all ow states to "include measures in their plans beyond those that the EPA included in its determina tion of the BSER", and indicated the final rule should retain this flexibility for states. Co mmenters indicated that many states are experiencing increased implementation of Distribute d Generation ("DG") resources, particularly adoption of roof top solar installations in residen tial markets. Commenters stated that the EPA should explicitly recognize DG and other emerging t echnologies as eligible resources for demonstrating compliance with state plans and targe ts.

Commenters indicated that the EPA should clarify th at states may choose to include new NGCC units in their 111(d) compliance plans. Commenters supported the EPA's indications that new NGCC units, constructed in compliance with Section 111(b), may also be included in states' Section 111(d) compliance plans. Commenters said th at the EPA should confirm in the final rule that states have the flexibility to include new NGC C units in their compliance plans. Commenters said the EPA should also clarify when, i f ever, NGCC units built after the effective date of the 111(d) rule, but not immediately includ ed in 111(d) compliance plans may be subject to that rule rather than 111(b) and how the emissio ns from those units will be treated within the state goals. Commenters said these clarifications a re necessary in order for states to adequately develop Section 111(d) compliance plans.

Commenters supported the proposed rule's flexibilit y, but indicated that the extraordinary amount of deference provided to states under the pr oposed rule is likely to create uncertainty with state regulators. Commenters said that waste- to-energy (WTE) is a valuable renewable energy resource that may be used as a compliance to ol, and that to provide clear guidance, the269

EPA should clarify that every megawatt hour generat ed by WTE facilities can be used toward reducing emissions from affected electric generatin g units in a state plan. Commenters said that by taking this step, the EPA will provide clarity t hat the treatment of WTE in state plans can continue to reflect federal and state renewable pro grams and policies, while providing states with greater compliance flexibility and ensuring a robus t mix of renewable energy technologies. Commenters added that because WTE prevents the gene ration of methane from waste otherwise destined for landfills, the co-benefit of reducing methane is also captured. Commenters indicated that the EPA has previously concluded that every to n of waste managed at a WTE facility actually reduces overall GHG emissions by one ton o f carbon dioxide equivalents.

Commenters said the flexibility afforded to states must be better defined. Commenters said in order for the proposed rule to be fully evaluated, even the framework of flexibility afforded to
the states must be defined. Commenters said leavin g the SIP requirements open does help with flexibility, but also carries with it uncertainty. Commenters said that specificity in defining SIP "bookends" will not lessen flexibility, but will gi ve more meaning to it, with a clearer understanding of expectations for SIP approval.

Comment 22: The EPA should specify minimum criteria or require ments for each policy approach (rate based vs. mass based, source-based v s. state commitment approach, etc.) in order to ensure consistent enforceability. The EPA shoul d provide one or even several model plans, or components of model plans that states could adopt.

Response 22: The final rule provides flexibilities to states to comply with the mass-based or rate-based goals. The EPA will work with the states to provide any guidance necessary during the state plan development. The EPA has converted the rate-based goals to mass-based goals. See section VII of the final rule preamble of the C PP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule support ing the final CPP for the final massbased goals.

The following are summaries of the specific public comments under this comment:

Flexibility can cause difficulties with verifiabili ty and enforceability. Commenters applauded the flexibility that the proposed regulation gives stat es, and in particular expressed support for EPA's
decision to allow states to convert from rate-based targets to mass-based targets. Commenters said however, the flexibility given to each state i n developing its own plan does create some potential difficulties with respect to the verifiab ility and enforceability. Commenters said it will
be difficult to ensure that conversions are done in a way that is accurate and is consistent from state to state, so the EPA's final rule must provid e a clear discussion of how it will ensure consistency and enforceability in the instance of r ate to mass conversions.

Rate-based approach. Commenters said in states that choose to adopt a rate-based approach, enforcement and verification can be done by ensurin g that each power plant keeps its emissions below the target rate, or purchases the necessary c redits, or holds sufficient emission allowances if the state adopts a mass-based system. Commenters said the final rule should include a robust discussion of how the states could implement these types of systems and ensure that, along with270

each source meeting its emissions targets, the stat e achieves the overall reductions required on the specified time-frame.

Mass-based approach. Commenters said alternatively, states that take a mass-based approach must incorporate into their plans an enforceable me chanism that applies to the regulated sources and ensures that any shortfall in emissions reducti ons will ultimately be remedied, again within the specified time-frame. Commenters said in both c ases (rate-based approach or mass-based approach) the EPA should define minimum requirement s that will ensure verifiable and
enforceable emission reductions.

Model plans and minimum criteria or requirements. C ommenters urged the EPA to provide one or even several model plans, or components of model plans that states could adopt. Commenters said further, the EPA should specify minimum criter ia or requirements for each policy approach (rate based vs. mass based, source-based vs. state commitment approach, etc.) in order to ensure consistent enforceability. Commenters encouraged th e EPA to emphasize model plans or model components of plans that most facilitate the use of renewable energy and energy efficiency measures to achieve reduction targets. Commenters s aid finally, the EPA should also provide a model plan or model plan components for states that wish to cooperate with other states or enter into multistate agreements in order to meet their t argets.

Comment 23: The EPA should not write guidance which restricts flexibility, and should broaden its scope of sequestering carbon dioxide

Response 23: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information. See secti ons VIII for more information about the application of carbon capture and sequestration.

The following are summaries of the specific public comments under this comment:

EPA should not write guidance which restricts flexi bility. Commenters said the EPA repeatedly states in the preamble that EPA will allow states t o use different tools to demonstrate compliance. Commenters said in some cases, EPA soli cits comments on whether it should restrict that flexibility and write guidance that l imits states. Commenters said for example, on page 34921, EPA solicits comments on whether EPA sh ould allow a broad range of renewable energy and demand-side energy efficiency measures a nd programs in demonstrating compliance or write guidance to limit it to certain well-estab lished programs. Commenters said because South Dakota is already on a path of increasing ren ewable energy without EPA mandates, we strongly suggest that EPA give states flexibility a nd not write guidance which restricts flexibility.

EPA should broaden scope of sequestering CO2. Comme nters said on page 34897 of the preamble, EPA requests comments on whether carbon d ioxide emission reductions associated with other measures not currently included in any o f the four proposed building blocks be included in the state goals. Commenters said South Dakota recommends EPA broaden its scope271

of sequestering carbon dioxide. Commenters said for example, EPA should allow states to use distributed generation, which is power generated at the point of consumption and reduces power demand from electric utilities and cooperatives, an d certain farming practices along with wetland, grassland, and forest preservation practic es in meeting the state's goal. Commenters said although the farming practices are not directly rel ated to the production of electricity, these practices reduce carbon dioxide, which is the goal of EPA's proposal

Comment 24: Each state's goal reflects its unique conditions

Response 24: The EPA agrees with the comment that each state’s goal reflects its unique conditions and that the final rule provides flexibi lity to the states to comply with the rule.

The following are summaries of the specific public comments under this comment:

Commenters said the proposed rule provides flexibil ity and the goals reflect the unique conditions of each state. Commenters said the prop osed rule provides states the flexibility to consider a broad range of compliance options that r ecognize that the power sector is made up of a diverse range of companies that own and operate f ossil fuel-fired EGUs, including vertically integrated companies in regulated markets, independ ent power producers, rural cooperatives and municipally-owned utilities, all of which are likel y to have different ranges of opportunities to reduce GHG emissions while facing different challen ges in meeting these reductions. Commenters said in addition, in calculating each st ate's CO2 goal, EPA took into consideration the state's fuel mix, its electricity market and nu merous other factors, and thus, each state's goal reflects its unique conditions. Commenters said eac h state will have the flexibility to design a program to meet its emissions goal in a manner that reflects its particular circumstances and energy and environmental policy objectives. Comment ers said States will be able to address the economic interests of their utilities and ratepayer s by using the flexibilities in this proposed rule to reduce costs to consumers, minimize stranded ass ets, and spur private investments in renewable energy and energy efficiency technologies and businesses.

Comment 25: Need guidance regarding how to deal with deregulat ed electric sectors using a mass-based plan

Response 25: See section VIII of the final rule preamble of the CPP for a discussion of a state’s flexibility in submitting state plans and assigning emision rates or mass limits to sources.

The following are summaries of the specific public comments under this comment:

Commenters said that the USEPA should be aware that in some states, like Michigan, there are elements of the electric industry that are unregula ted and therefore a number of load-serving entities (LSEs) or independent power producers (IPP s) do not fall under the jurisdiction of the
Commission. Commenters said that the Commission can not use its regulatory authority to bring the operations and cost recovery of these entities into alignment with a state plan that uses a mass-based approach. Commenters said that in fact, it is unclear how such entities could be272

included in a mass-based state plan. Commenters ind icated that the MDEQ can put some CO2 emissions stipulations into permits that would infl uence the LSEs' plant operations in a ratebased plan. Commenters said that the USEPA should p rovide guidance for states that have partially or fully deregulated electric sectors on how such states could comply with their Section 111(d) emission reduction obligations in a mass-bas ed plan. Commenters added that a similar situation occurs with municipal utilities, which ru n primarily coal-fired plants. Commenters noted that the Commission has no regulatory authori ty over their operations or cost recovery; therefore, it is difficult to envision how such uti lities could be included in a mass-based state plan.

Comment 26: Deregulated market concerns - the EPA should work with states to encourage market reform as part of compliance with the CPP

Response 26: This final rule is consistent with both regulated and de-regulated markets. Market
structure is a choice for individual states made we ll outside the confines of this final rule.

The following are summaries of the specific public comments under this comment:

Commenters said the proposed CPP would potentially reach the entire spectrum of energy policy. Commenters said before proceeding with a p roposal that seeks to transform the electric generation system, EPA must more carefully and thor oughly evaluate its proposed CPP in light of the numerous, complex electricity market design considerations that are implicated by the proposal.

Commenters said Dynegy, as an independent power pro ducer, operates solely in the deregulated markets, with no captive customers or rate base fro m which to recover the costs of compliance with environmental or other requirements. Commenter s said therefore, the markets in which Dynegy operates must be appropriately designed to p rovide a level playing field and prevent
interference that undermines the markets.

Commenters said for example, Illinois is one of the few multi-independent system operator ("ISO") states in the country (i.e., Illinois is se rved by both MISO and PJM), and no other state is split so dramatically on a geographic or generation basis. Commenters said without significant capacity market design changes in the MISO market r egions (southern and central Illinois), it is unlikely that sufficient revenue will be generated for power plants to make the necessary investments in equipment upgrades that would help t he state achieve its CO2 targets.
Commenters said the market disconnect between MISO and PJM in how the two RTOs compensate generators for capacity is substantial - in the last PJM capacity auction, a 500 MW power plant in PJM would have received $22 million in capacity payments. Commenters said in contrast, under the last MISO capacity auction, a s imilarly-situated plant in the MISO region of Illinois would have received only $3 million in cap acity payments, or approximately 14% of what the similarly-situated plant located in PJM re ceived. Commenters said this disconnect means that investment required for heat rate improv ements and other carbon-reduction approaches will not be economically justifiable in southern/central Illinois and, as a result, the only compliance option will be plant retirements. C ommenters said therefore, EPA should work273

with the states, including Illinois, to encourage m arket reform as part of compliance with the
CPP.

Commenters stated that to ensure fairness and accur acy, EPA should reconstruct BSER calculations based on the differing market dynamics in each state. Commenters said setting an accurate state specific rate requires such attentio n to detail.

Commenters stated as a general comment, that FE bel ieves that the rule is faulty in that while EPA relied on the fact the electric system is an in ter-connected system and thus requires an interdependent approach laid out in the proposal, E PA then developed specific BSER building blocks as independent silos without calculating the ir interconnectivity.

Comment 27: Rule should not limit diversity of technologies; m isc.

Response 27: This final rule does not limit diversity of genera tion technologies. The final rule RIA suggests the technology diversity in the genera tion portfolio will become more diverse in response to the policy. Moreover, states/sources h ave the flexibility to discuss a variety of abatement technologies to achieve emission reductio ns and demonstrate compliance with the 111(d) requirements as discussed in section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Maintain diversity. Commenters stated that the fina l rule should not place a limit on the diversity of technologies, as future advancements cannot be p redicted, and should be applied to all sources of emissions in order to ensure that climate change goals are achieved in the most cost effective, timely and efficient manner for each state.

Commenters said the final rule should be constructe d to give states sufficient flexibility to foster a diverse power supply, including continued use of coal-fired power plants. The commenters said a diverse power supply can shield electricity consu mers from fuel disruptions and price spikes. Commenters said this can be achieved by permitting states to develop provisions that recognize
the inherent differences between different kinds of electric generating units, including the difference between coal-fired power plants and natu ral gas-fired power plants.

Commenters supported the broad flexibility that EPA proposes to grant states to develop emission performance standards on either a rate bas is or to convert that rate-based goal to a mass-based equivalent.

Comment 28: Proposed regulation provides flexibility to the st ates.

Response 28: The EPA agrees with the commenters that the final rule provides flexibility to
states. See sections V.A and VIII.A. of the final r ule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:274

Several commenters stated that under the proposed r ule states have substantial flexibility in developing their compliance plans.

Commenters stated that the EPA has taken a technolo gy neutral stance to compliance, and that the flexibility of the rule allows states to choose among the full range of advanced energy technologies in order to meet their targets. Comme nters commended the EPA for providing states broad flexibility in crafting compliance pla ns that work for their particular circumstances. Commenters said with a wide range of advanced energ y technologies and services at their disposal, states can develop plans to meet EPA's ca rbon emission standards that will be vehicles for creating a higher performing electric power sys tem for all customers. Commenters said deploying advanced energy technologies and services will create jobs and stimulate economic growth from investments in modernizing the electric power system. Commenters said new consumer value will be created in a long-stagnant e lectricity sector by introducing competition, choice, and innovation for new products and service s, both known today and not yet imagined. Commenters said and because advanced energy technol ogical development continues at a rapid pace, flexibility will allow states to utilize new technologies and mechanisms as they are developed over the course of the next 16 years. Com menters also commended EPA for allowing a range of readily available market-tested "beyond the fence line" measures for compliance.

Commenters also supported the flexibility the EPA p roposes to provide states in crafting plans to achieve compliance with the targets, which they ind icate is consistent with key principles of cooperative federalism and the successful history o f the CAA. Commenters said the EPA correctly proposed state-specific emission targets under CAA Section 111(d), while, at the same time, recognizing that states and regions with the experience and authority to regulate energy markets and implement clean energy and energy effic iency programs are in the best position to determine the most cost-effective way to achieve th e required emission reductions. Commenters said moreover, states and regions have the ability to coordinate across state agencies, work with independent system operators/regional transmission organizations (ISOs/RTOs), and solicit input
from stakeholders.

Several commenters said the proposed regulation pro vides substantial flexibility to states to
determine the most cost-effective means to meet the applicable target based on the specific resources and opportunities in a state. Commenters said as long as a state can demonstrate that its compliance choices can achieve its applicable e mission reduction level, the EPA appropriately proposes to recognize those measures as compliance options. Commenters urged the EPA to encourage market-based programs such as the Regional Greenhouse Gas Initiative or the California Global Warming Solutions Act program . Commenters said the electric power sector is the most capital-intensive industry in th e U.S., and experience has shown that flexible, market-based solutions have been highly effective a nd cost-effective in transitioning to cleaner energy technologies.

Commenters said that in the proposed regulation the EPA appropriately defers to the states to design plans that meet the Agency's goals, and emph asized that only states truly understand their own energy systems, and said the EPA has appropriat ely given states broad latitude to use all the
tools available to them to reduce emissions.275

Commenters said the proposal gives states wide lati tude to identify their overall compliance strategies in response to their local circumstances , and incentivizes state participation in multistate approaches by offering an additional year for compliance to states that elect to adopt a multi-state approach. Commenters added affected pow er plants also have a decade to comply
with the new standard.

Commenters said the rule permits each state to craf t a compliance plan that is tailored to the specifics of its local and regional economy that wi ll protect existing jobs while reducing emissions, and that can create opportunities to gro w new jobs, encourage investment, and jump start new technologies. The commenters also said th e proposed rule allows a state with multiple coal plants to encourage improvements in both suppl y and demand. The commenters said technological changes can increase the supply of po wer produced by each ton of coal, and boosting end use energy efficient tools will reduce demand for electricity during peak hours.

Commenters said the CPP offer a common sense, flexi ble, and achievable way to protect the health of our communities and address the impact of climate on our world. The commenters also said there is evidence showing that it's a good inv estment, and the CPP allows state to design plans that best fit our regional economies, and mix es of energy sources.

Commenters discussed the flexibility the proposed r egulation offers states regarding Building Block 1. Commenters indicated that the proposal do esn't mandate that every state or every coalfired EGU engage the 6 percent HRI as a compliance strategy and rather allows the states to forgo this building block altogether. Commenters i ndicated that because the Clean Power Plan allows a state to demonstrate compliance through an y number of pathways, which may not even include and HRI investment strategy, the 6 percent HRI assumption should be retained in the
final Clean Power Plan.

Comment 29: Flexibility of regulation allows states to choose most economical approach, and such flexibility encourages innovation and makes in dustry more competitive.

Response 29: The EPA appreciates the supportive comments and ag rees that the final rule provides flexibility to states and affected EGUs.

The following are summaries of the specific public comments under this comment:

Commenters said the Clean Power Plan is flexible, g iving states many opportunities to meet their goals. The commenters said each state gets a targe t based on its existing resources and progress to date, but can comply by selecting from many of v arious different options. The commenters said this flexibility lets each state choose the mo st economical approach for its electricity customers considering available resources, economic potential, and more human impacts such as jobs, environmental justice, and the enormous publi c health benefits of reducing carbon and other air pollutants.

Commenters said although they trust in the power of technology, they have learned that it is actually policy and regulations that drive innovati on. The commenters said studies have found
that flexible standards like the Clean Power Plan w ill drive businesses to be more competitive276

globally and at home. The commenters said the Indu stry Studies Association found that strict car pollution standards for carbon monoxide and hydroca rbons in the 70s incentivized US auto makers to innovate, making them more competitive th an many overseas manufacturers.

Commenters said giving states flexibility allows th em to determine how best to reduce emissions in ways that are tailored to the interests of the l ocal regional economies to protect existing jobs while reducing emissions to create opportunities to grow good new jobs, to encourage investment, and to catalyze innovation.

Commenters urged EPA to maintain the flexibility fo r states to achieve the required emission reductions in the most economic means possible. Co mmenters said this flexibility will unleash innovation through technological advancement and sm art policies.

Comment 30: Plan does provide flexibility, but flexibility can be abused and can be a
disincentive for real action

Response 30: The EPA believes that providing flexibility to sta tes/source provides significant
benefit in terms of least cost reductions. Section VIII of the final rule preamble of the CPP outlines a robust set of standards for state plans and how they must demonstrate compliance with the rule’s BSER while utilizing alternative complia nce measures and the flexibility afforded
them.

The following are summaries of the specific public comments under this comment:

Commenters stressed that although some degree of fl exibility in the rule is good, flexibility should not override strong incentives for states to step up their game. Commenters worried that the CPP may give states too much flexibility.

Commenters expressed concern that the flexibility b uilt into the rule may create problems. The commenters said if the individual jurisdictions are going to have the authority and the responsibility for achieving the goals there's goin g to have to be an enforcement mechanism with teeth because we can expect some of the jurisdictio ns to be less than enthusiastic about pursuing this goal.

Commenters said the CPP gives states the flexibilit y to craft the best solution for their particular situation, which is often better than a one-size-fi ts-all federal directive, but cautioned that with flexibility comes the need for fair standards and c areful oversight. The commenters said that it is an unfortunate reality that the weaker the oversigh t, the more politicized the decision-making is likely to be. The commenters said since no state w ants to be subject to a federal implementation plan, the fact that the EPA is committed to impleme nting such a plan if states are unable to is one of the best ways to ensure meaningful state action.

Commenters said state flexibility is good, but caut ioned that the EPA oversight is needed to keep states on tract. The commenters said OH recently s caled back its alternative energy standards and strengthened wind power siting requirements, an d as a result two large wind energy277

producers scaled back plans for development in Ohio . The commenters said they fear if the states are left without standards or oversight, cle an energy production is doomed.

Commenters supported the proposed regulation but ex pressed concern that the states are being given way too much flexibility, and cannot be trust ed to enforce the regulation, and offered Pennsylvania as a case in point. Commenters said P ennsylvania Department of Environmental Resources has given the state over to the natural g as industry for the development of fracking, and is not protecting their environment. Commenters said Pennsylvania has seen reductions in carbon emissions over the past several years as a r esult of significant development of the state's shale gas resources. Commenters said recent experie nce indicates that Pennsylvania will need close oversight to ensure a good job is done develo ping and enforcing a compliance plan.

Commenters said Kentucky's Assistant Secretary for Climate Policy, John Lyons, recently stated that the average carbon emissions of Kentucky's fle et of coal fired power plants should meet the new standard by 2020 - because 11 coal boilers are already scheduled to be shut down because of EPA's air quality regulations. Commenters said so, in other words, Kentucky can meet the Clean Power Plan standards simply by continuing their pre sent course, with little incentives for
additional innovation.

Commenters said while the EPA standards call for 30 percent reduction in the nation's carbon emissions, Kentucky's specific goal is only 18.3 pe rcent. Commenters said they are already at the bottom, and our regulators don't want to do more - the flexibility is a disincentive for real action.

Commenters said Kentucky's progress to date allows it to remain at the very bottom of every indicator, from efficiency to clean power to protec tion of human health. Commenters said the
Clean Power Plan continues the subsidization of obs olete coal fired and nuclear power, making it
more difficult to move our state forward and to cle aner resources.

Commenters said that the state-specific plans may b e too flexible. Commenters said BSER is an ambiguous term with no precedent on how to interpre t this provision. Commenters said the ultimate interpretation is problematic because it i s sufficiently broad to include actions and restrictions that go beyond the fence line of exist ing power plants. Commenters said as such, states can include provisions in their plans to red uce carbon dioxide emissions from existing power plants, energy consumers, and other potential sources of carbon dioxide emissions such as combustion units at metalcasting facilities.

Comment 31: The EPA should establish an emissions trading bank

Response 31: States have the flexibility to coordinate establis h interstate systems if they so
choose as discussed in section VIII of the final ru le preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Several commenters supported the use of emissions t rading to reach targets.278

Commenters said that Massachusetts intends to rely primarily on the most well-tested and economically efficient strategy for reducing power plant emissions - the RGGI allowance trading program. Commenters highly recommended a similar ap proach in other states. Commenters said that in fact, they recommend that EPA explore the p ossibility of hosting or funding a third-party emissions trading bank that can allow interested st ates to "plug-and-play" in to a wider, more cost-effective market. Commenters said however, we also applaud EPA's recognition of other strategies that more directly target energy efficie ncy and clean energy, and urge EPA to ensure
that the final CPP allow states to take full advant age of these strategies. Commenters said that while accommodating a variety of flexible approache s, we urge EPA to ensure consistency between target setting and compliance formulas and measures throughout the rule to maintain the stringency of the rule as a whole.

Commenters encouraged the EPA to establish a bank f or RE to recognize early action and to ease planning in later years. Commenters said that lead ing RE states have received more stringent, more expensive state emissions mandates under the P roposed Rule, and that the proposed structure tends to punish states that have passed r enewable standards, built RE, and used NGCC plants to integrate RE. To fix this problem, commen ters proposed that the EPA incorporate a banking concept to credit early and ongoing RE deve lopment.

Commenters stated that the design set forth in thes e comments is only one among several possible designs for RE banking. Commenters indicat ed that under their concept, the EPA would first set a floor for banking eligibility of 1.5 ti mes the national average renewable generation in 2012. Commenters said that the national average in 2012 was 5.6%, so this floor would be 8.4%, and that only states that had renewable generation above that level would qualify for banking.
Commenters said these states would be allowed to ba nk all renewable generation that is above the 2012 leadership floor percentage for the years of 2017-2019.

Commenters said that States would be able to realiz e the value of the bank in later years of the program. Commenters proposed that, working in conju nction with the state-determined interim target period concept discussed elsewhere in their comments, states would have the option to "spend" their bank in the form of adding the banked renewable MWh into the denominator of their final targets from 2030-2034. Commenters said that after the bank is depleted, or by 2035, states would then be required to achieve the final target established in the Clean Power Plan. Commenters said that banking rewards renewable lead ership by deferring investments in the last increment of emissions reductions necessary to meet the final goal, but states would ultimately still be required to meet the same final goal. (Com menters said, however, if the EPA does not allow states to propose their own glide path to the 2030 target, banking becomes still more important as a means to alleviate some of the cost and other impacts of the interim targets.)

Commenters said the renewable banking concept offer s many benefits. Commenters said first, it would restore the message to states that early acti on on renewables will not be ignored - in fact, it would do so in a way that explicitly recognizes that the early reductions made by RE long before 2020 have real value under the program. Comm enters said that second, it would more fairly treat the utility customers who have funded proactive RE development. Commenters said third, the banking concept would create a new incen tive for implementation of new renewables prior to 2020, which may be critical for ongoing re newable development, especially if the current
set of federal tax subsidies for solar and wind is not renewed. Commenters said that banking279

accomplishes these objectives while maintaining the same total carbon loading to the atmosphere as required under the proposed rule; it provides re lief only to the extent that equivalent reductions occurred prior to the commencement of th e program. Commenters said that it recognizes early reduction actions taken long befor e the proposed rule would become binding. Commenters stated that the general concept of early reduction banking, and renewable banking in particular, enjoys the support of a broad set of stakeholders across the utility industry, environmental advocates, and renewable trade groups , and is raised by the EPA as an alternative in the proposed rule (79 Fed. Reg. at 34918-19).

Comment 32: Crediting early action

Response 32: See sections VI and VIII of the final rule preambl e of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Credit if go beyond target. Commenters indicated th at under the Clean Power Plan, states and companies that have already transitioned towards lo wer carbon and zero carbon energy and energy efficiency are closer to the full deployment of the BSER than others - and EPA should consider clarifying that states that go beyond thei r targets under the Clean Power Plan would receive credit for those actions under future updat ing of the carbon pollution standards for power plants. Commenters noted that in addition, the sta ndard only applies to fossil generators, so those states with less fossil generation in their s ystem mix will bear less cost.

Emission reductions in 2012-2020 timeframe. Several commenters said that the years between 2012 and 2020 present a distinct challenge. These commenters said that the EPA uses 2012 data on power sector infrastructure in assessing the pot ential for emission reductions to be secured under the best system of emission reduction during the 2020-2029 compliance period. These commenters suggested that crediting emission reduct ions secured between 2012 and 2020 would encourage states and companies to act earlier, movi ng emission reductions forward in time. These commenters noted that the potential to reduce carbon pollution during 2012 to 2020 was not taken into account in setting the state tar gets. These commenters said that as such, giving compliance credit to those actions taken during thi s time that would have happened regardless of the Clean Power Plan - take, for example, renewable energy deployed by a renewable energy standard in a state strongly committed to clean ene rgy - creates a bank of compliance credits that will be used by that state during the compliance pe riod in the place of other, beyond business-asusual emission reducing actions, and the overall em ission reductions achieved by the Clean Power Plan will be reduced by the same amount.

Several commenters suggested that states and compan ies can take advantage of the 5 years
between the finalization of the standards and the b eginning of the compliance period to gradually build out renewable generation and build up energy efficiency programs so that these resources are ready to deliver carbon reductions.

Crediting. Commenters said that if the EPA does dec ide to provide early action credit, we urge the Agency to ensure that such crediting does not e rode the environmental integrity of the Clean280

Power Plan by crediting business-as-usual actions. Commenters further said, crediting for early action should take place in the context of strength ened state targets that better reflect the full potential for emission reductions under the best sy stem of emission reduction, as discussed above with respect to each of the building blocks and the formula change.

Commenters said that it is naturally difficult to d etermine what electricity generation is avoided as a result of early actions that commence before t he start of the interim compliance period. Therefore, Commenters recommended that the EPA cred it such actions in a manner that does not
over-reward such actions and undermine the benefits of the Clean Power Plan. Commenters suggested that one possible approach that the EPA m ay wish to consider is comparing early action in states employing rate or mass based progr ams against the emissions standard for new natural gas plants under section 111(b), or the sta te's GHG emissions rate for the interim control period, whichever is lower. Commenters said that an other possible approach that could be used in conjunction with or in place of the first approa ch would be to credit states adopting massbased programs based on how much they reduce emissi ons below their approved cap for the interim compliance period.

Comment 33: Flexibility to use measures not defined within the BSER building blocks is critical; use of existing programs and measures sho uld be available to count towards compliance; rule should explicitly acknowledge application of r eductions from existing state plans beginning in 2013 to ensure early action is not penalized.

Response 33: See sections VI and VIII.B of the final rule pream ble of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Commenters said as proposed, the regulation allows states to include measures in the State Plans beyond those the EPA included in its determination of the BSER, and maintains that this flexibility is critical. Commenters said in the pr oposed rule, states may identify technologies or strategies that are not explicitly mentioned in any of the four building blocks and may use those technologies or strategies as part of their overall plans (e.g., market-based trading programs or construction of new natural combined cycle units or nuclear plants)." (79 Fed. Reg. at 34,837) Commenters said this acknowledgement of measures no t defined within the BSER building blocks is critical to maximizing the flexibility of states to achieve their reduction targets. Commenters also agreed that use of existing program s and measures should be available to reduce CO2 emissions from EGUs and help states meet their state targets. Commenters said the Proposed Rule should explicitly acknowledge the app lication of reductions from existing state plans beginning in 2013, because this would ensure that states already employing GHG reduction strategies are not penalized by their early actions

.
Commenters said the EPA proposes that states may su bmit compliance plans that include measures not specifically identified in EPA's BSER determination, and maintained that the use of non-BSER compliance options is an important flex ibility mechanism that allows states to design compliance plans that reflect the reduction opportunities available in a state.281

Commenters said the CPP should allow states to comp ly with the proposed Section 111(d) guidelines by continuing to participate in RGGI.

Commenters said while in the proposed Guidelines EP A explicitly listed CHP and cogeneration approaches as examples of non-BSER measures that co uld be included as compliance alternatives in a state plan, states should not be limited to those non-BSER measures explicitly spelled out in EPA's proposal. Commenters said othe r GHG reduction strategies could include

• Methane leak reduction programs currently being und ertaken by local distribution companies,

• Programs incentivizing the direct use of natural ga s in home heating;

• Programs incentivizing the capture of fugitive meth ane from municipal waste landfills and in bio-gas digesters at agricultural facilities ;

• Improved utility infrastructure (reduces line losse s and thus improves efficiency of the utility transmission and distribution systems);

• Commenters said Indiana is a heavy manufacturing st ate, and such states should be
allowed to:

• Count savings from EE and DSM programs at manufactu ring facilities,

• Count savings from the conversion of coal -fired in dustrial boilers to combined heat and power (CHP) systems at industrial facilities

• Count the energy efficiency savings of the large cu stomers that may have already opted out of EE programs per the SEA 340 opt-out provisio n.

Commenters stated the final guidelines should allow states to include non-BSER measures - both those identified by EPA in the proposal and those n ot specifically included - in state compliance plans submitted under the final guidelines for appr oval.

Comment 34: States need maximum flexibility to use existing st ate-initiated programs to meet goals, and states need broad compliance flexibility in part because significant changes to other sectors of the economy could affect the emission ra te of the electric sector.

Response 34: As discussed in sections VI, VII, and VIII, of the final rule preamble of the CPP the EPA is finalizing a rule that continues the sta te flexibility from proposal and builds onto that by more clearly establishing alternative compliance metrics.

The following are summaries of the specific public comments under this comment:

Use existing programs for compliance with CPP. Comm enters strongly supported the EPA's proposal to provide states with substantial flexibi lity in how they achieve the Clean Power Plan's282

emission targets because states are in the best pos ition to balance the numerous competing legal, environmental, economic, geographic, and equity iss ues that will arise as they attempt to reduce CO2 emissions from their existing fossil fuel-fired generation fleet. Commenters said further, many states have already begun to implement multi-y ear programs to reduce CO2 emissions from existing power plants and other sources. Calif ornia's Cap-and-Trade, Emission Performance Standard (EPS), Energy Efficiency Resou rce Standard (EERS), and Renewable Portfolio Standard (RPS) programs are just four examples of the kinds of multiyear policies that California is implementing to reduce its GHG emissions. Commenters agreed with the EPA that the Proposed Rule should p rovide California and other states with maximum flexibility to use such existing state-init iated programs to meet the federal guidelines and support federal goals.

Changes to economy affect electric sector emissions . Commenters said another reason for providing states with broad compliance flexibility is that many states could experience significant changes to other sectors of their econo mies that could affect the emission rate of their electric sector. Commenters said for example, Calif ornia already provides numerous incentives to encourage deployment of electric vehi cles and public transportation. Commenters said in addition, the Port of Los Angeles has been pursuing a number of strategies to reduce GHG emissions from port traffic and operations. Com menters said one of these strategies involves installing "alternative maritime power" (A MP) facilities to allow docked vessels to reduce their emissions by relying on the electric g rid for power while in port. Commenters said as with vehicle electrification initiatives, the Po rt's AMP initiative could increase demand and emissions from the electric power sector even as it greatly reduces overall GHG emissions from the Port. Commenters said both state and local gove rnmental entities are currently contemplating
additional initiatives to increase the electrificat ion of the transportation and other sectors as a means of reducing emissions of both conventional an d GHG pollutants.

Commenters said these changes, many of which are al ready in progress, could potentially increase demand for electricity from fossil-fueled power plants even as they reduce the overall
level of emissions across all sectors in the state. Commenters said implementation of these initiatives will also require careful coordination between the state and local entities to ensure continued emission reductions while maintaining a r eliable, cost-effective supply of electricity. Commenters said consequently, substantial flexibili ty is essential for allowing states to achieve their federal emission targets in the most cost-eff ective and efficient manner possible, in light of both existing state programs and future state goals

.
Other points. Commenters expressed support for seve ral additional policies including:

In general, the EPA should allow states to meet the ir emission targets in any way they choose, so long as the states can demonstrate that their polic ies and programs can meet the targets.

SCPPA strongly supports the EPA's proposal to allow states to demonstrate compliance by meeting a mass-based target in lieu of a rate-based target (although they have concerns with the EPA's proposed approach to quantifying the mass-bas ed goal).283

SCPPA also supports the EPA's proposal that states could adopt a "portfolio" or "state commitment" approach that would assign responsibili ty for attaining emission reductions to
entities other than affected EGUs.

Comment 35: Rule must give states the flexibility to design th eir state programs in a manner
that best allows the states to address the socioeco nomic and other impacts that the rule will have on some sectors of state economies, especially thos e in coal producing states

.
Response 35: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters said although the Clean Power Plan is an essential step forward for the U.S. in the fight against climate change, the proposed rule has the potential to have significant and disproportionate negative impacts on some parts of the country - particularly coal producing states, such as West Virginia. Commenters said ther efore, it is essential that EPA's final rule provide states the flexibility to design their stat e programs in a manner that best allows the states to address the socioeconomic and other impacts that the rule will have on some sectors of state
economies.

Commenters said as EPA moves toward finalizing the Clean Power Plan rule, EPA should consider the broader socio-economic challenges that West Virginia and other coal producing states face with respect to compliance with this ru le, in addition to the economic development challenges associated with declining demand for coa l. Commenters said while EPA is limited in its ability to address many of these issues directl y, it should retain those provisions of the proposed rule that allow flexibility for states to achieve emission reductions across the electric power system - both inside and outside the fence-li ne measures - through the use of market based mechanisms and multi-state and regional compliance pathways.

Commenters said such flexibility will give states t he best opportunity to reduce compliance costs and enhance their ability to support the sectors of their economies that are positively affected by the rule, and mitigate impacts in those sectors tha t are negatively affected.

Comment 36: Rule should allow alternative compliance payment i f state is unable to meet interim and/or final goal

Response 36: The EPA believes that states have a variety of fle xibilities, including the trading/purchasing of credits that will enable them to comply with the BSER requirements.

The following are summaries of the specific public comments under this comment:284

Commenters suggested that the USEPA should consider allowing an "alternative compliance payment" if a state will be unable to meet its inte rim and final goals. Commenters said that this payment could be made if a state adequately demonst rates that meeting the final goal is technically infeasible, given the circumstances and characteristics of the state's electric industry. Commenters said the USEPA could use these payments to fund clean energy projects throughout the country to offset the retained emissions in the states making the alternative compliance payments.

Comment 37: On a case-by-case basis, the rule should allow sta tes to apply less stringent emissions standards or longer compliance schedules than those otherwise required

Response 37: While this rule does provide flexibility on demons trating compliance over a period of time, meaning annual rates and emission levels m ay vary, compliance levels still must be demonstrated over the course of the period. States have the flexibility to assign rates and reduction incentives to affected sources, but at th e aggregate level would still need to demonstrate compliance with BSER.

The following are summaries of the specific public comments under this comment:

Several commenters said that EPA should provide an exemption or allow for a deviation from the goals in select instances.

Commenters stated that a Force Majeure-type provisi on that allows states to deviate from the goals in unforeseen circumstances is necessary. Com menters said there are numerous
circumstances over which states have no control tha t must be factored into the ability to meet the proposed goals of the Clean Power Plan. Commenters said that for example, the Western States are experiencing severe drought conditions, and dro pping water levels may result in a significant decrease of available hydropower, and states like N evada would have to make up the difference by relying on existing fossil-fuel fired facilities . Commenters said that other examples of force majeure events include, but are not limited to conf licting orders from the United States Department of Energy or the FERC requiring continue d EGU operations to ensure reliability, and overarching requirements of U.S. military bases within state boundaries as to the parameters of nearby RE projects. Commenters said that these i ssues may interfere with Nevada's ability to timely meet the goals, and said that the EPA should include an exemption or allow for a deviation from the goals to mitigate states' risk f or failure to comply in such circumstances.

Several commenters said the EPA must also maintain a state's authority to "on a case-by-case basis for particular designated facilities or class es of facilities . . . provide for the application of less stringent emissions standards or longer compli ance schedules than those otherwise required . . . provided that the State demonstrates with respe ct to each such facility (or class of facilities):

• Unreasonable cost of control resulting from plant a ge, location, or basic process design;

• Physical impossibility of installing necessary cont rol equipment; or285

• Other factors specific to the facility (or class of facilities) that make application of a less stringent standard or final compliance time signifi cantly more reasonable."

Comment 38: The EPA must allow revisions to emission target af ter rule is finalized. Existence of flexibility depends on specific circumstances; A laska's circumstances restrict compliance options. Alternative mass-based emission target sho uld be allowed

Response 38: The EPA is not including emission performance goal s for Alaska in this final rule. See section VII of the preamble for discussion of t his issue.

The following are summaries of the specific public comments under this comment:

Proposed rule prohibits changes after finalization. Commenters said that it is essential that the final rule allow flexibility in the assigned target emission rate. Commenters said currently, EPA proposes that "once the final goals have been promu lgated, a state would no longer have an opportunity to request that the EPA adjust its CO2 goal." Commenters said the EPA also proposes to remove flexibility that is generally pe rmitted in implementing EPA regulations to deviate from a standard of performance based on fac ility specific considerations. Commenters said this proposal takes the rule in the wrong dire ction. Commenters said in Alaska, there are a limited number of affected EGUs, a limited transmis sion system, and a small ratepayer base.
Commenters indicated said we have serious reservati ons about our ability to implement this rule in the first instance. Commenters said further, EPA has not evaluated the feasibility of impact of the rule here and the data provided by EPA containe d errors and imprecise data. Commenters stressed that if Alaska is not exempted, there must be a mechanism to re-evaluate the target rate
after the rule is finalized.

Flexibility depends on specific circumstances. Comm enters said the existence of flexibility depends on specific circumstances; Alaska's circums tances restrict compliance options. Commenters said the flexibility available to Alaska is limited by:

• The number of EGUs at issue,

• The role of those EGUs in the generation mix,

• The number of ratepayers to bear compliance costs,

• Transmission constraints,

• Climate and geography, as well as

• Other factors.

Commenters said their review of available data duri ng the comment period suggests that achieving the mandated emission rate will require r etiring one of the Healy coal units - in fact, EPA's goal calculation presumed that neither of the Healy units would operate. Commenters said286

given the importance of maintaining reliability of electric service for the Fairbanks load center, EPA should not promulgate a rule that would require such a result.

Mass-based emission target. Commenters supported EP A's proposal to allow an alternative mass-based emission target. Commenters said this pr ovision introduces a degree of flexibility that may avoid penalizing states for reducing total CO2 emissions from affected EGUs when the same event increases the per megawatt hour emission rate because of a shift in the proportion of
fuel sources.

Comment 39: Regulation should allow for phased implementation

Response 39: The EPA describes the flexibilities available to s tates in Section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters said that the EPA needs to provide polic y flexibility to state regulators as they develop their state plans under 111(d), and in part icular, the EPA should allow and encourage state plans to provide for phased implementation, w ith a Phase I policy, Phase II policy, etc. as
needed.

Commenters indicated that a true emission reduction glide path would allow state regulators to adopt a relatively simple and bulk electric system (BES) - compatible set of policies to achieve the relatively minor emission reductions and "low h anging fruit" in the early years of the next decade, and to subsequently develop a more comprehe nsive and integrated set of polices to achieve the deeper emission reductions in the latte r part of the decade. Commenters said that this more comprehensive, subsequent set of policies can better be identified and realized in the early part of the next decade than it can today, because there will be far more insight into the commercial viability, cost and system implications of emerging clean energy technologies, and more ability to integrate the state policy with the more complex system of federal, regional and other stakeholder policies and practices described above.

Commenters said that for example, Phase I could con sist of what the EPA terms a "portfolio approach" to incent the deployment and integration of clean energy resources in both the grid and the distributed energy markets, coupled perhaps with a moderate mass-based budget and a generation- and consumer- friendly allowance alloca tion framework to minimize stranded costs.
Commenters said this would allow states to achieve the moderate emission reductions under the front end of their glide paths, with lower impact t o the BSE, while also supporting the initial integration of cleaner resources.

Commenters said that Phase II could consist of a mo re stringent budget, rate and "portfolio" objectives designed to propel the evolving system t o achieve the 2030 goals and continue to achieve greater emission reductions after 2030. Com menters argued that Phase II, however, would be best designed after 2020, based on the gre ater information about the economics of remaining coal plants, the cost, performance and av ailability of low carbon solutions, and their integration with the BES.287

Commenters stated that this approach would also hav e great practical value in a number of states, which would require legislative approval or modific ation of existing statutes even to implement the BSER elements EPA bases its emission targets on . Commenters said that it would be far easier to achieve such approval for a simple Phase I plan to meet modest emission reductions in 2020 through 2025, than for the potentially drastic plans needed to achieve the EPA's current 2020 emission reduction requirements - much less to deal with the need to protect reliability, prevent market distortions, and keep prices reasona ble for consumers during such a dramatic
sudden reduction in emissions.

Comment 40: The EPA must allow states to consider the remainin g useful life of existing affected EGU when developing 111(d) plans.

Response 40: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said that states must be able to conside r the remaining useful life of an affected existing EGU when developing 111(d) plans. Comment ers said on page 34926 of the preamble, EPA solicits comments on its position that states m ay not include the remaining useful life of affected electric generating units, and other facil ity-specific factors identified in the existing implementing regulations, as a basis for adjusting a state emission performance goal or for relieving a state of its obligation to develop and submit an approvable plan that achieves the goal on time. Commenters said Section 111(d) (1) (B) of the Clean Air Act explicitly states, "Regulations of the Administrator under this paragr aph shall permit the State in applying a standard of performance to any particular source un der a plan submitted under this paragraph to take into consideration, among other factors, the r emaining useful life of the existing source to which such standard applies.” Commenters said ther efore, EPA has no choice but to give the states flexibility in considering the remaining use ful life of the existing affected electric generating unit when developing 111(d) plans.

Comment 41: The EPA must recognize the substantial variability in hydro generation when assessing compliance to avoid penalizing states for spikes in fossil-fuel generation caused by unfavorable hydro conditions, either through compli ance exemption for use of normalization or some other adjustment method during demonstrated pe riods of low hydro generation.

Response 41: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA must recognize the substant ial variability in hydro generation when assessing compliance to avoid penalizing states for spikes in fossil-fuel generation caused by unfavorable hydro conditions. Commenters said the E PA's proposed use of a rolling three-year288

average to measure compliance with performance goal s is not adequate to account for the effects of variability in hydro generation.

Commenters provided a figure (Figure 1), which depi cts Idaho Power's total system hydro generation from 1975 through 2013. Commenters said the rolling averages plotted in Figure 1 further show that using a five-year, or even a ten- year, rolling average is not sufficient to even out the effects of the historic hydro variability. Commenters said use of at least a fifteen-year rolling average would be necessary to even out the effects of hydro variability in measuring compliance with performance goals.

Commenters said the EPA must allow states flexibili ty to account for this inevitable hydro generation variability in demonstrating compliance with interim and final performance goals, either through a compliance exception or use of nor malization or some other adjustment method during demonstrated periods of unfavorable water co nditions and low hydro generation. Commenters said in the absence of meaningful adjust ments, hydro-dependent states, and particularly Idaho given its extremely low state pe rformance goal, simply will not be able to demonstrate compliance during such periods.

Comment 42: The EPA has no authority to dictate arbitrary "int erim" goals. Plans should avoid forced early retirement.

Response 42: The EPA has modified the interim goals in response to comments and our further consideration. The interim period covers the years 2022-2029 and includes illustrative interim emission values for the periods of 2022-2024, 2025- 2027, and 2028-2029. States have the flexibility to use different steps than those inclu ded in the final rule if the state demonstrates in its state plan that the values chosen for the 3, 3, and 2 year increments are equivalent to the interim goal included in the final rule for the 202 2-2029 period. See section VII of the final rule preamble for discussion of the statewide goals. Ple ase see section IV of the final rule preamble for discussion of the EPA’s authority.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA has no authority to dictate arbitrary "interim goals. Commenters suggested that because future em ission reductions will occur through the natural aging of the existing fleet, plans could be established based on the remaining useful life of existing units consistent with the express langu age of section 111(d). Commenters indicated
that the EPA should allow states to examine the emi ssion reductions that will occur within the existing fleet as units near and reach the ends of their useful lives, and establish a glide path to lower total mass emissions from the existing fossil fleet. Commenters said the EPA should allow states to calculate the "degree of emission reducti on" achieved through such a procedure, and to develop the path for reductions that is consistent with the energy and economic needs of the

states.

Commenters stressed the need for reasonable decommi ssion schedules to avoid excessive rate
increases. Commenters said that to reach its emissi on goals the Clean Power Plan must be viewed as cost effective by the public, and the bes t way to accomplish this is to establish realistic289

goals and allow the states to craft credible and co st-effective plans, which include reasonable decommission schedules for existing units in a mann er that avoids rate shock. Commenters said that the final rule should provide states the flexi bility contemplated by the language and legislative intent of Section 111(d).

Comment 43: The proposed regulation would result in nonsensica l consequences, such as a newer, cleaner coal-fired plant being forced to ret ire in one state, while an older, dirtier coal-fire d plant in a neighboring state remains operating.

Response 43: The EPA maintains that the final rule provides amp le flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters said as the Supreme Court recently remin ded EPA, nothing in the CAA authorizes the Agency to regulate GHGs "in any way that would be 'extreme,' 'counterintuitive,' or contrary to 'common sense.'" Commenters said yet even a curs ory examination of the Proposal reveals that it is rife with extreme, counterintuitive, and nonsensical consequences.

Commenters said perhaps the most bizarre consequenc e is the arbitrary way that statewide redispatch under Building Block 2 affects different E GUs based on the state in which they are located. Commenters said as an example, imagine tha t two states - State A and State B - have equal amounts of generation from existing coal-fire d EGUs, but State A's coal-fired units are newer, more efficient, and operate state-of-art env ironmental controls, while State B's coal-fired units are older, degraded, and operate older enviro nmental controls. Commenters said if State A happens to contain more unused NGCC generating capa city than State B, then under Building Block 2, State A will be forced to curtail its coal -fired generation more severely than State B - even though its EGUs are newer and emit air polluta nts at a lower rate. Commenters said indeed, if the unused NGCC capacity in State A is great eno ugh, Building Block 2 may eliminate its coal-fired generation entirely, while the older coa l-fired EGUs in State B continue to operate.

Commenters said this is precisely the scenario that would take place in Arizona under EPA's Proposal with respect to the Springerville Generati ng Station, which is owned in part by TriState. Commenters said the 418 MW Unit 3 at Springe rville, which achieved commercial operation in the summer of 2006, is Tri-State's new est and most efficient coal-fired unit and has state-of-the-art controls, and represents a signifi cant investment by Tri-State, both in the generating facility itself and in the long-term tra nsmission, water, and land rights necessary to operate the facility.

Commenters said yet under the Proposal, EPA's "best system of emission reduction" for EGUs located in Arizona involves eliminating all generat ion from coal-fired EGUs - including all 4 units of the Springerville facility. Although EPA c laims that the proposed emission guidelines provide states with "flexibility" to adopt plans th at do not strictly follow the Building Blocks, the290

State of Arizona has performed its own analysis and determined that the proposed state goal for Arizona is so stringent that it actually provides n o implementation flexibility as a practical matter. Commenters said thus, the Proposal would ef fectively force the premature retirement of the Springerville facility.

Commenters said Tri-State owns several other, older coal-fired EGUs in different states where the proposed state goals do not require eliminating all coal-fired generation. Commenters said accordingly, the Proposal would have the bizarre co nsequence of forcing Tri-State to retire its newest, most efficient, best-controlled coal-fired EGU, which has already been the subject of significant capital investments. Commenters noted t hat if the Springerville facility had been located just 10 miles to the east in New Mexico, it would be saved from forced retirement.

Commenters said shutting down Springerville Unit 3 would strand a significant investment made by Tri-State less than 10 years ago. Commenters add ed that the decommissioning and write-off costs for Unit 3, in conjunction with any measures needed to replace that power supply, would harm Tri-State, its 44 member cooperatives, and the retail consumers of those cooperatives through higher rates to compensate for the loss of this valuable asset in Tri-State's generation portfolio. Commenters said equally important, elimi nating Springerville Unit 3 would shut down a baseload facility that Tri-States uses to serve firm load, leading to potential disruption in loadserving reliability. Commenters said baseload capac ity is a key component of a reliable generating system and provides value particularly d uring the peak hours of a utility's peak season. Commenters said if Unit 3 is shut down, Tri -State will not have sufficient capacity to serve firm load, and will be required to construct new generation to replace that capacity, further increasing costs to its member systems.

Comment 44: The EPA should take steps to foster consumer and l abor oversight and participation

Response 44: See the EPA’s Regulatory Impact Analysis for the Clean Power Plan Final Rule, EPA-452/R-15-003 ( RIA) for the final CPP for a discussion of consumer impacts

The following are summaries of the specific public comments under this comment:

Commenters said the EPA should take steps to foster consumer oversight by making key information readily accessible on its website and s hould require states to provide consumer voice and oversight in the development and execution of i mplementation plans. Commenters said consumers will benefit from sound policies and bear the brunt of poor policies, and as a matter of fairness, they deserve a strong role in the formula tion and execution of state plans. Commenters said consumer participation and oversight is valuab le for another reason as well - there is substantial overlap between the policies that are b est for reducing emissions and those that are best for consumers. Commenters said consumer partic ipation will substantially increase the likelihood that states will adopt sound, least-cost plans that are likely to yield their projected carbon-reduction goals.

Commenters said that when customers are involved in their energy solutions, such as with community solar, they are much more tied to the dec isions they are making. The commenters291

said in such situations consumers recognize the imp acts they have, and how much it really
affects their bottom line.

Commenters said that states must be encouraged to i nclude labor voices in the development of their compliance plans.

Comment 45: The EPA should provide a comparative analysis of t he costs of action versus the
costs of inaction

Response 45: The EPA’s Regulatory Impact Analysis for the Clean Power Plan Final Rule, EPA-452/R-15-003 ( RIA) analysis discusses the cost and benefits of th is final CPP rule.

The following are summaries of the specific public comments under this comment:

Commenters said in the analysis for the proposed ru le, the EPA has yet to compare the costs of
business as usual. Commenters said it would be ver y helpful if the EPA would provide a comparative analysis of the costs of action versus the costs of inaction.

Comment 46: Commenters said EPA should encourage the states to implement least cost approaches by indicating that the selection of reso urces that deviate significantly from this principle will be subject to close scrutiny.

Response 46: The EPA uses least-cost modeling tool when assessi ng compliance scenarios. A State may use this to inform their thinking about l east cost approaches.

Comment 47: Diverse fleet of generating resources is optimal b ut renewable energy resources and energy efficiency can be dispatched and thus ca nnot be considered replacements for existing fossil fuel-fire generation, but rather additive in nature

Response 47: The EPA discusses abatement potential through rene wable energy in section V.A of the final rule preamble of the CPP. Holding loa d assumptions constant for a given future year, as renewable generation increases it will likely re place fossil sources. The collective regional fossil generation of the fleet with more RE generat ing resources is expected to be less than one
with fewer RE resources.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA should encourage the mainte nance of fuel diversity with each states' generation portfolio, rather than choosing winners and losers to the effect of decreased system reliability. Commenters said that maintaining a div erse fleet of generating resources is optimal because it gives utilities the ability to capitaliz e on the lowest cost fuel options over the long term and ensure low cost electricity to customers. Commenters said that a fleet that is overly292

reliant on one particular generating resource would cause customers to bear significant risk with respect to the cost of that particular generating s ource. Commenters indicated that as part of Georgia Power's maintenance of a diverse fuel mix, the Georgia PSC has approved additional renewable generating resources, including solar gen erating capacity. Commenters stressed that to meet their purpose of maintaining fuel flexibility and diversity, however, these generating resources cannot be considered as replacements for existing fossil fuel-fired generation, but
rather are additive in nature.

Commenters indicated that it is important to note t hat neither renewable energy resources nor demand-side energy efficiency (DSEE) can be dispatc hed, i.e., they cannot be called upon to serve electricity load at any time. Commenters note d that most renewable energy resources are dependent on weather conditions and DSEE is depende nt on customer behavior; neither is guaranteed. Commenters concluded that as a result, they serve a different purpose than existing fossil fuel-fired generation, which is capable of b eing called upon to meet customer demand. Commenters said that the EPA's proposal to lower st ates' goals by assuming the replacement of existing dispatch-able generation with intermittent renewable resources and DSEE that relies on customer behavior similarly would significantly imp act the reliability and cost-effectiveness of the electric grid and is directly inconsistent with the purpose of these resources and the decisions of state PSCs to approve the addition of these reso urces to utilities' generation (or avoided generation) mixes to ensure fuel diversity and cost -effective electricity.

Comment 48: The EPA should treat renewable energy from Canadia n sources in the same manner as renewable energy from domestic sources. Explicitly including Canadian hydropower as a resource that can be used to comply with the C PP obligations would give states the flexibility they need to meet goals.

Response 48: See section VIII.K. of the final rule preamble of the CPP for the EPA’s response
to this comment.

The following are summaries of the specific public comments under this comment:

Commenters fully supported the EPA's position that states should be given maximum flexibility in determining how best to meet the targets set for th in the Clean Power Plan, and said inclusion of Canadian hydropower in the Clean Power Plan woul d be consistent with state RPS requirements and would also allow states the flexib ility they will require to meet SIP goals in the
future.

Commenters said even prior to the release of the pr oposed Clean Power Plan, many states had already begun requiring utilities to increase their reliance on renewable generation through renewable portfolio standards (RPS). The commenter s said this has included recognizing Canadian hydropower as a resource that can help sta tes meet their renewable energy and climate change goals. Commenters said as the EPA notes in t he Clean Power Plan's supporting technical documents, "most states allow use of eligible renew able resources located in other states to satisfy the state RPS requirements," and this "may also include Canadian hydroelectric and wind energy resources."293

Commenters said in recent years, California, Connec ticut, Minnesota, Rhode Island, Vermont, and Wisconsin have all adopted legislation or regul ations that allow local utilities to use Canadian hydropower in meeting their respective RPS targets. Commenters said New England States are also exploring ways to increase hydropow er imports in the region to help meet their GHG reduction goals. Commenters said in the MISO r egion, which includes Manitoba, Wisconsin adopted legislation in July 2011 that gra nts renewable credit to imports from new hydropower facilities under development in Manitoba . Commenters added similarly, in March 2011, Minnesota's Public Utilities Commission ruled that Minnesota Power could apply a portion of hydroelectricity purchases from Manitoba Hydro t o meet its state renewable energy standard requirements.

Commenters said as the examples noted above demonst rate, states and utilities have been proactive in seeking out renewable energy sources t o supply the current and future needs of their residents and businesses. Commenters said explicitl y including Canadian hydropower as a resource that can be used to comply with Clean Powe r Plan obligations would give many states the flexibility they will need to meet their SIP go als and emission reduction targets in the future.

Comment 49: States can most cost-effectively achieve Clean Pow er Plan 2030 carbon emission reductions through deployment of greater levels of renewable power generation and EE. Flexibility and effective state policies are e ssential.

Response 49: The EPA agrees with the comments that flexibility for state plans is essential. The EPA maintains that the final rule provides ample fl exibilities to states. States are allowed to use the BSER measures, or other measures in their state plans to comply with the goals; there are flexibilities within the BSER measures and how they are executed; and states also have nonBSER measures at their disposal. See sections V.A a nd VIII.A. of the final rule preamble of the
CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters said states can most cost-effectively ac hieve Clean Power Plan 2030 carbon emission reductions through deployment of greater l evels of renewable power generation. Commenters said renewable energy is virtually emiss ions-free, the least expensive option resource in many markets today and, as with most ma turing but technologically enabled industries, and costs continue their downward trend . Commenters said states can achieve their Clean Power Plan targets while also realizing a hos t of additional benefits, including a 21st Century modern grid, a more modern diverse power su pply, greater energy independence, more secure energy supply, new private sector investment , economic growth, and a growing mix of quality jobs. Commenters said effective state polic ies are essential to deploy greater levels of renewable energy and leverage the capital and ingen uity of the renewable energy industry.

Commenters said RE and EE are the key to reducing c arbon pollution, and also drive job growth and reduce energy bills. The commenters stated the y think these resources can contribute even
more to the CPP.294

Commenters said it is appropriate that the CPP plac es emphasis on expanding renewable energy and energy efficiency efforts. Commenters said over the next 40 years Pennsylvania can transition to 100% renewable power generation, and the CPP will also inspire investment in infrastructure to protect communities from climate change impacts they are already experiencing, spur the kind of innovation that will power America n with clean energy in the 21st century, and improve resiliency and give states flexibility to i mplement plans that increase efficiency.

Commenters said the EPA should provide additional g uidance to state about how to integrate high levels of RE.

Commenters encouraged EPA to clearly signal to that that the flexibility built into the CPP should be met through increased capacity for renewa ble energy projects.

Commenters supported the CPP's inclusion of demand side energy efficiency as one of the four major pollution reducing tools available to states.

Comment 50: The U.S. needs an "all-of-the-above" energy strate gy that encourages development of all energy source options, without f avoring one specific source over another.

Response 50: The flexibility afforded to states as described in Sections V and VIII of the final rule preamble of the CPP maximizes the breadth of c ompliance options and allows states/source to keep any of the “all-of-the-above” generation te chnologies that it chooses.

The following are summaries of the specific public comments under this comment:

Commenters said the U.S. truly needs an "all-of-the -above" energy strategy to ensure we are responsibly developing energy sources while meeting consumer demands, protecting the environment and modernizing extraction and refining processes through market-led efficiencies. Commenters said this means adopting policies that e ncourage development of all energy source options, without favoring one specific source over another. Commenters said by allowing businesses and consumers to self-select, we encoura ge energy-efficiency by allowing consumers, not the EPA or the federal government, to choose pr eferred sources. Commenters said allowing consumer choice prevents the inefficiencies that in evitably come with government-led, command and control regulation.

Commenters said all consumers of energy, whether th ey are large manufacturers or individual households, benefit most from an all-of-the-above e nergy strategy. Commenters said diversity of energy supply is not only critical in keeping energ y costs reasonable, it is essential in ensuring steady and reliable streams of energy to power our factories and heat our homes. Commenters said for many Georgia businesses and industries tha t compete in a global economy, energy represents a major input cost that can ultimately d etermine viability. Right now, energy is an advantage for many Georgia industries in large part because of the abundant and diverse supplies of affordable energy resources that are collectivel y keeping energy costs reasonable and supply
reliable. Commenters said with the current diversit y of generating resources, Georgia continued its trend of maintaining below-national average ele ctricity prices, which is crucial to the continued growth and success of Georgia's economy. Commenters said however, if regulations295

such as the EPA's CPP force energy options off the table, energy prices will be more volatile, costs will increase, reliability will be threatened and ultimately Georgia's businesses and other U.S. firms will be less competitive in the global e conomy.

Commenters said the stringency of the building bloc ks makes compliance costly, risky for system reliability, and implausible if not impossib le. The commenters said the real flexibility states need is the flexibility to maintain a divers e, low-cost, and reliable generation mix for their citizens, economic, and energy security. The comme nters said that the value of generation diversity to stability in power supplies and prices is missing in this proposal.

Comment 51: The EPA should encourage states to use carbon capt ure mechanisms as a compliance tool.

Response 51: The final rule provides ample flexibilities to the states to use the BSER measures, or other non-BSER measures to comply with the goals . See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters said the proposal offers maximum flexibi lity for compliance, and said a state can authorize carbon capture and storage mechanisms to reduce emissions from existing coal plants. The commenters said this technology recently announ ced the Department of Energy is actually helping to fund construction of the largest post co mbustion carbon capture project in the world, the Petra Nova Project in Texas, which was just ann ounced a few weeks ago. The commenters said this is projected to capture 90 percent of the carbon dioxide emissions from one of the plant's generators. The commenters urged the EPA to include in the final rule language, encouraging states to use carbon capture mechanisms as a compliance tool.

Comment 52: States should be allowed to decide how the distrib ution of responsibility to meet goals is allocated, whether a rate-based or mass-ba sed approach is used, and should be able to establish the compliance timeline.

Response 52: The final rule provides ample flexibilities to the states to use the BSER measures, or other non-BSER measures to comply with the goals . See sections V.A and VIII.A. of the final rule preamble of the CPP for more information. The states also have the flexibility to choose whether a rate-based or mass-based approach is used , however the EPA has converted the ratebased goals to mass-based goals. See section VII o f the final rule preamble of the CPP and the
CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the final CPP for the final rate-based and mass-based g oals. The timing for compliance remains as 2030 for the final goals. The EPA has modified the interim goals in response to comments and our further consideration. The interim period cover s the years 2022-2029 and includes illustrative interim emission values for the period s of 2022-2024, 2025-2027, and 2028-2029.

The following are summaries of the specific public comments under this comment:296

In response to the EPA's request for comments, comm enters supported permitting states to decide how the distribution of responsibility to me et goals is allocated as well as the compliance timeline. Commenters said in part, this is a practi cal solution as the affected EGUs will require some time to implement in-boundary changes while th e state can implement programs under Building Block 3 and Building Block 4 that could po ssibly affect immediate reduction in #CO2/kWh. Commenters suggested the implemented prog rams could, in fact, be implemented by the private capital market and private businesse s, thus creating both system cash flow and increased employment. Commenters said in turn this will reduce the total generation requirements, and reduction in generation requireme nts results in less of a capital burden on the EGUs and ultimately less of a burden on the utiliti es rate-payer. Commenters said in addition,
the Rural Electric Providers who are least able to afford modifications to EGUs will have time to secure capital. Commenters said that two heating an d cooling technologies, Ground Source Heat Pumps (GSHP) and Waste Energy Recovery (WER) system s, are excellent examples of technologies that compliment this approach.

Several other commenters also said that the EPA sho uld allow states the flexibility to allocate responsibility for meeting a state's emission reduc tion goal among that state's affected entities as
it sees fit. Several commenters said as described in the State Plan Considerations TSD, EPA proposes to "give states broad discretion to develo p state plans that best suit their circumstances and policy objectives." Several commenters said thi s should include the recognition that affected entities within a state will not begin at the same starting point regarding carbon-reducing actions that are already in effect. Several commenters said individual utilities - and their customers - may have implemented a number of measures which have al ready reduced carbon emissions, and under the Clean Power Plan, states are able to inco rporate these actions into their compliance plans so long as emissions reductions achieved post -2020 can be attributed to these measures. Several commenters said in the final rule, EPA shou ld specifically allow states to determine how their compliance obligations will be allocated amon g all affected entities, thus allowing states to conclude that entities which implemented early acti ons that will achieve ongoing and long-term emission reductions will not be required to contrib ute further towards a state's emissions reduction goal.

Several commenters said the EPA should continue to allow states the flexibility to select a ratebased approach or a mass-based approach to emission s reductions for inclusion in state compliance plans. Several commenters said they have reviewed EPA's Notice of Additional Information Regarding the Translation of Emission R ate-Based CO2 Goals to Mass-Based Equivalents issued November 6, 2014, but cannot yet determine if this approach provides significant benefits over the previously proposed r ate-based mechanism. Several commenters said in fact, it appears that the two standards do not correlate well. Several commenters said as a general observation, MidAmerican notes that impleme ntation of the guidance on rate to mass conversion results in a greater reduction in emissi ons. Several commenters said where the ratebased reduction from 2012 levels would be 24%, a ma ss-based conversion would result in a reduction of 31% from 2012 levels by 2030. Several commenters requested that EPA's final rule retain the flexibility for states to select which e missions standard best suits their circumstances.

Comment 53: Rule implementation at the state level is subject to political influence297

Response 53: As demonstrated in the GHG Mitigation Measures TSD and discussed in Section V of the final rule preamble of the CPP, the quanti fication of building blocks and BSER is a bottom-up technology cost and performance assessmen t.

The following are summaries of the specific public comments under this comment:

Commenters said the flexibility provided to the sta tes, and much lauded cooperative federalism approach, is in some ways a double-edged sword beca use it creates the potential to affect how the rule is implemented based on political ("policy ") preferences. Commenters said for instance, the rule could end up being implemented through a m ass-based limit whereby allowances are distributed resulting in a situation where Florida utilities are competing amongst themselves for their fair-share of a limited pool of allowances. C ommenters said ultimately, those smaller utilities with little or no political influence may be penalized despite their good intentions, early investments, and realized reductions. Commenters sa id for example, EPA should ensure that any approved state plan does not unfairly penalize thos e early adopters such as the City of
Tallahassee.

Comment 54: States should be allowed to use non-affected EGUs to achieve compliance with 111(d) targets, and should have ultimate flexibilit y in building their state programs and determining what activities can be included for com pliance (partial list of activities provided)

Response 54: See sections V and VIII of the final rule preamble for discussion of the flexibilities
available to states and affected EGUs.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA must provide the maximum fl exibility for states to use non-affected EGUs to achieve compliance with 111(d) targets. Co mmenters said states should be permitted to
determine what the least cost methods are for achie ving the emission rate reduction targets set by
the EPA.

Commenters said CAA section 111(d) require states, not EPA, to set standards of performance for sources and not only do states have the authori ty to set the standards, but they also have the authority to determine how the sources within each state will meet those standards. Commenters said therefore, states should have ultimate flexibi lity in building their state programs and determining what activities can be included for com pliance. Commenters said these activities include, but are not limited to, the following area s:

1. A state should have authorization to deem that a cu rrent state program qualifies as BSER
for that state

2. The states should have sole discretion on how to re ach the 2030 compliance target including timing, glide path, interim targets, etc. .., without any requirements from EPA during that interim period

3. Enforcement of a state plan should be the sole resp onsibility of the state298

4. States should have the discretion to include new Se ction 111(b) affected NGCC units in their compliance plans

5. States should have the ability to control what acti vities count towards compliance and when these activities can count towards compliance including, but is not limited to, plant retirements, treatment of nuclear and hydro, energy efficiency measures, renewable energy, and new 111(b) NGCC units

6. States should have the ability to count any emissio n reductions that occur after the baseline year including retirement of fossil-fired generation

7. States should have sole authority over whether or n ot the state uses a mass-based or rate based approach towards compliance and how that tran slation is calculated

8. States should have definitive oversight and control over any multi-state approach or plan

Comment 55: States must be given sufficient flexibility in det ermining how to incorporate biomass energy into their implementation plans, and biomass feedstocks should be evaluated at a national level, not using a state or regional-level approach that incorporates chain-of-custody accounting for biomass feedstocks which would add c omplexity and cost to the program without
added benefit.

Response 55: A discussion regarding the use of some biomass fee dstocks for compliance purposes can be found in Section VIII.I and Section VIII.K of the preamble.

The following are summaries of the specific public comments under this comment:

Commenters emphasized that it is essential that sta tes be given sufficient flexibility in determining how to incorporate biomass energy into their implementation plans. Commenters said given the number of existing state programs ad dressing biomass and biomass energy, it is imperative that States be able to design Section 11 1(d) implementation plans that are consistent with those programs and avoid subjecting forest own ers and biomass energy facilities to duplicative or inconsistent regulatory programs. Co mmenters said further, giving States broad latitude to incorporate biomass energy into their i mplementation plans is consistent with the cooperative federalism principles that are embodied in Section 111(d) and give States primary authority to establish standards of performance and implementation plans to achieve those
standards.

Commenters said that it is critical from a policy p erspective that the EPA and States adopt GHG regulations that avoid unnecessary complexity and a re capable of implementation. Commenters said evaluating changes in forest carbon stocks at an appropriate scale, such as at the national level, captures essential information about the sus tainability of forestry practices from a carbon perspective consistent with established internation al norms and supporting science. Commenters said in contrast, a narrowly focused stand, state o r regional-based approach that incorporates299

chain-of-custody accounting for biomass feedstocks would add significant complexity and cost to the regulatory program at the risk of making bio mass utilization uneconomic without providing additional useful information with respec t to sustainability from a carbon perspective.

Comment 56: Small generators have special concerns

Response 56: As discussed in section V of the final rule preamb le of the CPP, the EPA believes the BSER approach provides compliance options (incl uding ERC credits) that are available to every affected source. Moreover, states have the f lexibility to assign emission rate or emission limits as it best sees fit, and therefore can accom modate concerns of a particular units. The final CPP BSER does not prescribe any specific utilizatio n for individual units.

The following are summaries of the specific public comments under this comment:

Commenters indicated that municipal generators face additional challenges. Commenters
indicated that three of Nebraska's six utilities af fected by the Clean Power Plan are municipal generators, and these utilities each serve communit ies of approximately 50,000 or fewer using only one or two power plants with units of 100 mega watt capacity or less. Commenters said that in addition to facing the challenges to public powe r utilities, the small scale of these municipal generators further restricts their ability to find flexibility under each of the building blocks of th e EPA's proposed Clean Power Plan.

Commenters indicated that smaller generating facili ties mean smaller efficiency gains per dollar spent on heat rate improvements described under Bui lding Block 1 or demand-side energy efficiency measures described under Building Block 4. Commenters said that in addition, limited natural gas electric generation and a lack of acces s to robust natural gas supplies and infrastructure effectively rule out re-dispatch to natural gas facilities described under Building
Block 2.

Commenters also expressed concern about the proposa l's treatment of smaller electric cooperatives. Commenters said that in the proposal the EPA notes that "the power sector is made up of a diverse range of companies that own an d operate fossil fuel-fired EGUs, including vertically integrated companies in regulated market s, independent power producers, rural electric cooperatives and municipally-owned utilities, all o f which are likely to have different ranges of opportunities to reduce [greenhouse gas (GHG)] emis sions while facing different challenges in meeting these reductions." Commenters said that ind eed, it is difficult for an electric cooperative such as Tri-State to comply with the Proposal becau se it is not vertically integrated. Commenters said that the EPA acknowledges that cooperatives wi th smaller fleets may have a more difficult time because they do not have as much of an ability to re-dispatch among their own units. Commenters said that the EPA asserts, however, that the Proposal provides enough flexibility
that this should not be much of an issue - the EPA is incorrect. Commenters said that in reality, the state targets are so stringent that all flexibi lity is removed and that the EPA assumptions in applying the four Building Blocks are so unreasonab le that there is no way for a state to meet its goal without adopting all four Building Blocks and implementing them largely in line with the EPA's assumptions.300

Comment 57: Small utilities that are minority co-owners of EGU s have no ability to make decisions about or exercise control over new projec ts, and should therefore be given some accommodation in meeting the standard set forth in the proposed rule.

Response 57: As described in section V of the final rule preamb le of the CPP, the EPA believes its BSER provides for compliance options that are a vailable to all units.

The following are summaries of the specific public comments under this comment:

Commenters said small utilities that are minority c o-owners of EGUs have no ability to make decisions about or exercise control over new projec ts, and should therefore, be given some accommodation in meeting the standard set forth in the Proposed Rule. Commenters said states should be permitted and encouraged to use their dis cretion to address special considerations towards small utilities in order to equalize the pl aying field against their large utility counterparts.

Commenters are a minority owner, non-operating join t participant in at least one affected EGU - the Hunter 2 Unit operated by PacifiCorp. Commenter s said small utilities that are minority coowners of EGUs are strictly bound by contract as to what rights, if any, they may exercise in major decisions affecting those units. Commenters s aid in these circumstances, minority owners have no ability to initiate measures that would be required to implement actions necessary to complying with the requirements set forth in the Pr oposed Rule. Commenters said voting rights in such relationships typically vest in the majorit y owner(s) the ability to initiate - or not initiat e - large-scale capital projects.

Commenters said HRI projects certainly fall into th is category. Commenters said when small utilities have no ability to force HRI projects, th ey risk not being able to meet compliance deadlines, which ultimately brings into questions t hose small utilities' ability to maintain compliance with applicable rules. Commenters said s mall utilities' inability to institute HRI projects also highlights the potential for varying motivations between large, majority owners and their small, co-owner counterparts.

Commenters said small utilities will have far fewer resources to satisfy regulatory obligations. Commenters said in addition, large ope rating utilities may not share in the same
motivation that small utilities have to achieve the relevant emission reduction levels, which will require significant capital expenditures. Commenter s said larger utilities managing their fleet of EGUs will be competing for capital dollars with oth er EGUs.

Commenters said moreover, larger utilities, or inte rest-controlling co-owners typically have at their disposal other options to meeting the require ments that are not available to small utilities. Commenters said for example, large utilities may ha ve interstate carbon trading programs in which to satisfy emissions reductions requirements contemplated in the Proposed Rule. Commenters said larger utilities that are also oper ators have the ability to operate EGUs in such ways to meet compliance requirements, such as by us ing different dispatching techniques, where small utilities have no such ability.301

Commenters emphasized that states should be permitt ed and encouraged to exercise their discretion to address special considerations toward s small utilities in order to equalize the playing field against their large utility counterpa rts.

Comment 58: Flexibility must be combined with accountability. The EPA should be careful not to create the expectation that the CPP's targets ar e all that can be asked of the electric utilities. Additional reductions should be required.

Response 58: The EPA is establishing a Best System of Emission Reductions consistent with the 111(d) requirements and considerations.

The following are summaries of the specific public comments under this comment:

Commenters said the CPP provides flexibility, and a llowing flexibility in achieving the goals can have significant benefits to stakeholders. The comm enters said however, the final plan must be crafted in a way that ensures environmental results , marrying flexibility with accountability. The commenters said because an effective response to cl imate change may require additional emissions reductions from the power sector, the EPA should be careful not to create the expectation that the Clean Power Plan's targets are all that can be asked of the electricity
utilities.

Commenters said the rule could be a little more agg ressive and include additional elements that will serve both to the goals of reducing greenhouse gases while giving state more flexibility. Commenters expressed support for the CPP, but said they don't go far enough.

Comment 59: Greater flexibility is need for Interstate Coopera tive efforts, including flexible frameworks within plans will be approved and market -based options that do not require an interstate agreement. In addition to flexible opti ons, the states need adequate time to meet, discuss, and create multi-state plans.

Response 59: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Multi-state plans. Commenters said there is a compe lling rationale for states to enter into multistate plans, including increased flexibility and co st-savings opportunities. Commenters said that while there are advantages to this type of arrangem ent, the Proposed Rule fails to take into consideration the arrangement from a regulatory sta ndpoint and the time involved in reaching an enforceable interstate agreement. Commenters said t o be binding or obligatory upon any state, Congress must approve any agreements or compacts re garding the control of air pollution. Commenters said additionally, not all states will b e able to enter into joint plans covering every aspect of their EPA-mandated plan.302

Commenters indicated that the rule must contain max imum flexibility and more time to design interstate plans and interstate carbon trading prog rams.

Market-based emissions trading. Commenters said the EPA needs to provide additional flexibility regarding emissions trading mechanisms that are market-based and do not require an interstate agreement. Commenters said the EPA shoul d clarify that states can cooperate regionally without blending state goals, whether ra te-based or mass-based, into a regional goal for which all cooperating states are jointly liable . Commenters emphasized that this should include ensuring that only the state that fails to meet its obligation is penalized under a multistate approach and not the other states participati ng in the program.

Carbon credit and liabilities. Commenters said the EPA should support approaches that allow
states to allocate credit for zero-carbon resources , along with approaches that allow states to reach agreements on the allocation of carbon liabil ities. Commenters said this includes ensuring that existing tracking mechanisms for renewable ene rgy, such as the Western Renewable Energy Generation Information System (WREGIS), are compati ble with the final rule.

Extensions. Commenters said the final rule should m ake it clear that a state qualifies for the available extension as long as it is committed to c oordinating action with other states. Commenters said this should include allowing states to pursue a dual-track approach -continuing to evaluate both multi-state options and single-sta te options.

Additional guidance. Commenters said the EPA should also provide greater clarity on the documentation requirements and compliance options f or multi-state and regional plans, including the option for states to participate in more than o ne multi-state program.

Commenters said for a multi-state plan to be a feas ible option under the Proposed Rules, the EPA needs to provide flexible frameworks within whi ch plans will be approved and marketbased options that do not require an interstate agr eement. Commenters said in addition to flexible options, the states need adequate time to meet, dis cuss, and create multi-state plans.

Comment 60: T&T Supplemental - The building blocks were create d to give the states flexibility in meeting emission reduction goals. S imilar flexibility was not given to the Navajo
Nation.

Response 60: See sections V, VI, VII, and VIII of the final rul e preamble for the EPA’s response
to this comment.

The following are summaries of the specific public comments under this comment:

Commenters said the Building Blocks were created to give the states flexibility in meeting emission reduction goals. Similar flexibility was not given to the Navajo Nation. A Navajo Nation plant adopted under the proposed supplementa l rule will not contribute to a "vibrant and growing economy"303

Comment 61: Flexibilities to States

Response 61: We disagree with these comments. We describe in th e preamble the flexibilities available to the states, including the additional f lexibilities afforded by the final rule, compared to the proposal. See sections V and VIII of the fin al rule preamble for more discussion of state
flexibilities.

The following are summaries of the specific public comments under this comment:

The commenters stated that, in prior rule makings, EPA has provided a target(s) for compliance and the goal for reduction, and each state was resp onsible for determining the best method of implementation. However, the commenters stated that in this rule making, EPA mandates a target for 2030 (the overall goal) and then interim targets for 2020 and every two years thereafter, thus usurping the state's autonomy to d etermine what is necessary to insure safe, reliable, cost effective electricity for their citi zens. The commenters stated that in 44 years of the CAA, the EPA did not micromanage the states, effect ively eradicating their autonomy. The commenters encouraged the EPA to establish the goal and allow the states to determine the glide path and technical solutions necessary to achieve t he goal thus insuring safe, reliable, environmentally sound, low cost electricity.

The commenters stated that the stringency of the pr oposed rule usurps states authority because states cannot exercise the flexibility in establish ing the performance standard allowed by section 111(d). Commenters stated that the proposed rule di ctates all key policy choices that should have
been left to the states. The commenters stated that EPA has claimed a high degree of flexibility afforded to states under the proposed rule, but the rule is not flexible. Commenters stated Section 111(d) is intended to provide a framework for State s to establish regulations on affected sources;
states are afforded a number of mechanisms to make such standards feasible and effective. Commenters stated that this is clearly not the case and the EPA is proposing binding emission reduction targets that each State would be legally obligated to meet. See 79 Fed. Reg. at 34,892; see also proposed 40 C.F.R. 60, Subpart UUUU; Secti on 60.5740(a3ii).

Commenters said that the only flexibility allowed u nder the standard is to determine where to require even more stringent standards within certai n building blocks should one block not be achievable, and that the mere shifting of targets w ithin building blocks does not really provide flexibility to states.

Comment 62: Proposed Rule does not provide states' flexibility to establish the performance
standard – states cannot take into account "remaini ng useful life" and other factors

Response 62: The EPA maintains that the final rule provides ampl e flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:304

Commenters argued by proposing binding, inflexible State emission reductions targets without the site-by-site analysis provided for in the CAA a nd regulations, the EPA is violating Congress' intent to allow States to adjust standards and emis sions controls to fit the fleet of existing sources. Commenters also argued that the EPA did no t consider the investments made by consumers to maximize benefits throughout a generat ing facility's useful life.

Commenters noted that state flexibility is specific ally addressed in section 111(d)(1), EPA must permit a state to consider, "among other factors, t he remaining useful life" of existing sources when applying performance standards. Commenters pro vided examples of factors that can be considered, including costs, non-air quality health and environmental impacts, energy requirements, physical impossibility, technical fea sibility, the costs and feasibility of installing controls considering the plant age, location, and p rocess design. Commenters said that the proposed rule does not adhere to the statute's requ irement that states be given maximum flexibility in applying BSER in setting standards o f performance for existing sources based on the unique circumstances of their states. Commenter s stated that the statute gives states the flexibility to establish the stringency of performa nce standards, the form that standards must take, the types of compliance measures EGUs may use to meet state performance standards, and the schedule under which EGUs must comply. For exam ple, the commenters noted that states should be free to develop their own "glide paths" t o achieving the emission reduction goals for the first compliance period.

Commenters believed the EPA structured the Proposed Rule in a way that would prevent individual states from considering "the remaining u seful life of the existing source" and other factors in applying a state-established performance standard. The commenters argued the proposed rule infringed upon states' rights and abi lity to consider remaining useful life and other factors. Commenters felt the "Agency's overreach" w ould result in the stranding of assets, which would impact rural electric cooperatives due to the ir relative small size, limited portfolio of resources, and recent significant capital investmen ts.

Commenters pointed to the 1977 Amendments and state d that the Amendments expressly provided that states determine the standard for exi sting sources, and that states have the authority when regulating existing sources to take into consi deration the costs of compliance and other nonair quality impacts and energy requirements. (Pu b. L. No. 95-95, 91 Stat. 700 (1977)). The commenters stated that the House Report of the Legi slative History confirms congressional intent to continue state primacy and protect the in vestment backed expectations represented by existing sources, and noted the language that, "the State would be responsible for determining the applicability of such guidelines to any particu lar source or sources" and "Unless the State decides to adopt and enforce more stringent standar ds, the State plan would be expected to take into account the remaining useful life of the sourc e (or sources)."

Commenters argued that the duty Congress imposed on EPA to allow states to consider the remaining useful life of the individual sources is further expanded in EPA's 1975 regulation at 40 C.F.R. 60.24(f). That regulation provides:

"States may provide for the application of less str ingent emissions standards or longer compliance schedules than those otherwise required by paragraph (c) of this section, provided that the State demonstrates with respect to each su ch facility (or class of facilities): (1)305

Unreasonable cost of control resulting from plant a ge, location, or basic process design; (2) Physical impossibility of installing necessary cont rol equipment; or (3) Other factors specific to the facility (or class of facilities) that make app lication of a less stringent standard or final compliance time significantly more reasonable."

Commenters said EPA rejected the case-by-case excep tions described in the federal implementing guidelines (40 C.F.R. 60.24(f)) in its proposed rule.

Commenters noted that in the implementing regulatio ns for Section 111(d) (Subpart B), EPA expressly acknowledged states' authority to establi sh performance standards. Commenters quoted Subpart B "States will have primary responsi bility for developing and enforcing control plans under Section 111 (d)" and "will also have au thority to grant variances in cases of economic hardship ...." and commenters cited Subpar t B: "Given the variety of circumstances that may be encountered in controlling existing as opposed to new sources, it makes sense to have the States develop plans based on technical in formation provided by EPA and make judgments, subject to EPA review, concerning the ex tent to which less stringent requirements are appropriate."

Commenters stated that the EPA guidelines do not al low the state to set less stringent goals or longer compliance schedules or consider the remaini ng useful life or other factors and thus the proposal is contrary to the CAA. Commenters asserte d that states have unique site-specific knowledge that allows them to design more effective emission standards.

Comment 63: State Flexibilities

Response 63: The EPA maintains that the final rule provides ampl e flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

The commenters said the binding emission goals prop osed for each state are sufficiently stringent that states will be unable to meet them u nless they: go beyond the traditional insidethe-fenceline first block and significantly alterin g their energy and resource policies; or retire units or drastically curtail production from existi ng coal-fired power plants. Commenters stated that this comes at a heavy price - for individual s ources that may be required to shut down before the end of their useful lives, with the potential f or huge stranded investments, or at the massive cost of adding otherwise unnecessary renewable ener gy.

Comment 64: State Goals

Response 64: The EPA has converted the rate-based goals to mass- based goals. See section VII of the final rule preamble of the CPP and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the f inal CPP for the final mass-based goals.306

The following are summaries of the specific public comments under this comment:

Commenters stated that while states might technical ly be free to vary from the BSER level of control of each building block, the practical effec t is that because of the magnitude of the proposed BSER emission reductions, EPA has establis hed the level of control that each state must meet and states do not have the ability to set their own standards of performance. Commenters stated that the State may convert the EP A-set state goal into a rate- or mass-based goal but cannot change the number, and the State ha s leeway to "assign the emission performance obligations to its affected EGUs, "but only", as long as, the required emission performance level is met.

Commenters stated even if a State were to determine that the emissions reduction targets set by the EPA was inappropriate and could not reasonably be achieved, then states have no power under the proposed rule to change the emission redu ction goal EPA has set for it based on that inability and would still be required to submit a p lan that satisfies the EPA's binding targets, or risk the imposition of a federal implementation pla n administered by the EPA.

The commenters concluded that EPA must modify its p roposed rule to allow states to adjust their goals as necessary to preserve state authority "to adopt whatever mix of emission limitations it deems best suited to its particular situation." Train v. NRDC, 421 U.S. at 79 (1975), s ee also
Union Elec. Co. v. EPA , 427 U.S. 246, 267 (1976) (noting that "the State has virtually absolute power in allocating emission limitations so long as national standards are met . . .").

Comment 65: State Flexibilities

Response 65: The EPA maintains that the final rule provides ampl e flexibilities to states. States are allowed to use the BSER measures, or other meas ures in their state plans to comply with the goals; there are flexibilities within the BSER meas ures and how they are executed; and states also have non-BSER measures at their disposal. See sections V.A and VIII.A. of the final rule preamble of the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenter argued that the EPA has not done a source -by-source analysis of each source in the state that would be subject to the proposed guideli nes, and noted that is the job of the states in setting the standards and developing its plan. The commenters argued that the express language in Section 111(d) for consideration of remaining us eful life and other factors suggests that the guidelines BSER proposed by EPA needs to be presump tive so state specific analyses can consider remaining useful life and/or stranded asse ts in developing state plans.

Commenters said that this rule has less compliance flexibility than what is typically allotted to states under section 111 (d). Commenters said, sec tion 111 (d) grants states the authority, in applying a standard of performance to particular so urces, to take into account the source's remaining useful life or other factors. Commenters said, EPA suggest that, given the degree of flexibility in the BSER approach, the statutory all owance for source specific considerations will not be allowed. Commenters said, the statutory dire ctive to allow states to take those factors into307

consideration should not be ignored in any context, but especially here where our options are so limited already.

Comment 66: Commenters stated that there is no specific langua ge in section 111(d) or elsewhere in the act that prohibits states from inc luding measures other than performance standards, implementation, and enforcement measures , provided that they reduce emissions from
affected EGUs.

Response 66: We agree that there is no such explicit prohibition . In particular, as stated in the proposal, the terms of CAA section 111(d) (1) do no t explicitly address whether, in addition to emission limits on affected EGUs, state plans may i nclude other measures for achieving the emission performance level. 79 FR at 34902. The pro posed portfolio approach would have allowed states to include such other measures, such as demand-side efficiency mechanisms, in their state plans. See 79 FR at 34902–03. But as ex plained in section VIII, after considering comments on the proposed portfolio approach, EPA is not finalizing that approach. Instead, EPA is finalizing an option to submit a “state measures ” plan type, under which a mass CO2 emission goal may be partially or entirely achieved through state measures that impose requirements on
entities other than affected EGUs and that are not included in the federally enforceable 111(d) state plan, provided the state submits standards of performance for CO2 emissions from affected EGUs in the form of a federally enforceable “backst op” that would be triggered if the state measures fail to achieve the required CO2 emission performance level. See section VIII. Thus, the state measures approach provides the flexibilit y that the commenters favored while ensuring that federally enforceable standards will be in pla ce if needed.

Comment 67: Comments in support of the level of flexibility pr ovided in the rule

Response 67: We appreciate the support and we note that the fin al rule differs from the proposed
rule that the commenters commented on in certain re spects. However, the final rule still provides the type of flexibilities suggested by the commente rs.

The following are summaries of the specific public comments under this comment:

• Commenters commended EPA for the level of flexibili ty provided in the rule, specifically:

• The commenters supported different goals for each s tate to reflect existing policies and resource availability.

• The commenters supported option for states to selec t a mass-based standard.

• The commenters supported allowing states to decide how to achieve the emissions target.

• The commenters supported states’ ability to deploy the system or systems of emission reduction most appropriate for the emission sources in their state (23140).

Commenters stated that this flexibility will assist Arizona in achieving its emissions reduction target through greater reliance on renewable energy and energy efficiency measures than in EPA's goal assumptions.308

Commenters stated that the procedures "similar to t hat provided by Section 110" allow states sufficient flexibility in meeting the state goal se t thereunder to include in their compliance plans other measures (i.e., measures that are neither per formance standards nor measures that enforce or implement performance standards).

Comment 68: Goal Design

Response 68: Please see section VII of the final rule preamble of the CPP for more information regarding state goals. The EPA has also converted t he rate-based goals to mass-based goals. See section VII of the final rule preamble of the CPP a nd the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule supporting the final CPP for the final mass-based goals.

The following are summaries of the specific public comments under this comment:

Commenters stated, U.S. EPA's general section 111 ( d) implementing regulations reinforce the range of approvable plan designs that U.S. EPA and the states may jointly develop. Commenters said, the general regulations track the statute's l anguage, directing that state plans are to "establish emission standards for designated pollut ants from designated facilities and provide for the implementation and enforcement of such emission standards." 40 C.F.R. section 60.21 (c) (emphasis added). Commenters said, although the sta ndards "shall apply to all designated facilities within the State," the precise way in wh ich the standards are applied is to be defined in the state plans themselves. See id. At section 60.2 4(b) (3). Commenters said, though careful monitoring and reporting are required to ensure tha t facility emissions decline as required, see id.at section 60.25, states may chart a range of pa ths towards the BSER emission levels. Commenters said, U.S. EPA maintains authority over the timing of this process via a requirement that plans include compliance schedules with "legally enforceable increments of progress" for "each designated facility or category of facilities." Id. at section 60.24(e) (1). Commenters said, thus, the regulations, appropriate ly, allow for state creativity while maintaining close U.S. EPA oversight to ensure that states stay on track.

Commenters stated, accordingly, the general regulat ions provide only limited constraints on just how emission standards themselves are to be designe d. Commenters said, they do set broad terms, providing that "[e]mission standards shall e ither be based on an allowance system or prescribe allowance rates of emissions except when it is clearly impracticable"- if so, other methods are presumably allowed. See id. At section 60.24(b) (1). Commenters said, mass-based trading programs qualify as allowance systems, and these are plainly allowed (and if they were not now permitted, U.S. EPA would still be free to specifically allow them, or other mass-based programs, in this instance, via notice-and-comment rulemaking, as it proposes to do). Commenters said, in sum, just as the statute does, the regulations leave a wide array of emissionstandards designs open to the states.

4.8 OTHER GOAL-SETTING APPROACHES309

Section 4.8 covers public comments related to other goal-stetting approaches to the final and interim goals.

Commenters have raised a number of issues related t o this subsection which are organized by topics (comments) below. Responses are provided for these topics.

Comment 1: Commenters offered an alternate plan from New York State.

Response 1: See section V of the final rule preamble of the CP P for the EPA’s response to this

comment.

The following are summaries of the specific public comments under this comment:

Commenters noted that an "alternate plan has been o utlined in detail for New York State.

Commenters noted that "Even though New York is dist ant from the U.S. sites that are the most advantageous for harnessing wind and solar energy, a peer- reviewed report by scientists from leading universities have described and justified a plan that fulfills the State's energy needs, virtually without exception, by 2020 (the exception being air transport)."

According to commenters, “The plan relies on solar energy, wind energy, and energy derived from a small number of water turbines" and accompli shes the following:

• "Reduces demand by about 37% through various effici encies"

• "Creates more jobs than jobs lost (aided by the fac t that most energy will be produced instate)"

• "Improves price stability since energy costs from w ind and the sun will be virtually zero"

• "Decreases the number of deaths per year due to air pollution by 4,000."

Comment 2: The Dynamic Distribution System

Response 2: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters recommended "The Dynamic Distribution Sy stem: Encouraging competitive markets forces to complement compliance goals will move the U.S. toward steady and sustained greenhouse gas reduction goals; redesigning the ene rgy distribution market throughout the U.S. to allow for new energy generation market entrants and even individual businesses and home-310

owners to sell excess self-generation energy in a f air, open, and transparent dynamic distribution system marketplace is the recommended path."

Comment 3: The EPA should not compel the creation of multi-st ate collaborations, but should support multi-state collaboration when states reque st it

Response 3: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said each state has its own unique energ y supply, distribution and customer end use infrastructure that they weigh when determining the cost of compliance and level of hardship to electricity consumers in the state under the EPA's CPP targets. Commenters said the EPA should not compel the creation of multi-state collaboratio ns, but should allow states to voluntarily provide for cooperative agreements for CPP complian ce if they determine it is mutually agreeable and EPA determines that equivalent enviro nmental performance is delivered.
Commenters said that the EPA should not establish C PP targets that are not economic or feasible within each state or based on an assumption of stat e collaborations.

Comment 4: Regional versus state specific goals

Response 4: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Several commenters said the EPA's proposal suggests that states that coordinate implementation of their compliance plans would need to combine all of their state goals in a multi-state group and implement the same multi-state goal. Several co mmenters said that the combining of state goals to create a multistate goal represents only o ne possible approach to multistate coordination and the EPA should enable multistate approaches und er which individual states keep their state goals and nevertheless allow for cooperative activi ties between states.

The commenters said enabling regional approached to compliance may have implications for
how the EPA determines the extent of available rene wable energy in constructing each state's goals. The commenters said the regional approach t o state goal-setting described in the EPA's NODA is one such way that the state goal methodolog y can be better aligned with the principle of interstate trading of renewable power and associ ated attributes.

Comment 5: The best approach to achieve the goals set forth b y the CPP is a regional approach, and not a state-by-state approach311

Response 5: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Several commenters said they believe that the best approach to achieve the goals set forth by the Clean Power Plan is a regional approach - and not a state-by-state approach. Commenters said if the approach to Clean Power Plan was a regional app roach, then many of the compliance hurdles
and constraints would be alleviated. Commenters sai d this is particularly true given the vast majority of electricity is bought and sold within a n RTO region, all of which (save Texas) have a multi-state footprint. Commenters said in addition, studies by RTOs indicate costs are minimized using a regional approach, and in fact, MISO has de monstrated through detailed analysis that regional approaches are more economic. Commenters said the electricity industry already operates on a regional basis, and electrons flow wi thout regard to geographic conventions: What
matters in the electric transmission business are t he boundaries between transmission operators.

Commenters were very supportive of allowing for mas s-based, regional plans amongst state to achieve compliance and create region-wide solutions like the successful Regional Greenhouse
Gas Initiative.

Commenters stated EPA should select Regional Approa ch as its primary model for the BSER. The commenters acknowledged that there is a great d eal of flexibility for states or regional groupings of states to develop compliance options f or the proposed rule, even outside the direct
framework of the BSER. The commenters said this fle xibility no doubt will help mitigate some of the severe job impacts that could be a consequen ce of the proposed rule. The commenters said even so, these impacts are expected to be substanti al; the 46-50 gigawatts of capacity EPA expects to be taken out of service under the more s tringent proposed Option 1 represents (by commenters estimate) at least 7,200 direct jobs at power plants with a substantial number of indirect jobs, perhaps as many as 60,000, from comp anies that supply the power plants and from businesses that cater to the operations' employees. The commenters said Option 2 would reduce the amount of capacity expected to be taken out of service by about one-third, and would substantially mitigate the harsh impact to workers and communities, with only very moderate impacts on the carbon dioxide emissions reduction e xpected. The commenters said in context, EPA states clearly that the expected carbon reducti on from the proposed rule is less than that for either of the two light duty vehicle rules it has p romulgated. The commenters said EPA should encourage states to combine their compliance effort s via regional approaches; substantial efficiencies and potential cost-savings are likely if states are allowed to work together, with little or no impact on the effectiveness of the rule, and those efficiencies could further ensure grid reliability and preserve jobs and communities.

Comment 6: Regional approaches are most cost effective mechan isms for compliance - role of
RTOs

Response 6: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.312

The following are summaries of the specific public comments under this comment:

Commenters said regional approaches to compliance p rovide the easiest mechanism for handling the interstate effects of state plans and recent an alyses, including one from MISO and one from the Brattle Group, show that regional approaches ar e the most cost effective mechanisms for compliance. Commenters said although EPA has not de fined an exact approach to creating a regional plan, EPA notes that Regional Transmission Operators, such as PJM Interconnection, could have a role in implementing, or at least logi stically facilitating, multi-state efforts.

Commenters stated that a regional approach would he lp Ohio overcome technical challenges such as cross-state power flow and crediting and, m ore importantly, would lower implementation costs. Commenters added that at the same time, it w ould facilitate the work of the region's business community responsible for carrying out emi ssion reductions by reducing the number of markets and variability between them.

Commenters said in addition to the role that PJM co uld play in meeting a regional compliance target that included Ohio, Ohio AEE believes that P JM could help Ohio realize renewable and energy efficiency resource gains. Commenters said P JM already has a system in place to utilize demand response resources, and according to PJM, th ese demand response resources are competitive with wholesale electricity generation i n some load areas. Commenters said as Ohio increases its energy efficiency resources, PJM coul d integrate these into its existing system.

Comment 7: "Regionalizing" the RE goal computation is technic ally unsupportable. The EPA must revisit any computation method for RE and appl y it based on state-specific factors and
abilities

Response 7: See section V.E. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said regionalizing the RE goal computati on is technically unsupportable. Commenters said they understand tha t Ohio was grouped with other states based in part on "regional similarities" that can be infe rred from the state-level technical potential reported in an NREL GIS-based analysis. Although c ommenters didn't dispute the quality of the NREL study cited, they noted that there is signific ant variation in the various renewable technology potentials amongst the states grouped wi th Ohio. Commenters said although it is unclear from the available information, it appears that the East-Central region was grouped based on the technical potential of rooftop solar - howev er, in no IPM modeling study did solar generation demonstrate significant growth in Ohio.

Commenters urged EPA to clarify the methodology of grouping states together, with emphasis on those renewable potentials that are demonstrated to be similar amongst the various regions. Commenters said it is clear that if EPA is to pursu e setting of renewable goals based on regional potential, more reasonable groupings must be used. Commenters said in setting BSER, U.S. EPA must examine what is demonstrably achievable, suppo rted by technically sound projections, and313

cost effective. Commenters said the rational for gr ouping states based on a wide range of technical potentials is unclear, and said if U.S. E PA insists on continuing with this approach U.S. EPA must consider what renewables are currently in use and being developed in each state. Commenters said undoubtedly, renewable potential ca n be very different from state-to-state, even those within certain presumed regions. Comment ers said the EPA has derived unrealistic RE goals, and has ignored the fact that many state RE portfolios have a cost safety valve to protect rate-payers from exorbitantly high RE costs . Commenters said however, U.S. EPA assumes when setting BSER that a state can achieve its entire RPS goal thereby artificially inflating RE potential and ultimately assumed reduc tions. Commenters said the EPA must analyze each states RPS programs in more specificit y to truly inform a cost-effective and technically feasible BSER for RE.

Commenters offered several instances which clearly demonstrate that the EPA's "regional" approach to determining a state's RE goal is not ap propriate and the EPA should be determining this ability on a state-by-state basis.

Commenters stated the EPA notes that for some state s interim and final targets never reach the level they actually achieved in 2012. Commenters sa id clearly in these cases the "best practices" is not computed accurately if a state does not even have to achieve in 2030 what they were capable of achieving in 2012.

Commenters stated the EPA notes Alaska and Hawaii a re not grouped with other states given their unique locations, and the EPA developed RE ge neration targets for each of those states based on the lowest values for the six regions eval uated. Commenters said the EPA is giving consideration to unique location but ignores with a ll other states uniqueness actually related to RE potential.

The EPA acknowledges the approach to quantification of a state's RE generation target does not explicitly account for the amount of fossil fuel-fi red generation in that state and therefore, the application of their approach could yield, for a gi ven state, an increase in RE generation that exceeds the state's reported 2012 fossil fuel-fired generation. [79 FR 34868] Commenters wondered, what would that additional RE displace.

Commenters said fundamentally, this approach, in so me instances will either drive a state's final goals up or down, inequitably compared to other sta tes, and this cannot possibly be considered a best practices scenario. Commenters said the EPA mu st revisit any computation method for RE and apply it based on state-specific factors and ab ilities.

Comment 8: States need more time to develop multi-state plans - the two years for coordinating with other governments may not be sufficient. The EPA should do more to facilitate development and implementation of regional plans or arrangements, and one way is for the rule to recognize "modular" plans like those discussed b y CARB.

Response 8: See section I.A., III.A. and VIII of the final rul e preamble of the CPP for the EPA’s response to this comment.314

The following are summaries of the specific public comments under this comment:

Need more time for plan development. Commenters sa id while EPA affords states more time to develop multi-state plans (two years, rather than t he one year allotted for an individual state plan), two years to coordinate with other governmen ts may not be sufficient. Commenters said
the additional time allowed for multi-state coordin ation is further muted by interim filings and target deadlines that must include specific impleme ntation details. Commenters said as proposed, the timeline for submitting plans and for implement ation of those plans does not contemplate the time need for inter-state coordination (even in the absence of a multi-state plan), nor for development of necessary infrastructure improvement s needed to execute the mandated
reductions.

Enforcement waivers and extended deadlines. Comment ers said furthermore, EPA should do more to recognize the interrelated nature of the el ectricity grid in various regions and provide more robust measures and provisions that facilitate the development and implementation of regional plans or arrangements, including recogniti on of measures that address enforcement
waivers or extended deadlines if warranted. Comment ers said indeed, as EPA itself noted, "system operators have offered suggestions in using regional approaches to implement CAA section 111(d) while maintaining reliable, affordab le electricity." (79 Fed. Reg. at 34,846) Commenters indicated such regional approaches canno t be successfully implemented within the time-lines set forth in the Proposed Rule.

Modular Plans. Commenters said one way to facilitat e multi-state agreements is for EPA's rule to recognize "modular" plans, like those that have bee n discussed by the California Air Resources Board. Commenters said these individualized plans w ould allow states that are in accord on specific matters to enter into compliance agreement s where a comprehensive multi-state plan (where all of the parties agree to all of the neces sary terms and conditions that would be required for a comprehensive multi-state plan) may be infeas ible. Commenters said not all states are similarly situated with regard to meeting their sta te targets, or the measures that would most likely be employed to get there. Commenters said is sue-specific agreements with another state or groups of states could be utilized to advance a sin gle objective and facilitate attaining the states' targets. Commenters stated these types of arrangeme nts would also allow better alignment of individual issues, such as the treatment of energy efficiency and renewable energy, and would facilitate regional coordination regarding critical electric-grid related considerations.

Comment 9: Additional clarity is needed regarding some issues related to multi-state/regional compliance, and EPA must provide additional assista nce and infrastructure related to multistate/regional compliance

Response 9: See sections VIII of the final rule preamble of th e CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated that to support multi-state appro aches to 111(d) implementation, the EPA
should:315

“Provide greater clarity on requirements for states to qualify for the 2-year extension to submit state plans when coordinating action with other sta tes.

Clarify that states can cooperate without blending state goals into a multi-state goal (which is in accordance with best emissions tracking and account ing practices to ensure appropriate crediting and to avoid double counting). Indeed, multi-state cooperation is most likely to arise among states that have individual state plans that recogn ize reductions or credits from other states - this approach should qualify as a multi-state approach e ligible for an additional year extension.

Provide the necessary assistance and infrastructure for states to accomplish multistate approaches. For example, EPA should provide or appr ove the use of credit tracking systems for states that wish to implement trading programs and accept reductions or credits from other states as valid compliance currency.

For rate-based trading between states, EPA would ne ed to assist states on Evaluation, Measurement and Verification (EM&V), tracking and m inimum requirements for crediting to enable a tradable credit system, and clarify how st ates could take advantage of emissions reductions driven by shifts in utilization that occ ur across state lines. EPA should also assist states with a tracking system or enable states and regions to build existing renewable energy tracking systems for this purpose.

Clarify several steps involved in developing a regi onal plan including (a) conversion to a massbased goal in a manner that does not disadvantage s tates that choose this option, and (b) the development of state 111(d) plans in states that ar e "split," with part of their generation in one regional transmission organization ("RTO") and the remainder in a different or no RTO.”

Commenters stated EPA should provide states with de tailed directions, equations, and examples explaining how a rate-based multi-state goal can be calculated by states that agree to participate together in a multi-state plan. The commenters said this guidance should also include directions on how to convert a multi-state rate-based goal to a multi-state mass-based goal.

Comment 10: For states choosing multi-state compliance option, the EPA should retain the approach of developing state-specific goals, rather than requiring multi-state or regional goals, the EPA or a third party should provide credit trac king system, and the EPA should allow for extension of plan submittals

Response 10: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Several commenters said that the EPA should retain its approach of developing state-specific goals and should not require multi-state or regiona l goals for states choosing multi-state compliance options. Commenters said the EPA's prop osal suggests the development of joint performance standards for states wishing to coordin ate their compliance plans. Commenters noted that this would likely involve the developmen t of a single emissions rate target for multiple316

states. Several commenters said there is little rea son to expect that states with goals less stringent than an average single goal would be willing to acc ept a more stringent regional average goal.

Commenters said given the timeframe available for s uch multi-state plan development, including the likely inability of states to agree on a single emissions rate target and develop a program to implement such a mechanism in a timely fashion, it will be extremely difficult to achieve. Commenters said that given the complexity of the ru le, states will likely need several years to fully examine their options for regional cooperatio n and to compare these approaches with statespecific compliance options, and at the end of this time consuming process, states may still decide to comply via strategies they can apply with in their state boundaries. Commenters said however, states that have seriously examined region al compliance options should still qualify for the extension for completion of their state plans s o long as they demonstrate that they are actively engaged in a process with other jurisdicti ons to consider multi-state coordination and that they are developing multi-state or individual state plans that contemplate such coordination. Commenters said that multi-state pla ns should provide for trading between states of credits representing tons of emissions or megawa tt-hours of generation, and the EPA or another third part entity should provide a credit t racking system to be used by states wishing to participate.

Commenters said that the EPA points to RGGI as an e xample of a regional program with a single emission target, but said it is important to note t hat RGGI is made up of a group of similarly situated, like-minded states, all of whom had the s ame overall emission reduction goal - a 10 percent reduction in carbon dioxide emissions - and required each state to agree to and pass model legislation. Commenters said on the other han d, the Western United States is an area that is very diverse in its generation resource mix and access to fuel supplies, whether they are minemouth coal supplies, wind resources, or rivers that supply an abundance of hydroelectric resources. Commenters said the application of BSER results in dramatically different emission rates to be achieved in the Western United States, which includes one of the highest emission rate goals (1,771 lb CO2/MWh in Montana) and the lo west emission rate goal (215 lb CO2/MWh in Washington). Commenters said this divers ity creates potentially insurmountable hurdles for Western states to agree on a single emi ssion rate target, and such a single target may not be appealing even to likeminded states given th e complexities, including how states may be penalized for noncompliance, of enforcing a multi-s tate program with a single emission rate target on a state by state basis. Commenters theref ore recommended that EPA retain its approach for developing state-specific emission rate targets , but allow states to develop creative and innovative multi-state compliance solutions.

Comment 11: The choice of which option to use for calculating a weighted average, rate-based CO2 emission performance goal for multiple states s hould be left to the states forming the multistate group. States should have the option of eith er relying on its modeling capabilities, or if state defers to its ISO, the ISOs modeling capabili ties when establishing the state's goals.

Response 11: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.317

The following are summaries of the specific public comments under this comment:

Several commenters provided input regarding which o f the two proposed approaches for joint demonstration of emission performance in multi-stat e plans should be used. Several commenters said the EPA proposed two alternative methods to ca lculate the weighted average emission rate goal for a group of participating states, and indic ated that states should have the discretion to decide which approach makes the most sense for thei r multi-state jurisdiction. Commenters said that if only one option can be used, the second opt ion (using projected quantity of electrical generation by affected EGUs each year in each of th e states) is preferred because it acknowledges that different states within a multi-s tate grouping will grow at different rates. Commenters said if however, the first optio n is required (uses electricity generation by affected EGUs in each of the states during the 2012 base year), a multi-year baseline should be used instead of the unrepresentative (due to abnorm ally low natural gas prices) 2012.

Commenters said to assure that state goals are set which ensure reliability, manage cost and recognize the need to balance the interactions betw een the four building blocks on an hourly basis taking into account the regional market impac ts, the state should be able to either rely on its modeling capabilities, or if the state defers to it s ISO, the ISO's modeling capabilities when establishing the state's goals. Commenters said reg ional models will incorporate greater consideration of regional impacts on a state's goal s by accounting for impacts and interactions between the region's electric resources.

Comment 12: Multi-state approaches

Response 12: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Several commenters argued that EPA lacks the expert ise to properly assess costs savings associated with multi-state approaches. Commenters indicated it should be left to the participating states to make the economic determina tion that such an agreement is in the interest of the ratepayers. Commenters said that while the CAA does leave discretion to the Administrator, such economic consequences are so st ate-specific that it is beyond the EPA's ability to make those decisions, and therefore, the requirements should be limited to meeting the required emission reduction goals. Commenters said that even if EPA did have the expertise to properly assess costs savings associated with multi state approaches, it would be inappropriate to penalize states that are willing to and can reduce program costs by utilizing multi-state options or to gauge the reasonableness of the costs of state-s pecific goals by surmising potential economic benefits associated with theoretical multi-state ap proaches.

Commenters posed several questions regarding modeli ng for potential multi-state targets. Commenters asked:

If modeling is required for potential multi-state t argets, should states model the individual state rate targets or a regional target.318

Should the regional target be weighted by state fos sil generation or some other metric

Should it be based on 2012 generation or projected generation

Comment 13: The EPA should impose a minimum gas generation sha re target by state. This could increase true flexibility, enhance opportunit ies for coordinated state action, and decrease
overall economic burden of the CPP

Response 13: The EPA has revised its building block two assessm ent and determination of subcategory-specific rates. The regionalized build ing blocks help share some of the natural gas abatement potential across every state relative to proposal that limited building block two reduction potential within state. See section V.D f or discussion of building block two.

The following are summaries of the specific public comments under this comment:

Commenters said that Building Block 2's re-dispatch step effectively displaces all coal generation in Mississippi, making the rule very inf lexible. Commenters said that states and their utilities must plan based on the state-specific goa ls the EPA has derived. Commenters said that even if multi-state compliance and/or trading mecha nisms could enhance flexibility in theory, the proposed goals and compliance schedule will in prac tice force states and utilities into actions that will increase costs and risk reliability impacts. Commenters said that several of these issues could be addressed by requiring a minimum share of gas by state, and then adjusting other state requirements to provide actual flexibility in devel oping compliance plans.

Commenters said a modified goal setting methodology with minimum state gas generation shares or alternatively, maximum coal generation shares or maximum average emissions rates - would also provide real flexibility to states such as Mis sissippi to maintain some generation diversity and would help to minimize overall compliance costs because states would not be forced into potentially irreversible actions to ensure complian ce on a single-state basis. Commenters indicated they have not evaluated what minimum shar e level could be appropriate, but believes such modification could increase true flexibility, enhance opportunities for coordinated state action, and decrease the overall economic burden of the Clean Power Plan, while maintaining overall emissions reduction goals.

Comment 14: The EPA should evaluate the merits of a uniform ra te-based national performance goal. It would be simpler, could achieve the same 30% national reduction, would address early action, increase reliability, and provide flexibili ty.

Response 14: See sections V of the final rule preamble of the C PP for the EPA’s response to this

comment.

The following are summaries of the specific public comments under this comment:319

Commenters said the EPA should evaluate the merits of a straightforward, uniform, rate-based, national performance goal that considers all applic able electric generating units (EGU), as opposed to EPA setting individual, state-specific g oals. Commenters said a single national goal
could achieve the same 30% national emission reduct ion and be based on a national performance limit in the range of the proposed Section 111(b) s tandards applied to the collective power sector
for each state. Commenters said that additional tim e and alternative voluntary strategies for compliance could be provided to states that require the greatest emission reductions.

Commenters said a national performance goal would e quitably address past emissions reductions (early action) and could be designed to provide fle xibility for achieving compliance. Commenters performed a variety of calculations and concluded that a national performance standard of 1,030 lb/MWh would achieve similar emis sion reductions sought by the EPA under its proposed rule and would appropriately credit pa st actions and broaden compliance options. Commenters said that the 1,030 lb/MWh goa l is within the range of the EPA's proposed Section 111(b) new source performance standards for coal boilers and NGCC units, which is appropriate over the long term, as existing units a re replaced with new units.

Commenters said as an alternative to a suggested 1, 030 lb/MWh standard, the EPA could apply the proposed Section 111(b) standards to each affec ted existing unit under Section 111(d), and compute a weighted average based upon a formula to be determined. Commenters said under this scenario the national performance goal would be set within the range of 1,000 lb/MWh and 1,100 lb/MWh, using Section 111(b) standards for ne w coal boilers and natural gas combined cycle power plants (NGCC). Commenters added that wh ile New Jersey has not developed a methodology for this approach, the EPA could perfor m a weighted average approach by either using historic unit generation or projected unit ge neration.

Commenters added that a uniform national goal would improve the reliability of the electric grid by enabling states like New Jersey to maintain some fuel diversity, which is important for addressing price volatility and weather events.

Comment 15: The proposed CPP RE targets are too low; UCS's "de monstrated growth" approach should be used to set more aggressive targ ets for RE

Response 15: See section V.E. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

The commenters said to drive the kind of renewable energy gains necessary to have meaningful impact on U.S. carbon emissions, the EPA should ado pt the Union of Concerned Scientists' ("UCS") recommendations for strengthening the CPP. The commenters said the UCS's "Demonstrated Growth" approach uses "the latest ava ilable market data, demonstrated rates of growth in renewable energy, and existing state comm itments to deploy renewables."

The commenters said the UCS analysis showed that th e levels of renewables reached through compliance with the CPP are lower in 2020 than what the EIA predicts would occur under a320

business-as-usual approach, and the CPP's 2030 resu lts are only marginally higher than the EIA's projections.

The commenters said the UCS Demonstrated Growth app roach uses baseline renewable energy generation for each state and adds a reasonable inc remental level of growth. The commenters said in Texas, for example, the UCS Demonstrated Gr owth approach assumes that Texas will maintain the 1.1% annual growth rate in renewable e nergy deployment that the state achieved during the baseline period - 2009 through 2013. The commenters indicated that UCS estimates that a demonstrated growth approach would result in 40% renewable generation in Texas by 2030, compared to just 20% under EPA's proposal, wi th improvements in every region of the country.

Comment 16: Regulation must account for remaining useful life of EGUs; states should have lead role in developing targets; targets for existi ng sources cannot be more stringent than corresponding standards for new sources under Secti on 111(b)

Response 16: See sections V and VIII of the final rule preamble of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Background. Commenters explained that UNS subsidiar ies TEP and UNSE are members of the Arizona Utility Group (AUG), which also is filing c omments on the Proposal. Commenters said the AUG comments present details of a joint proposa l (AUG Proposal) that would achieve a substantial CO2 emission rate reduction while mitig ating other adverse impacts that would result from the EPA's Proposal.

Commenters said the fundamental tenet behind the AU G Proposal is that the EPA is compelled both statutorily, and by common-sense public policy to recognize and account for the "remaining useful life" of coal-fired power plants that are se rving Arizona residents at a cost already incorporated in customers' approved rates. Commente r said in addition, the AUG Proposal emphasizes the lead role that states are afforded i n establishing "standards of performance" under Sec. 111(d), and clarifies that "standards of perfo rmance" for existing sources under Sec. 111(d) cannot be more stringent than corresponding standar ds for new sources under Sec. 111(b).

Suggested specific changes to methodology. Comment ers offered specific language incorporating these concepts as presented below:

1. For purposes of goal setting under BB2:

a. Redispatch from coal-fired EGUs to natural gas c ombined cycle (NGCC) EGUs should occur upon the later of any of the following :

i. January 1, 2020;321 ii. 40 years after initial commencement of operati on; or

iii.20 years after commencement of operation of maj or pollution control retrofit, such as selective catalytic reduction (SC R), flue gas desulfurization (FGD), or baghouses at any EGU if i nstallation occurred prior to issuance of the final 111(d) rule, or afte r commencement of operation of selective non-catalytic reduction (SNC R) or electrostatic precipitators (ESPs) at an EGU owned by a small uti lity as defined by the Federal Energy Regulatory Commission (FERC) if inst allation occurred prior to the first year of the compliance period (i .e., 2020).

b. For coal-fired EGUs that either shutdown or conv ert to natural gas-fired operation, re-dispatch would occur as specified in an applicable implementation plan or enforceable Title V permit, provided that s uch commitment is entered prior to the effective date of the final rule and t he date of shutdown or natural gas conversion is prior to January 1, 2030.

c. Coal-fired EGUs that do not re-dispatch prior to January 1, 2030 under paragraphs 1.a or 1.b remain coal-fired EGUs for pu rposes of calculating the
Interim and Final Goals.

2. For purposes of goal setting, when re-dispatching t o NGCC, a rate of 1,000 lbs CO2/MWh should be used, consistent with the most st ringent standard in the EPA's proposed New Source Performance Standard for EGUs.

3. The State should establish the Interim Goal in its State Plan based upon EPA's building block approach as modified by paragraphs 1 and 2 above.

Effect of suggested changes. Commenters said incor porating these changes, Arizona's interim goal emission rate is determined through the state planning process, and the final 2030 goal
emission rate becomes 963 lbs CO2/MWh.

Commenters said Salt River Project Agricultural Imp rovement and Power District (Salt River Project or SRP) conducted an analysis of the impact the AUG Proposal would have on each state using a database developed and maintained by The Br attle Group. Commenters said SRP's analysis concluded that, although these changes wou ld result in later re-dispatch of coal-fired units in a limited number of additional states, the overall impact across the entire universe of
affected units is small.

Commenters said UNS believes that the AUG Proposal satisfies the intent of Clean Air Act Section 111(d) while avoiding the EPA Proposal's si gnificant threats to reliability, affordability and Arizona's economy. Commenters strongly encourag ed the EPA to incorporate these changes
in the final rule.

Comment 17: Proposed methodology using existing RPS requiremen ts as a foundation significantly underestimates renewable energy poten tial in many states322

Response 17: See sections V and VI of the final rule preamble o f the CPP for the EPA’s response to this comment

The following are summaries of the specific public comments under this comment:

Commenters indicated that the methodology EPA propo ses to estimate renewable energy potential available to states significantly underes timates the potential. Commenters asserted that an approach that incorporates all renewable energy resources and takes into account established trends in market growth would provide a better basi s for determining feasible renewable generation growth in each state as part of building block 3.

Commenters said to estimate the carbon emission red uctions from affected EGUs achievable based on increases in renewable generation, EPA has developed a "best practices" scenario for renewable energy generation based upon RPS requirem ents already established by a majority of states. Commenters stated that this methodology, h owever, represents a significant understatement of the renewable energy potential av ailable to states for the reduction of greenhouse gas emissions.

For instance, according to commenters, seven states had more renewables in 2013 than EPA's 2030 targets for those very states, and 17 states w ould develop less renewable generation under EPA's target than under their existing mandatory RP Ss. Commenters said under EPA's proposed method, 25 states also would not reach the proposed regional target by 2030. Commenters said EPA's approach effectively assumes that renewable g eneration grows at 0.65 percent of total electric sector market share per year, well below t he recent market share growth rate of 1 percent per year. Commenters said as such, the proposed app roach's renewables targets fail to meet the CAA standard for "best" system of emissions reducti ons.

Comment 18: The proposed RPS approach is flawed because state RPSs are not necessarily based on the amount of cost-effective, achievable R E within a given state's or region's borders.

Response 18: See sections V and VI of the final rule preamble o f the CPP for the EPA’s response to this comment

The following are summaries of the specific public comments under this comment:

Commenters stated that although the TSD and NODA ap proaches are indeed an improvement over the RPS-based approach, they still significant ly underestimate the actual RE potential for states today. The proposed RPS approach is flawed, according to commenters, because state RPSs, which are policy commitments, are not necessa rily based on the amount of cost-effective, achievable renewable energy within a given state's or region's borders.

Commenters said the Clean Power Plan assumes that s tate RPS programs are set based on an assessment of the costs and feasibility of target p ercentages of renewable energy. Commenters said however, the establishment of the BSER, includ ing evaluations of cost and feasibility, is the responsibility of the EPA and not the states. Comme nters said by resting the justification for the level of achievable renewable energy generation on the fact that "states have already had the323

opportunity to assess those requirements against a range of policy objectives including both feasibility and costs", EPA's Proposed RPS Approach does not directly demonstrate that the Administrator has determined that building block 3 meets the standard for BSER, as Section 111(d) requires.

Commenters agreed that the recognition of regions t o cost-effectively support renewable generation is an important insight that should be u sed in establishing the BSER. However, Commenters argued, this conclusion does not mean th at the responsibility to determine BSER for each region should be left to the political decisio ns reflected in some state policies, which may have been developed for purposes other than reducin g carbon emissions at affected EGUs. Commenters said it is unlikely that state RPS were set based on the same criteria that the EPA is required to use when determining BSER.

Commenters said in addition, RPS requirements devel oped by the states do not necessarily reflect consideration of regional achievability. Co mmenters said for instance, many of the existing state RPSs do not take into consideration renewable energy trading markets, achievability of regional emission reduction goals, and the full extent to which renewable generation may be implemented within a particular r egion. Commenters said further, by only examining the impact of one policy framework, the a nalysis is inherently conservative, as many other policy options are available in addition to R PS frameworks for EPA to establish best practices for renewable generation expansion.

Comment 19: Regional growth factor should not be applied to ea ch state; instead the EPA should assume that each state can meet the average of existing RPSs in the region

Response 19: See section V.E. of the final rule preamble of the CPP for the EPA’s response to
this comment

The following are summaries of the specific public comments under this comment:

Commenters disagreed with the proposed RFS approach which only expects a state to meet a regional average rate of renewable energy generatio n, even if the state's renewable generation already is above that average. Commenters recommen ded that EPA not apply the regional growth factor to each state and instead assume that each state can meet the average of the existing RPSs in the region.

The commenters said under the EPA's proposal, state s with renewable generation below the regional targets make pre-determined incremental an nual progress; however, once a state reaches that goal, renewable generation remains flat throug h 2030. Commenters said this results in markedly slower growth in renewable generation than is achievable to best reduce carbon emissions and is not consistent with statutory mand ate to create "best practices". Commenters said in addition, using the proposed regional appro ach to establish generation targets, the EPA would effectively be giving some states renewable g eneration targets lower than the state's actual reported generation amounts for 2012.324

Commenters said under the EPA's Proposed RPS Approa ch, if a state's renewable generation in 2012 has already exceeded the regional renewable ta rget, its annual renewable generation levels are held to the regional target for the entirety of the compliance duration, 2017 to 2029.
Commenters said this would result in an unintended outcome whereby a number of states would
not need to reduce carbon emissions below their 201 2 levels under building block three, and the same regional renewable generation target in percen tage (share of total generation) terms is imposed on all states in a given region.

Commenters said in addition, because of the applica tion of the regional growth factor to the 2012 renewable generation in a state, the absolute megaw att-hour target would be smaller for states starting with a lower amount of renewable generatio n, and larger for a state starting with a higher absolute amount of renewable generation. Commenters said as such, some states would effectively be rewarded for not pursuing cleaner en ergy portfolios before 2012. EPA's final rule should reflect a more equitable solution.

Comment 20: The EPA should not assign RE goals based on region al averages and 2012 generation, but instead should conduct rigorous sta te-specific RE integration analyses.

Response 20: See section V.E. of the final rule preamble of the CPP for the EPA’s response to
this comment

The following are summaries of the specific public comments under this comment:

Commenters said assigning renewable goals informed by regional averages and 2012 generation does not ensure realistic goals based on transmissi on constraints and grid reliability. Commenters said EPA should conduct rigorous state-specific ren ewable energy integration analyses, factoring
in:

• Existing transmission capacity and reliability issu es,

• Environmental siting requirements,

• Land use requirements and restrictions,

• Endangered and species of special concern habitat, and

• Other factors

To inform the renewable goals set for states, comme nters said EPA should also consider the impact of neighboring states and regions attempting to significantly increase renewables integration within the same timeframe, which will a lso compound reliability and constructability related challenges325

Comment 21: States, not the EPA, should determine key, state-s pecific elements of BSER, such as renewable energy potential, as part of their sta te plans.

Response 21: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment

The following are summaries of the specific public comments under this comment:

Commenters suggested EPA consider allowing states t o determine key, state-specific elements of the BSER, such as renewable energy potential, as pa rt of their state plans in the phased approach recommended above under "policy flexibility". Comme nters said this is especially important for states with extensive renewable programs already un derway, as well as in other states where breakthroughs in renewable energy technologies and business models have the potential to unlock much more competitively priced renewable ene rgy in the future than is apparent today.

Comment 22: The EPA should consider an incremental approach to BB1 so that there would be no reductions associated with coal plant heat rate improvements for states that generated less than roughly 10 percent of their total annual energ y from coal as of the end of 2012

Response 22: See sections VI and VIII of the final rule preambl e of the CPP for the EPA’s response to this comment regarding credit for early actions. The EPA is not implementing an incremental approach to Building Block 1 in the fin al rule.

The following are summaries of the specific public comments under this comment:

Commenters said that the adjusted emission rate for New York is overly stringent and penalized New York for its early actions. Commenters suggest ed an incremental approach to BB1 which includes no reductions associated with coal plant h eat rate improvements for states that generated < 10% of their total annual energy from coal as of the end of 2012.

Commenters said New York has invested in a wide-var iety of energy reduction programs that (when coupled with the energy efficiency inherent i n urban systems) have led to relatively low carbon dioxide emissions when compared with other s tates. Commenters said New York's low carbon dioxide density is also a reflection of the fuel mix of the power sector. Commenters said New York has historically invested in the use of hy droelectricity from in-state hydroelectric plants and high-voltage transmission links to hydro electric facilities in Canada. Commenters said when combined with nuclear capacity, more than 53 p ercent of the electricity used in New York is generated by zero-emissions resources, with less than 3 percent generated by coal in 2013.

Commenters said in states that have taken early act ion to reduce their dependence on coal, increase the amount of natural gas capacity, and in tegrate zero-emissions resources, EPA's four Building Blocks combine to create stringent targets and challenging conditions on the power system.

Commenters said in establishing its targets for coa l generation heat rate improvements, EPA repeatedly highlights the range of practices, techn ologies, and measures adopted by the various326

EGU's that make up the nation's coal generation fle et. Commenters said the EPA's finding of technical feasibility relies on fleet-wide averages , recognizing that "some EGU's may have already implemented some upgrades," and best practi ces associated with heat rate improvements. Commenters said in so doing, EPA declines to set pl ant-specific targets.

Commenters said in New York, attainment of EPA's ta rgets is based on the existing technology and practices at a small cohort of plants. Commente rs said only seven coal-fired plants operated in New York in 2012, for a total nameplate capacity of roughly 1,350 MW. Commenters said since that time, one plant has retired, a second co -fires natural gas, and a third is being closed and re-powered to burn natural gas, and two of the remaining plants are required to operate under reliability-must-run orders. Commenters said this c alls into question the technical feasibility of using a "fleet-wide average" to implement EPA's tar gets.

Commenters said to resolve this technical feasibili ty concern resulting from "fleet-wide" assumptions being applied to a small cohort of unit s, the Alliance recommends EPA consider an incremental approach to Building Block #1 so that t here would be no reductions associated with coal plant heat rate improvements for states that g enerated less than roughly 10 percent of their total annual energy from coal as of the end of 2012 . Commenters said such an incremental approach could be applied fairly across all states and would support EPA's intention to avoid setting emission standards on a plant-by-plant basi s.

Comment 23: Each state's RPS goals should be used as a floor f or achievable RE generation in that state, not for establishing a ceiling.

Response 23: See section V.E. of the final rule preamble of the CPP for the EPA’s response to
this comment

The following are summaries of the specific public comments under this comment:

Commenters argued that the proposed RPS approach sh ould use each state's RPS goals as a floor for achievable renewable generation in that state, not for establishing a ceiling. The commenters said under the proposed RPS approach, if a state's own RPS is more ambitious than its regional average, the regional average is nevertheless used. The commenters said by failing to incorporate a state's own RPS commitments in its BS ER determination, the EPA undermines its own justification for the proposed RPS approach.

According to commenters, this analytical error is p articularly acute for the five states that already generate as much or more renewable electricity than their regionally calculated average for 2030. The commenters said oddly, such a state could incre ase affected EGU use as a proportion of generation and still meet its BSER targets for rene wable energy.

Commenters said the EPA is taking comment on whethe r the level of 2012 renewable energy generation in each state should serve as a floor fo r the amount of renewable energy generation expected for that state under building block 3. Com menters strongly supported such a floor; however, to more accurately reflect the level of re newable generation a state has actually achieved, they recommend that the floor be set at a state's renewable energy generation when the327

Clean Power Plan is finalized in 2015. Commenters s aid further, the Clean Power Plan should determine that for states with an RPS policy more a mbitious than the regional average, the BSER should require that renewable energy targets are at least as high as the state RPS requirement. Commenters said this approach is consistent with th e EPA's general "no backsliding" policy approach.

Comment 24: The EPA approach should not assume no renewable en ergy growth during the period 2012-2017, and rather than using 2012 renewa ble energy as a starting point, the EPA should use renewable energy at the time the regulat ion is finalized

Response 24: See section V.E. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters disagreed with EPA's assumption that the re will be no renewable energy growth
between 2012 and 2017. The commenters also asserte d that the proposed RPS approach should use a state's renewable energy generation rate at t he time the Clean Power Plan is finalized as the starting point from which its renewable generation is expected to grow, rather than 2012.

Commenters stated under the Proposed RPS Approach, state level renewable energy targets begin in 2017 and continue to ramp up through 2030, even though compliance would not be required until 2020. However, commenters stated, th e methodology assumes the increase starts to occur only after 2017. Commenters stated to dete rmine a state's 2017 baseline generation levels, EPA takes 2012 renewable generation and ass umes that as the starting point in 2017. Commenters felt that this approach inadequately ass esses renewable potential as it assumes no growth in renewable generation from 2012 through 20 17, even though significant renewable capacity that was not generating in 2012 (including a large amount of renewable capacity added during 2012 that contributed less than a full year' s output to 2012 generation) has been installed, is currently under construction, or is under advanc ed stages of development and will be online by
2017.

Commenters stated the Clean Power Plan should assum e each state's renewable energy generation is able to grow beginning in 2012 until it meets the regional target, rather than expecting zero growth from 2012 to 2017. The commen ters said in particular, if EPA adopts the Proposed RPS approach, the growth factor assumption should be adjusted to reflect growth throughout those years. The commenters said if this modification is not made, the best practices scenario for renewable energy expansion will be bas ed on an underestimation of the growth factor used for each state in that region. The comm enters said there should be an established trend from 2012-2029 using data that yields an annu al growth factor unique to each region and based upon each region's current and target renewab le generation levels.

Comment 25: In the final rule, the EPA should clarify that cre dit for off-the-grid renewable generation will be allowed in plan compliance.328

Response 25: See sections V.E. and VIII of the final rule pream ble of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA should clarify in th e final rule that credit for off-the-grid renewable generation will be allowed in plan compli ance. Commenters said that some states, such as New Mexico, have many rural areas where cos ts for connection to the grid make distributed generation with storage capacity (off-t he-grid) the most economic option for both
residential and some commercial facilities. Comment ers said these resources, while small, still reduce the usage of fossil generation that otherwis e would have been necessary without the installations, and with proper evaluation, monitori ng and verification, these should be valid resources for crediting in a state plan.

Comment 26: The EPA should add a national benchmark to better reflect demonstrated growth of renewable energy

Response 26: See section V of the final rule preamble of the CP P for a discussion of changes made to building block three in this final rule, an d supporting analysis in the GHG Mitigation
Measures TSD.

The following are summaries of the specific public comments under this comment:

Commenters recommended that the EPA revise the prop osed RPS approach to ensure that state emissions rate reduction targets and, in particular , renewable growth rates, better reflect deployment rates already being achieved by many sta tes (what has been adequately demonstrated) and reasonable projections of deploym ent (what is achievable). The commenters said to that end, the EPA should revise its preferr ed alternative to ensure that a "demonstrated growth approach" for setting renewable energy targe ts is used.

Commenters stated that to calculate state renewable energy targets, the EPA should use EIA data to calculate each state's renewable energy growth r ate over the five-year period from 2009 to
2013. The commenters said that EIA data show that s tates, on average, have increased the share of their total generation coming from renewable ene rgy by 1 percentage point annually over this time period .The commenters said this demonstrated growth rate should be used to set the future renewable generation targets. Commenters stated tha t this is a reasonable target to use as a national benchmark, since 11 of the 15 leading stat es that have achieved annual growth rates at or above one percentage point annual growth have ma intained this over the past ten years. The commenters said establishing a national benchmark a ccounts for recent rapid growth in wind and solar generation and captures much of the historic development spurred by state RPSs.

Commenters suggested that for states below the one percentage point national benchmark growth rate, 2017 to 2020 would function as a period for s tates to ramp up deployment, allowing states that have not been active in renewable development to catch up to the national benchmark. The commenters said after 2020, it would be assumed tha t renewable energy within these states would grow at the one percentage point national ben chmark growth rate through 2030. For the329

15 leading states that have deployed renewable ener gy at or above the national benchmark, Commenters suggested that the EPA increase their re spective renewable energy targets from 2017 to 2030 at each state's average annual percent age point growth rate during the 2009-2013 benchmark period, up to 1.5 percentage points annua lly. Commenters stated that this is a reasonable upper limit that is capable of being sus tained over time, and a 1.5 percentage point growth rate is consistent with renewable energy tar gets set by many leading state RPSs.

Commenters indicated that to account for full compl iance with mandatory state RPS laws, states should be required to achieve the greater of two me asures: either the generation projected by this growth rate approach, or the level needed to meet s tates' respective RPS targets for each year from 2017 to 2030, as projected by the Department o f Energy's Lawrence Berkeley National Laboratory (LBNL 2013). The commenters said to ensu re reasonably achievable renewable energy penetration rates during the compliance peri od, the EPA could cap the total share of renewable generation for any state at not less than 40 percent of total state electricity sales, a level that several studies by grid operators, utili ties, and government agencies have shown can be achieved at the state and regional level in this ti meframe while maintaining reliability.

Commenters acknowledged that this approach places c onstraints upon renewable developments, such as a 1.5 percentage point annual growth cap an d a 40 percent overall target cap, but
observed that these restrictions are reflective of current conditions and should remain flexible. The commenters said as the EPA undertakes regular r eviews of the Clean Power Plan, these constraints could be adjusted upward or eliminated entirely to account for new renewable technologies, grid integration techniques, other ch anges in the generation mix, and falling costs over the compliance period.

Comment 27: The EPA should remove the provision requiring that states that are net importers of power discount any reductions that may be achiev ed by end-use energy efficiency programs. If discount requirement is not eliminated, it shoul d be based on the percentage of imported generation for the compliance year itself, not a fa ctor calculated based on 2012 baseline data.

Response 27: As described in section V.A of the final rule prea mble, the EPA is no longer including demand-side energy efficiency in its BSER quantification. However, states/sources still have the ability to use demand-side energy ef ficiency measures as part of their compliance strategy. The EPA discusses the EM&V procedures for demand-side energy efficiency approaches in section VIII of the final rule preamb le of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters said in states that import electricity, the EPA notes that states must discount the
CO2 emission reductions associated with EE to refle ct the level of electricity imports. Commenters said the EPA is proposing this be done t hrough modeling or use of a proxy net import factor. Commenters said if states are respon sible for all the emissions generated by instate resources, regardless of where the power is a ctually consumed, then states should not have to discount end-use energy efficiency reductions to account for power imports. Commenters said in addition, it is logical that a state be given fu ll credit for avoided emissions from state-330

implemented EE programs since the rate payers withi n the state are paying the program costs. Commenters said that for these reasons, we request that the EPA remove the provision requiring that states that are net importers of power discoun t any reductions that may be achieved by enduse energy efficiency programs.

Realizing that the EPA may not eliminate the discou nt requirement, commenters said to the extent that a proxy net importer factor is used, we request it be based on the percentage of imported generation for the compliance year itself, not a factor calculated based on 2012 baseline data. Commenters said that as encouraged by Virgini a law, Dominion has begun a program of building in-state generation to reduce the amount o f imported power. Commenters explained therefore, a requirement to use the 2012 import dat a as the basis for an EE credit adjustment factor would disadvantage Virginia and discredit me aningful EE measures implemented in the

state.

Comment 28: The EPA should assume that incremental renewable a nd energy efficiency resources have the effect of displacing fossil gene ration. Using that assumption, analysis by
Commenters indicated Alabama can reach the remainin g 55% of its target through renewable energy and energy efficiency, with only minimal gas re-dispatch

Response 28: In both proposal and final the EPA assumed that in cremental RE generation had the ability to replace existing fossil generation. In this final rule, per this comment and others, the EPA captures that replacement by reducing the b aseline level of generation from fossil sources in amounts equal to the incremental RE gene ration . See sections V and VI of the final rule preamble for further discussion.

The following are summaries of the specific public comments under this comment:

Commenters indicated their analysis shows that Alab ama can achieve its remaining reductions through a combination of renewable resource additio ns and increased energy efficiency investments, along with minimal natural gas re-disp atch. Commenters said for the purposes of this analysis, we ignored the potential reductions from the heat rate improvements of Building Block 1, which some utilities have cited as unfeasi ble or impractical.

Commenters said in our analysis, we make an assumpt ion that the EPA did not make: that incremental renewable and energy efficiency resourc es have the effect of displacing fossil generation. Commenters said as the EPA appears to r ecognize in its recent Notice of Data Availability [See 79 Fed. Reg. at 64,543.], to assu me otherwise is inconsistent with EPA's application of BSER for Building Block 2 and nonsen sical as a practical matter: utilities will dispatch resources having no fuel costs in lieu of those that do.

Commenters said they show that if renewable energy and efficiency measures are assumed to displace fossil generation, Alabama need not pursue natural gas re-dispatch all the way to 70 percent. Commenters said instead, Alabama could ach ieve its target by increasing to a capacity factor of 64 percent, just 5 percentage points high er than current utilization. Commenters said moreover, Alabama can achieve its target without pu rsuing renewable and energy efficiency
resource additions to the extent EPA assumed in its target-setting. Commenters said instead,331

Alabama could reach its target with just 80 percent of the levels of each measure that EPA
assumed in its calculations.

Comment 29 : The EPA solicited comments regarding whether it s hould change its formula regarding building blocks 3 and 4 not only add to r esources, but also to remove 2012 fossil fuel generation. Commenters warned analyzing effect of adding one type of resource on other resources is difficult and complex

Response 29: The EPA does assess the effect of its BSER quanti fication in a power sector modeling tool that informs of the collective impact s of the building blocks and BSER quantification.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA solicited comments regardin g whether it should change its formula regarding building blocks 3 and 4 to not only add resources, but also to remove 2012 fossil generation. Commenters cautioned that when adding o ne type of resource, the effects on other resources is a difficult and complicated determinat ion. Commenters said that if the EPA wishes to subtract existing generation in its goal setting , then it should carefully model any changes to make it more likely that these generation changes w ill actually occur in the way suggested in the
formula.

Comment 30: The EPA's proposed approach is overly restrictive in that it has potential to render a portion of energy efficiency measures stranded. To remedy this, the EPA should allow states to take credit for energy efficiency measures.

Response 30: See section V.A for a discussion of demand-side en ergy efficiency. The EPA is not including demand-side energy efficiency in the final BSER. See section V.A for a discussion of demand-side energy efficiency. Also see section VIII for discussion of how demand-side energy efficiency can be used for compliance in sta te plans.

The following are summaries of the specific public comments under this comment:

Commenters said in developing the energy efficiency target, EPA did not incorporate assumptions regarding emissions reductions associat ed with energy efficiency or demand side measures. Commenters said however, in the preamble EPA states that it is "proposing that, for demand-side EE measures, consistent with the approa ch that the EPA used in determining the BSER, a state could take into account in its plan o nly those CO2 emission reductions occurring (or projected to occur) in the state that result fr om demand-side EE measures implemented in the state." Commenters said in addition, in the State P lan Considerations TSD, EPA presents a number of options for calculating emissions reducti ons associated with energy efficiency measures - which may only be applied to affected re sources in the state where the energy efficiency measures were implemented. Commenters no ted that due to the interstate nature of the interconnected electric system, the emissions reduc tions associated with energy efficiency may
often occur in a different state from where the ene rgy efficiency measures were implemented, and therefore the EPA's proposed approach is overly restrictive in that it has the potential to332

render a portion of energy efficiency measures stra nded. Commenters said to remedy this, EPA should allow states to take credit for energy effic iency measures. Commenters said the EPA should allow states the flexibility to allocate ene rgy efficiency across their system(s) via resource planning and compliance reporting mechanisms to be developed under state plans.

Comment 31: 2030 Regional targets should be based on 2030 RPS targets, not 2020 targets

Response 31: See section V.E. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters suggested that using 2020 RPS goals to s et 2030 targets for a region is inappropriate. Commenters stated that instead, 203 0 regional targets should be based on 2030 RPS targets.

Commenters said while it is true many RPSs have dea dlines in 2015 or 2020-well before the 2030 compliance deadlines set forth within the Sect ion 111(d) proposed guidelines-the Clean Power Plan includes no justification as to why stat es should only be expected to meet 2020 targets by 2030, rather than 2020. The commenters s aid this approach is not consistent with EPA's justification for using state RPS policies in the first place. The commenters said the Proposed RPS Approach should, at a minimum, use the target in the final year of a state RPS requirement to set 2030 targets, rather than using 2020 RPS requirements to set 2030 targets. The commenters said in that way, the calculation of ach ievable renewable generation as part of building block 3 would not ignore the commitment by policymakers in some states to add renewable generation after 2020. For states with re quirements that do not continue to increase through 2030, commenters suggested that the Propose d RPS Approach should determine a reasonable growth rate based on historical market t rends or the historical rate at which that state
RPS increased to estimate an achievable level of re newable energy growth between the last year in which a state has an increasing requirement and 2030.

Comment 32: Proposed alternate set of state goals reflect an o verly conservative approach

Response 32: The EPA is not finalizing the alternative approach that had final goals in 2025. See section V of the final rule preamble for inform ation regarding our final BSER determination. Also see sections VI and VII of the final preamble for subcategory-specific emission performance rates and state goals, respectively.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA's proposed set of al ternate goals, which call for a different level of emissions reductions to be achieved by 2025 inst ead of 2030, reflect a less stringent application of the building blocks and a shorter im plementation period, ultimately reflecting an overly conservative approach. The commenters said i n particular, the alternate goals underestimate the extent to which the key elements of the four building blocks - including penetration of renewable resources - can be achieve d rapidly while preserving reliability and333

remaining reasonable in cost. The commenters said i n addition, the alternate approach proposal for a less stringent program with a 2025 goal year is overly conservative with respect to achievability by that time.

Comment 33: Final rule requiring 50% carbon emissions reductio n from today's levels appears achievable, so final rule should have more aggressi ve emission reduction target by 2030, and should signal an intent to require further reductio ns.

Response 33: See the Regulatory Impact Analysis for final CPP R ule, EPA-452/R-15-003. The EPA has quantified BSER in this final rule, and exp ects slightly more reduction than expected at proposal. The EPA’s statutory obligation is to det ermine a best system of emission reductions as described in section V of the final rule preamble o f the CPP.

The following are summaries of the specific public comments under this comment:

Commenters suggested that in addition to setting a more aggressive emission reduction target by 2030, the EPA should also set a target emission red uction level envisioned for 2050, to indicate that further reductions are expected beyond 2030.

Commenters said the final rule will likely result i n significant investment in new power generation and transmission assets through 2030, an d these assets have useful lives that can extend over 50 years from initial construction. Com menters said selection of generation technologies in which to invest will depend on a vi ew of emissions targets not only prior to 2030 but through the useful life of the generating plant . Commenters said that signaling the trajectory of emissions reduction targets expected post 2030 w ill limit investment in projects that would become stranded as emission reductions are strength ened.

Comment 34: State-specific emission goals should not be adjust ed after the final rule is issued, absent extraordinary circumstances

Response 34: The EPA will allow states, via State Plan submitta l or revision, to adjust their state wide rate or mass goals per unit inventory changes. If applicability review or formal applicability determinations change the status of units in regard s to their inclusion or exclusion in the state’s affected population, the state may adjust the goal. See section VII.E. of the final rule preamble of

the CPP for more information.

The following are summaries of the specific public comments under this comment:

Commenters agreed that once the final goals have be en promulgated, a state should no longer have an opportunity to request that the EPA adjust its carbon target to reflect a change in any one building block analysis (unless the state also demo nstrates that it could not get additional reductions from application of any other of the blo cks, or comparable measures). The commenters said to make such a demonstration, state s should be required to show that they
availed themselves of all reasonable and flexible c ompliance options, including from out-of-state

sources.334

Comment 35: BSER should be based on more than what is merely " reasonably achievable"

Response 35: See section V.A. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated that in the draft proposal, in de veloping state emissions reduction goals, only estimates of what is reasonably achievable were cal culated and considered for each building block. Instead, commenters indicated that the EPA should base BSER on more than what is merely reasonably achievable.

Commenters indicated that courts have recognized th at identification of BSER is an expansive,
flexible endeavor. The commenters said in the servi ce of securing the maximum emissions reductions, the D.C. Circuit Court has held that EP A may weigh "cost, energy, and environmental impacts in the broadest sense at the national and regional levels." The commenters said while the costs of implementing the BSER may not be unduly burdensome or exorbitant, this certainly does not mean the standa rd must only achieve the minimally reasonable reduction goals. The commenters said rather, EPA sh ould assess the technically feasible amount of emissions reductions possible within a region wh en considering emissions reductions goals.

Comment 36: GHG emissions are emitted from various sectors of the economy; reductions from other sectors of the economy besides EGUs should be considered

Response 36: See section V.A. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters indicated that because GHG emissions occ ur from various sectors of the economy,
emissions reductions from all sectors should be con sidered/required, not just from the EGU sector. Commenters expressed concern that the prop osed rule would establish a mitigation approach that does not adequately recogn ize alternative methods of reducing
emissions in an efficient and cost-effective manner across the U.S. economy.

Commenters noted that in the proposed rule, the EPA cites the 2009 Endangerment Finding, the recent Intergovernmental Panel on Climate Change re port, and the recently released National Climate Assessment to establish impacts from GHGs a nd the reason for regulatory action on CO2. The commenters said according to the EPA, all GHGs "cause and contribute" to the EPA identified impacts -- not only CO2. The commenters said further, CO2 is emitted from various sectors of the economy, not only from the electric sector. The commenters said in terms of U.S. GHG emissions, the electric sector comprises 32% of total anthropogenic emissions (excluding land use); the transport sector about 28%; and the combination of the commercial, industrial, and residential sectors comprises about 30%.335

Comment 37: Achieving meaningful, cost-effective emission redu ctions across the power grid requires taking a grid-level perspective, as states ' experience demonstrates

Response 37: See section V.A. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters emphasized that the EPA should draw on t he experience of states in identifying BSER and setting the emission goals by using a syst em-wide approach. The commenters indicated that meaningful, cost-effective emission reductions are best achieved through a systemwide approach that draws from three primary strateg ies

Commenters indicated that states are achieving very significant carbon pollution reductions through a variety of state programs, including emis sion budget and trading programs, renewable portfolio standards, energy efficiency programs, st ate statutes that require or promote planned electricity resource changes, and others.

Commenters emphasized that as EPA designs its Secti on 111(d) carbon pollution emission guideline for states on the basis of the "best syst em of emission reduction," it should take into account all of these types of demonstrated successe s and the carbon pollution reductions achievable by them. The commenters said that only b y considering reductions from all of these types of approaches will EPA be able to establish a standard that achieves the most meaningful,
cost-effective reductions.

Commenters indicated the state programs can be grou ped into three categories of approaches (as identified by EPA in its questions), each of which can secure a distinct pool of emission
reductions:

• changes at individual covered sources to reduce car bon emission intensity (market-based programs can help drive these types of improvements ; programs and incentive for combined heat and power generation can increase ove rall efficiency, carbon capture and sequestration can reduce emissions, other potential on-site improvements to reduce emissions include using RE to provide supplemental steam heating, using waste heat to remove moisture, implementing advanced systems for combustion and dispatch optimization, or oxy-combustion systems)

• shifts in generation from higher carbon emitting so urces to lower emitting sources (market-based state programs demonstrating effectiv eness of these types of shifts, state new source performance standards have also dr iven such improvements), and

• Reduction of emissions through displacement by zero carbon generation or reduction in electricity demand (adding wind and solar energy re sources as well as nuclear power 46

, market-based programs, renewable energy standards, and state demand-side energy efficiency standards and programs)336

Commenters indicated meaningful, cost-effective emi ssion reductions are best achieved through a system-wide approach that draws from all three of these strategies. The commenters said that in particular, state experience has demonstrated that the most cost-effective strategies resulting in meaningful reductions are those that promote shifts away from high-emission fossil sources, displace emissions with zero-carbon generation, or reduce electricity use through demand-side efficiency programs.

Commenters stated that in contrast, more limited em ission reductions are available from plantlevel efficiency improvements, as demonstrated by t he extensive technical analysis in EPA's proposed new source standards for the sector. The c ommenters indicated that meaningful
reductions could be achieved at a reasonable cost i f the full range of available on-site systems, including efficiency upgrades and other improvement s, were applied to each source, except those nearing the end of their remaining useful life. How ever, the commenters stated that such an approach is less cost-effective, and less effective in promoting long-term improvements in the electricity system, than a system-wide approach as described above and as demonstrated in our

states.

Commenters stated that the best emission reduction systems focus on shifting the grid as a whole away from high carbon sources because individual ge nerating units do not operate independently. The commenters said instead, they ar e part of a system of highly interdependent sources whose aggregate emissions are dependent on system management. The commenters said that as state experience has shown, reducing demand for fossil generation or providing alternative, cleaner, sources of supply achieves em issions reductions far beyond the level that can be achieved by improving the operations of indi vidual fossil plants.

Commenters indicated such grid-level programs have major economic benefits along with environmental improvements, and stated that state e fforts to add renewable power have improved the fuel diversity and system performance of the grid, while supporting a national boom in clean energy jobs. The commenters noted th at the EPA's Acid Rain Program achieved significant pollution reductions through a grid-lev el approach, rather than focusing narrowly on
individual sources. The commenters noted that the E PA's recently developed "roadmap" also outlines system-level approaches to reducing fossil fleet emissions to maintain compliance with standards for pollutants like ozone and soot.

Comment 38: The EPA should put all states on a trajectory to m eet goals, while allowing varying compliance times

Response 38: The EPA uses reasonable deployment schedules for i ts building block assumptions when quantifying BSER. This results in a glide pat h of increasing compliance responsibility moving from earlier years to later years. See secti ons VI, VII, and VIII of the final preamble for information related to the interim subcategory-spec ific emission performance rates, interim state goals, and state plans.

The following are summaries of the specific public comments under this comment:337

Commenters stressed that the emission guideline sho uld equitably recognize states' different starting points and circumstances (because they beg in with widely differing power fleets and existing regulatory initiatives). The commenters i ndicated that EPA should account for these differences by placing all states on a trajectory t o achieve a uniformly rigorous target, while allowing varying compliance times (recognizing that this period of time may extend beyond an initial phase covered by the rulemaking).

Commenters suggested one approach that EPA should c onsider is setting a single emission intensity target that would apply to each state, in dividually or as part of a region, representing net improvements to the carbon intensity of a state's e lectricity system that could be achieved through the system-wide approaches described above. The commenters suggested that this target could be expressed as an aggregate emission rate of pounds per megawatt-hour or potentially as a rate of emissions per gross domestic product.

Commenters said that states that would have further to go to meet the target could have longer compliance times to meet the common goal. The comme nters said this approach would require all states to reduce emissions while being equitabl e to states that have already made progress toward meeting the emission intensity target. The c ommenters said the same goal would be achieved by establishing a mass-based emission budg et for each state that reflects a level of aggregate emissions from covered sources commensura te with full use of the best system of
emission reductions.

Commenters said that approaches like these would au tomatically recognize the substantial emission reductions achieve by first-mover states w hile providing other states the time they need to pursue these opportunities. The commenters said that the EPA would ensure that each state has designed its program to put regulated sources o n an achievable glide path to reach its target as soon as practicable, thereby maintaining a clear regulatory incentive to reduce carbon dioxide emissions over the compliance period. To support t heir argument, the commenters said that the EPA has taken these approaches in the past: other C lean Air Act programs allow states time to comply, with the time period depending on the degre e of pollution reduction required and a showing of "reasonable progress" towards final stan dards. The commenters stated that the EPA's Section 111(d) general regulations likewise support this approach, as they anticipate that state plans will set compliance schedules that include re gular progress reports.

Commenters stated that this approach, which focuses on moving states toward a shared endpoint, is substantially better than one based on requiring percentage reductions (either in tons or rates) from a particular baseline year. The commenters sai d that setting an equitable baseline across the states, which have varying economic and emissions h istories, would be difficult and timeconsuming. The commenters added that because states have very different emissions levels now, requiring all states to reduce emissions by the sam e percentage across the board, regardless of starting circumstances, would not treat the states equitably, or be the most cost-effective way of achieving reductions.

Commenters indicated they recognize that other equi ty issues will arise as the EPA considers how to move the states towards a common target - in cluding the fact that states may be net importers or exporters of power, and so their emiss ions may be affected by actions in other states that they cannot directly control. The commenters a dded that on a related point, some states may338

have relatively smaller in-state power systems, and so may have limited opportunity for systemwide improvements within the state.

Comment 39: The EPA could recognize a minimum target level tha t was considered sufficiently low enough for any such state that additional reduc tions would not be required

Response 39: See section V.A. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Basic Concept. The commenters said separate from th e performance goals set for states on an individual basis, the EPA could recognize a minimum target level that was considered sufficiently low enough for any such state that add itional reductions would not be required. The commenters said states that achieve a minimum targe t would not be required to comply with the full state performance plan requirements contemplat ed in the rule, but rather, they only would need to submit a limited state plan that provides f or continued compliance with the minimum threshold. The commenters said establishing an appr opriate minimum CO2 target would achieve the EPA's desired result without requiring signific ant federal oversight or time and expense of detailing compliance. The commenters said additiona lly, it would incentivize states to meet the
minimum CO 2 target by allowing them to avoid the larger admini strative costs of complying with a full plan.

EPA Precedent. The commenters said a minimum CO 2 target approach is consistent with the EPA's other regulatory schemes and the sub-categori zation principles applicable to implementation of Section 111(d). The commenters sa id using its discretion to create subcategories on a state-wide basis, the EPA could create another subcategory that covers all generation sources in states like Idaho that have n o coal generation, low emissions, or similar characteristics that provide assurance that carbon emissions will remain low. The commenters said for those states, the EPA then could determine a separate BSER and related emission guideline based on a minimum CO 2 emission threshold or target that could not be exc eeded, rather than state-specific emissions goals based up on application of the four building blocks.

Proposed Minimum Level. The commenters proposed a m inimum target of 550 pounds of
CO2/MWh for Idaho. The commenters said other states could potentially hit this threshold target by 2020, or later in the compliance period, and cou ld modify their state planning requirements then, which would incentivize those states to accel erate emissions reductions.

The commenters said if the EPA does not withdraw it s proposed emissions goal for Idaho (which is Idaho's preferred outcome), then the EPA should adopt the "limited plan" system described above. The commenters said this system is consisten t with the EPA's overall goals and creates a more equitable and efficient result for states like Idaho that already have very low emissions and no in-state coal generation.

Comment 40: Guidelines should allow states to use effective cu rrent programs as the basis of compliance339

Response 40: See sections I.A., V, and VIII of the final rule p reamble of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA should incorporate i nto the BSER determination all of the approaches that states are already demonstrating ac hieve cost-effective emissions reductions, including reductions from onsite improvements, shif ts in generation among covered sources, and displacement from zero-carbon generation increases or demand-side efficiency. The commenters stated that even if the EPA doesn't expl icitly base BSER on state programs, it should allow states with any effective existing pro grams the option of using these programs as the basis of compliance, as long as states can demo nstrate through a rigorous, consistent methodology (to be identified by the EPA) that thos e programs will achieve the required
reductions.

Commenters suggested using the programs because sta tes managing greenhouse gas reduction, energy efficiency, and renewable energy programs ha ve built these programs through their own democratic and stakeholder processes, and with a de ep understanding of conditions within their power grids. The commenters stated that to the exte nt that those programs are delivering a substantial portion of the reductions needed to com ply with Section 111(d) guidelines, the EPA should ensure that its federal framework provides s tates with the option of incorporating their current programs with minimal change or burden as l ong as they achieve equivalent reductions. The commenters said that as its governing regulatio ns require, the EPA has regularly invited the states to propose a range of approaches to meet fed eral standards, in whole or in part, and they expect it to follow the same course here.

Comment 41: The EPA has not been sufficiently clear about its intention to allow states to rely on compliance options that were not included in the "building blocks" the EPA used to calculate state emission reduction goals. This must be clari fied in final rule

.
Response 41: See section V.A. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said that the EPA has not been sufficien tly clear about its intention to allow states to rely on compliance options that were not include d in the "building blocks" the EPA used to calculate state emission reduction goals. Commenter s said it is obvious that the EPA has failed to communicate this principle clearly, because there i s still confusion in public statements by states and others on this point. Commenters said there are only two statements in the preamble to the Clean Power Proposal that we could find, and both a re buried deep within the text of the preamble, and the proposed regulatory text is silen t on this point. Commenters said under the caption, "VII. State Goals - D. State Flexibilities " the preamble says:

"States can also choose to include in their plans o ther measures that reduce CO2
emissions at affected EGUs but that are not include d in the building blocks."340

Commenters said under Section "F. State Plan Consid erations - 8. Potential Emission Reduction Measures Not Used To Set Proposed Goals," the pream ble explains that:

"States may include measures in their plans beyond those that the EPA included in its determination of the BSER. In general, any m easures that meet the proposed criteria for approvable state plans could be employ ed in a state plan. Beyond that, under a mass-based approach, any measure that reduc es affected EGU emissions - even if not included in the state plan - will, if i mplemented during a plan performance period, help to achieve actual emission s performance that meets the required level... Although the emission reduction m ethods discussed in this section are not proposed to be part of the BSER, th e agency anticipates that some states may be interested in using these approaches in their state plans."

Commenters said it is understandable that the EPA b elieved this would be sufficient, but there is still considerable confusion and debate among stake holders. Commenters said accordingly, to
ensure that states are able to benefit from the fle xibility that the EPA intended to include in the Clean Power Proposal, AGA urges EPA to make it clea r and obvious -- in the preamble, final rule regulatory text and any fact sheet or other ou treach materials -- that states are allowed and encouraged to include compliance methods in additio n to those that EPA used in its
determination of BSER.

Commenters stated as states work to develop their u tility-driven portfolio plans, EPA should direct them to make available the building blocks, and any additional state measures, as optional tools available to the utility to select from in fi nding the most effective way to achieve its final CO2 reduction goal. The commenters said states shou ld be made to understand that the building blocks are not required to be imposed as mandates o n any entity, and a mandate is not required, for example, in order for renewable energy to be av ailable under block 3. The commenters said instead, because only utilities with affected EGUs in the state are regulated, mandates are unnecessary to achieve compliance. The commenters s aid the obligation of the utility to achieve its mandatory CO2 reduction creates the only incent ive necessary to ensure the further development of non-emitting resources and energy ef ficiency. The commenters said as long as the state plan allows utilities to use these buildi ng blocks for compliance, and the credits are freely transferable in interstate commerce, their i nherent value to the utility is assured, and no mandate is required. The commenters said this elimi nates much of the uncertainty surrounding the ability to obtain legislative approval and to d o so in a limited time frame.

Comment 42: The EPA should include clear language in the final rules allowing the use of outof-sector offsets by states (such as no-till, conve rting marginal croplands to grasslands, tree planting, fly ash recycling) to meet emission targe ts

Response 42: See sections V and VIII of the final rule preamble of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:341

Commenters encouraged the EPA to include clear lang uage in the rules allowing the use of outof-sector offsets by states to meet their emission performance targets, and to ensure that carbon
offsets are included as reduction mechanisms. Comme nters said over the years, traditional tillage has released much of the stored carbon from fields, which is why there is so much potential now for carbon storage from practices such as no-till a nd converting marginal croplands to grasslands. Commenters said these practices leave the soil undi sturbed and the plant residue in the field,
which allows the carbon to be stored instead of rel eased.

Commenters said Dynegy strongly supports the use of out-of-sector offsets and has been a leader in pursuing GHG emissions reductions through offset s. Commenters said specifically, Dynegy has planted over 8 million trees in 73 locations ac ross 8 states in the Mississippi River Valley. Commenters said Dynegy also recycles fly as h from coal combustion for beneficial reuse, including as a substitute for Portland cement in concrete. Commenters said in addition to safely re-using coal fly ash in lieu of landfilling , the re-use of fly ash reduces the amount of Portland cement produced, and the reduction of ceme nt production directly offsets the amount of CO2 generated by the cement manufacturing process.

Commenters said Dynegy has taken on these projects voluntarily and has invested significant capital in these projects, but investing in such pr ograms faces an uncertain future if they will not be provided any credit for compliance with the CPP. Commenters said by discounting unique and impactful programs like the ones Dynegy has tak en on, EPA stifles innovative GHG reduction projects., which is bad public policy, ba d business and, ultimately, bad for the
environment.

Comment 43: The EPA should set regional RE targets, grouping s tates by NERC region.

Response 43: See Section V.A of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters responded to specific questions the EPA raises in the recently published Notice of Data Availability ("NODA") that accompanies the Cle an Power Plan proposal issued June 2, 2014. The commenters reiterated support for settin g regional RE targets, and suggested that the EPA should group states by NERC [North American Ele ctric Reliability Corporation] region because these regions most realistically encompass what RE potential is available to serve load for a particular group of states. The commenters sa id these regions also largely conform to existing RE credit trading system boundaries. The c ommenters stated that while certain trading systems will overlap multiple NERC regions and some state boundaries may not seamlessly conform, this basic structure could be used with mo difications to deal with anomalies. The commenters said that for example, confusion may ari se where a state's boundaries straddle more than one NERC region. The commenters said that in s uch an instance, to alleviate such confusion, EPA could associate the entire physical area of the state with the NERC region where the majority of the state's load is served for purp oses of estimating renewable generation potential. The commenters indicated that this modif ication would ensure that the NERC region342

that has access to that RE generation potential is also assigned those potential emission reductions for goal setting.

Comment 44: Regional RE market concept has several flaws

Response 44: See section V.E. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said that the EPA's use of regional RE m arkets has several flaws. Commenters indicated the most glaring mistake is to assume tha t one regional state's portfolio requirements reflect energy development opportunities in neighbo ring states -that defies logic. Commenters said that such a portfolio recognizes unique state resources and the economics needed to competitively bring those resources to market, and to imply that all regional states have homogeneity in their RE resources and market potent ial is false.

Commenters also said the EPA's regional approach is flawed because it imposes the same target percentage to all states in a given region, regardl ess of their actual RE technical capabilities. Commenters said the regional definit ion for the EPA's South Central region is dominated by states that have considerable opportun ities for onshore wind development and are already some of the larger wind developers in the c ountry. Commenters said that although Louisiana is in the South Central region is does no t have any wind generation and doesn't have the technical capabilities for any meaningful grid- scale wind generation, so grouping it with high wind-generation states is unreasonable.

Comment 45: The EPA should allow states to demonstrate complia nce on a multi-year basis and allow carry-over of early reductions

Response 45: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA should permit states to demonstrate compliance on a multi-year basis and allows states to carry over early reducti ons.

Commenters said that emissions across an electricit y system can vary from year to year depending on factors such as weather, economic cond itions, and unexpected shutdowns, which are all outside the ability of plant operators to i nfluence. The commenters stated that the EPA can require a more substantial level of cost-effect ive reductions if it allows states to average emissions over a multi-year period and enables stat es to bank, or carry-over, early reductions. The commenters stated that unlike other pollutants that may have short-term impacts, the environmental harm caused by CO2 and other GHG poll utants have much longer periods of343

impact. Therefore, the commenters said, allowing co mpliance on a multi-year basis would not reduce the environmental benefits of the program.

Commenters said that the RGGI [Regional Greenhouse Gas Initiative] program uses a three-year compliance approach. According to the commenter, th e RGGI states' experience is that this approach has the benefit of allowing sources to tak e advantage of multi-year compliance strategies. The commenters indicated that by allowi ng sources three years, the regulated units have flexibility to address variations in emissions , unexpected shutdowns, or uneconomic dispatch orders, without impacting the enforceabili ty or environmental effectiveness of the program's requirements.

Comment 46: The EPA should recognize state discretion to adopt different approaches to goal conversion provided states provide a reasonable exp lanation

Response 46: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated that the methodologies for rate-t o-mass goal conversions contained in the proposed guidelines and the Translation TSD cannot be reconciled, yet the EPA appears to believe that either approach could lead to accurate and satisfactory mass-based goals. The
commenters indicated that the EPA should therefore adopt the approach to mass-based goal conversion suggested by the language in the preambl e to the Proposed Guidelines: EPA should recognize state discretion to adopt different appro aches to goal conversion provided states provide a reasonable explanation for the choices th ey have made.

Commenters stated that under the proposed guideline s states decide the "emission performance level" to include in their plans, but under the pro posed guidelines states are empowered only to select a rate-based or mass-based goal. The com menters indicated that although this choice is presented as providing flexibility to the states, i n reality it does not. The commenters said that EPA is merely affording states a choice between acc epting an EPA-prescribed and inflexible rate-based state goal, or translating that rate-bas ed goal into an equivalent mass-based goal.

Commenters stated that under the Proposed Guideline s, states are invited to attempt to calculate a mass-based rate. (Id. at 34,897). The commenters stated that the preamble to the Proposed Guidelines states that: "[i]f the plan adopts a mas s-based goal, the plan must include a description of the analytic process, tools, methods , and assumptions used to translate from the rate-based goal to the mass-based goal." (Id. at 34 ,911). The commenters indicated that similarly, section III of EPA's "Projecting EGU CO2 Emission Performance in State Plans" TSD (June 2014), Docket ID No. EPA-HQ-OAR-2013-0602-046 2 ("Projections TSD"), which was released with the Proposed Guidelines, purports to provide guidance to states on how to make such a goal translation. According to the commenter s, that guidance, however, does little more than direct states to project the CO2 emissions tha t would result from application of EPA's ratebased limit. The commenters said that these statements suggest that states have broad lee way to calculate mass-based goals

.344

According to commenters, Proposed 40 C.F.R. Sec. 60 .5770 includes an additional requirement,
however:

"The conversion must represent the tons of CO2 emis sions that are projected to be emitted by affected EGUs, in the absence of emissio n standards contained in the plan, if the affected EGUs were to perform at an av erage lb CO2/MWh rate equal to the rate-based goal for the state identified in Table 1 of [the Proposed Guidelines]." (79 Fed. Reg. at 34,953, Proposed 40 C.F.R. Sec. 60.5770). The commenters indicated that although this roughly ske tched methodology might produce rate-to-mass goal conversions that are equi valent, other approaches might prove better fits for some states, and EPA should p rovide states with flexibility to demonstrate that differing methods are appropriate, as the Agency suggests in the preamble language."

Commenters suggested that other state approaches mi ght be valid is seemingly confirmed by EPA's November 2014 TSD, entitled "Translation of t he Clean Power Plan Emission Rate-Based CO2 Goals to Mass-Based Equivalents, Docket ID No. EPA-HQ-OAR-2013-0602-22187 ("Translation TSD"). The commenters said that unlik e the Proposed Guidelines, which require a protection of emissions "in the absence of emission standards contained in the plan," 79 Fed. Reg. at 34,953, Proposed 40 C.F.R. Sec. 60.5770, i. e., in the absence of application of the Building Block, the Translation TSD directs states to adjust their 2012 emissions to "reflect the deployment of incremental building block three and four resources." (Translation TSD at 5).

Comment 47: The proposed rule does not appear to give full opp ortunity to Canadian electric utilities to provide electricity to the U.S.

Response 47: See section VIII.K. of the final rule preamble of the CPP for the EPA’s response
to this comment.

The following are summaries of the specific public comments under this comment:

Commenters emphasized that the final EPA rule shoul d respect the importance of U.S. - Canadian electricity generation resources for both countries. The commenters said the rule should address importing electricity from Canada, a nd should address whether Canadian exports of hydro or nuclear energy can be used to meet stat e goals.

Commenters said that electricity plays an integral role in the strong U.S.-Canada energy relationship - there are more than 35 electric tran smission interconnections between the U.S. and Canada, which together make a very integrated North American grid.

Commenters said that the Proposed Rule does not app ear to give full opportunity to Canadian electric utilities to provide electricity across th e border to U.S. states for these purposes.
Commenters said that the EPA should address this is sue in its rulemaking and provide full opportunity for Canada to continue to be eligible t o sell its electricity across the border. Commenters said that there is also a question as to whether Canadian exports of hydro or nuclear electricity to U.S. states can be used to meet stat e goals. Commenters stated that between five and ten percent of Canada's total electric generati on is exported to the U.S. and most of it is either hydro- or nuclear-based. Commenters said tha t the states of California, Minnesota,345

Vermont and Wisconsin have accepted imported electr icity from Canada to meet their various "renewable" energy definitions. Commenters recommen ded that imports of all non-CO2 emitting sources imported from Canada be eligible for compli ance in a state plan under the Proposal.

Commenters stated that further, the Canadian govern ment has its own version of NSPS for new and existing coal-fired power plants. Commenters st ated that any final rule from the EPA should address this issue in a manner that recognizes the interconnected nature of the North American grid and that is consistent with the U.S.-Canadian trade policies set by both the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA). Commenters provided the Canadian Electrici ty Association's "Reducing GHG Emissions Under EPA's Section 111(d) Guidelines" (J anuary 2014) paper to explain the complexity of this trade issue.

Comment 48: Counting out-of-state resources towards compliance goals. The EPA should provide clearer guidance on the crediting of emissi on reductions from out-of-state generation to ensure that the customers that are paying for a car bon-reducing investment receive the benefit of the investment, even if it's located in another sta te. Utilities should be able to move MW-h and associated emission rates generated by their facili ties between states.

Response 48: See section VIII.L. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA should ensure that customer s will receive the benefit of the utility's carbon-reducing investments that they paid for, eve n if investment is located in another state. Commenters said energy markets now cover multi-stat e regions, and to provide our customers with clean and affordable power, electric utilities make investment decisions to meet energy and environmental objectives, and site facilities in th e most-optimal locations. Commenters said in the case of renewable resources, such as wind gener ation, this may mean investing across state lines. Commenters said in order to provide citizens with clean and affordable power and to not restrain this efficient energy market, the final ru le should recognize that credit for carbonreducing investments stays with the utility whose c ustomers are paying for the investment and not be stranded inside a state's geographic boundar ies.

Commenters said they agreed with the EPA's proposal that a state should be able take into
account all of the carbon emission reductions from renewable energy measures implemented by the state, whether they occur in the state or in ot her states. Commenters said however, we encourage the EPA to provide further guidance in th e final rule on the crediting of the interstate
effects of emission reductions. Commenters said in particular, clarification should be provided on how states should avoid double counting in insta nces in which one state claims credit for renewable generation and another state that holds t he environmental attributes of the same energy also claims credit. Commenters said to that end, they recommend that the Clean Power Plan encourage states to develop or participate in an environmental crediting accounting system for renewable energy. Commenters said if a state ch ooses not to do so, the EPA should only346

allow a state to include renewable energy MWhs in i ts compliance plan if it can demonstrate
entities in the state have submitted environmental attributes (i.e., credits) for those MWhs.

The commenters said the EPA should approve the deve lopment of plans that allow utilities to move megawatt-hours and associated emission rates g enerated by their facilities between states.

Comment 49: Multi-State plans - General

Response 49: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Against

The commenters said application of the proposed rul e to individual states, constructed to try to meet the intent of 111(d), does not consider inters tate Electric Generating Unit (EGU) ownership or purchase power agreements (PPA). The commenters said the option of multi-state plans is not a viable solution to dealing with interstate owners hip or contracts.

For

Commenters stated the EPA should recognize that for some states, a regional budgeting approach will make more sense than using RECs for compliance ; therefore, states should also be allowed to enter into multi-state agreements that allow for emissions budgeting so long as the emission reductions are real, verifiable, and are not being claimed by another entity or state.

Commenters supported flexibility in implementation strategies through multi-state partnerships; there is an opportunity for states to collaborate a cross state-lines to create cost-effective
solutions.

Comment 50: For multi-state plans using a rate-based approach, the final rule should include an option for the multi-state rate-based goal to chang e each year based on the amount of generation in each respective state

Response 50: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters developed a "Rate-based Multi-State Trad ing Program" Commenters suggested that for multi-state plans using a rate-based approach, the final rule should include an option for the multi-state rate-based goal to change each year bas ed on the amount of generation in each respective state. Commenters said this approach wou ld not alter the amount of credit states347

receive per MW-h generated, but it would allow for trading credits/allowances across state lines while ensuring that each state would either meet it s rate-based goal or that excess emissions in one state would be offset by a partnering state tha t over-complied with their rate-based goal.

Comment 51: The EPA should allow utilities (particularly multi -state utilities like Otter Tail) to apply the BSER on a unit-by-unit basis to determine a Section 111(d) target that is specific to the capabilities and limitations of their existing gene ration portfolios.

Response 51: See section V of the final rule preamble of the CP P for the EPA’s response to this

comment.

The following are summaries of the specific public comments under this comment:

Commenters said EPA should allow utilities (particu larly multi-state utilities like Otter Tail) to apply the BSER on a unit-by-unit basis to determine a Section 111(d) target that is specific to the capabilities and limitations of their existing gene ration portfolios. Commenters said this would enable utilities to meet a BSER target by managing the generation resources and energyefficiency programs they control, instead of penali zing them based on the misfortune of operating in the same State as a different generati ng resource owned by an unrelated company.

Commenters said as EPA is no doubt aware, South Dak ota is a national leader in the production of zero-carbon energy generation. Commenters said w ind energy accounted for more than 24% of South Dakota's total energy production, and hydr opower nearly 50%. Commenters said yet, the proposed rule's inconsistent treatment of South Dakota's energy resources penalizes the state for its proactive and successful use of its abundan t clean power resources.

Commenters said the proposed rule would require Ott er Tail to reduce operation of Big Stone Plant to a level that condemns this significant ass et to premature retirement and replacement simply because it is located in the same state as B asin Electric's Deer Creek Station. Commenters
said the rule should instead allow Otter Tail to de termine an appropriate, utility-specific BSER
based on a determination of the extent to which eac h of the four Building Blocks can feasibly and reasonably be applied to its specific portfolio of owned generation and its retail load. Commenters said although such an approach would sti ll place a substantial burden on Otter Tail, it would allow Otter Tail and other companies to us e the "tools in their toolbox" to achieve required emissions reductions rather than forcing p remature retirements or inequitably transferring emission reduction burdens to neighbor ing utilities and their customers.

Comment 52: States should be allowed to consider utility-speci fic regional plans

Response 52: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:348

Commenters said in order to give maximum flexibilit y to utility companies that operate in more than one state, rate or mass based regional plans t hat are specific to one company should be allowed if the state has the legal authority for th e regional plan. Commenters said the regional goal for a utility could be a goal based on the goa l for each state covered by the regional plan and the company's fossil fuel generation during the bas eline in each state. Commenters said the utility would be allowed to determine compliance wi th the regional goal considering all generation and emissions reductions in the region, and compliance with the regional goal would be considered compliance with each state's goal.

Commenters stated that under such a plan, if a util ity "over complies" with the regional goal, each state would be allowed to use that over compli ance in their state average. Commenters said other forms of utility specific regional plans may provide viable options, after development by a state and consultation with the EPA before any fina l plan is submitted.

Commenters said in addition, the Department believe s the EPA must accept state plans that
include standards that are based on either rate or mass within the same plan; doing so enables compliance flexibility and cost minimization.

Comment 53: Company-based Multi-State plans could be considere d an additional "best system of emission reductions". Under such a plan, compan ies that generate and distribute power over multiple states would be able to apply their zero a nd certain low CO2 emission electricity generation to meet Section 111(d) emission rate lim its anywhere within their electric generation system, and there would be several advantages to th is approach.

Response 53: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said that the EPA should revise the prop osed rule to better mesh with the manner in which the power industry is already organized: acro ss state lines with dispatch by Regional Transmission Organizations (RTOs) seeking to assure system reliability. Commenters said they believe that this can best be done by expressly pro viding that company-based multi-state plans are an additional "best system of emission reductio ns" under CAA section 111(d). Commenters said that under such a plan, companies that generat e and distribute power over multiple states would be able to apply their zero and certain low C O2 emission electricity generation to meet CAA section 111(d) emission rate limits anywhere within their electric generation system, rather than being restricted to using those strategies in the state where the generation occurs.

Commenters indicated there are several advantages t o this approach.

1. Time to action and generators determine how to redu ce emissions. First, it is impossible under EPA's proposal for companies to anticipate ho w states will respond within their boundaries and how system dispatch will be reorgani zed. As a result, no action can be taken by affected companies until multiple plans ar e proposed, approved, litigated, etc., making it impossible to meet EPA's interim goals. A llowing companies to immediately349

begin addressing their own energy portfolios to dem onstrate compliance with EPA's emission targets and individual state emission limi ts helps mitigate this problem and allows the parties that actually generate the emiss ions determine how to best reduce them.

2. Additional Flexibility. Second, approving company p ortfolio management programs to qualify as BSER across state lines will provide sta tes with additional flexibility in developing and adopting plans to meet their emissio n rate requirements under the final
rule.

3. Maximize Efficiency and minimize waste. Third, allo wing companies to manage their portfolios across state lines allows resources to b e built where most efficient and without undue waste. Companies can manage their portfolios without regard to state boundaries
or constraints in the transmission infrastructure. This would allow companies to reduce their reliance on high carbon emitting sources by s upplanting those sources with low carbon emitting sources where they make the most ec onomic and technical sense, not constrained by state boundaries.

Commenters said they can address the EPA's goals un der a company-based multi-state plan approach and can do so without exceeding the indivi dual state emission limits. Commenters said that implementing such an approach would eliminate many of the structural limitations associated with a strict state-by-state system, avo id disruption of the existing RTO structure, and limit conflicts with FERC and state regulatory bodi es. Commenters said forcing the regulation of electric generation and dispatch into a state bound ary model provides no environmental benefit and creates unnecessary problems, complexities, and inefficiencies that will increase the cost of compliance and undermine grid reliability

Comment 54: Multi-state generation and transmission companies should not be artificially constrained by state boundaries in developing and i mplementing the most cost-effective, technically sound CO2 emission reduction strategies . Absent this flexibility assets will be stranded and unnecessary renewable and gas generati on will be constructed. Therefore, Basin Electric requests that the EPA clarify that this co mpany-based multi-state approach can be utilized as BSER to demonstrate compliance under th e final rule.

Response 54: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA premises its CAA section 11 1(d) proposal on the idea that the interconnected nature of the electric grid provides additional opportunities to reduce overall CO2 emissions from the power generation sector in the m ost cost-effective manner. Commenters said to fully harness these opportunities, however, mult i-state generation and transmission companies should not be artificially constrained by state bou ndaries in developing and implementing the most cost-effective, technically sound CO2 emission reduction strategies. Commenters said instead, these companies should be allowed to apply zero and low carbon resources where they make the most economic and technical sense, and the n use the emission reduction benefits350

achieved from the use of these resources in meeting their obligations in any of the states where they operate. Commenters said if the EPA amends its Proposed Rule to expressly permit companies to pursue this methodology, and if states are allowed to treat these plans as BSER, much of the disruption to existing systems potentia lly caused by EPA's proposal may be avoided.

Commenters said that absent this flexibility, compa nies will be forced to rely on less costeffective and less technically sound reduction stra tegies in order to meet individual state requirements. Commenters said in many cases this wi ll result in the stranding of existing assets
in states where utilization of such assets is not n ecessary to demonstrate compliance and the construction of new renewable and gas resources tha t are completely unnecessary from an electricity production standpoint but are required to demonstrate compliance within the confines of a particular state. Commenters said in different circumstances companies may even forego cost-effective CO2 emission reduction opportunities altogether because the opportunities exist in
states where there is no need to achieve further re ductions under the Proposed Rule.

Commenters said these can be avoided if the final r ule allows companies to allocate zero and low CO2 emitting resources to any state where they oper ate. Commenters said this simple clarification will allow companies to develop and u se zero and low carbon generation based on
technical and economic considerations and eliminate the need to build redundant and unnecessary generation in a particular state for th e sole purpose of demonstrating compliance with the rule. Commenters said that additionally, p roviding flexibility to allow out of state allocation of zero and low CO2 emitting resources i s a prerequisite to the establishment of any
robust market for CO2 credits outside the narrow co ntext of a full-blown, state-based multi-state plan.

Commenters said allowing companies to allocate zero and certain low emitting resources across the states where they operate is fully consistent w ith the provisions of the Proposed Rule. Commenters said moreover, providing companies flexi bility will neither impair states' ability to comply with emission limits established in the fina l rule nor restrict their flexibility in crafting state plans. Commenters said this is because compan ies that utilize a multi-state allocation approach will still be required to meet all of thei r obligations in each state where they operate, just like they would in the absence of a company-ba sed multi-state plan. Commenters said accordingly, Basin Electric requests that the EPA c larify that this company-based multi-state approach can be utilized as BSER to demonstrate com pliance under the final rule.

Comment 55: Overview of how a company-based multi-state plan w ould work, and some guidance regarding allocation

Response 55: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Basic Concept. Commenters said the basic concept u nderlying a company-based multi-state plan is very simple. Commenters said under such a plan, companies that generate and distribute power over multiple states would be able to apply their z ero and certain low CO2 emission electricity351

generation to meet CAA section 111(d) emission rate limits anywhere within their electric generation system, rather than being restricted to using those strategies in the state where the generation occurs. Commenters said for example, if Basin Electric generated 1,000,000 MWh net of wind energy in South Dakota in 2030, it woul d be able to allocate that wind energy to meet its CAA section 111(d) obligations in another state, such as Wyoming, or in multiple other states, such as South Dakota, Wyoming and North Dak ota. Commenters said this flexibility would allow multi-state companies the ability to re duce CO2 emissions and demonstrate compliance with the requirements of the final rule in much the same manner that they currently generate electricity, namely through the operation of their integrated multi-state generation systems.

Limitations Regarding Allocations. Commenters said that while Basin Electric believes that providing flexibility to multi-state operators to a llocate reduction strategies across their generation system is crucial to the development of the most cost-effective strategies to reduce CO2 emissions under an emission rate-based approach , it acknowledges that certain limitations on what can be allocated may be appropriate. Commen ters said specifically, allocations should not interfere with the integrity of the proposed st ate-by-state approach, or where agreed upon, multi-state approach, by altering states' responsib ilities under the rule. Commenters said additionally, allocations should not be allowed tha t have the practical effect of reducing the stringency of established state emission limits. Co mmenters said for example, companies should not be allowed to allocate existing coal generation from a state with a lower emission limit to a state with a higher limit. Commenters said such an allocation would undermine the established state-by-state compliance scheme by shifting respon sibility for that affected EGU from one state to another. Commenters said in addition, and perhap s more importantly, such an allocation would result in less stringent compliance requireme nts for that facility, and for the company as a
whole.

Generating Resources to be Allocated Freely. Comme nters said to avoid these problems, Basin Electric proposes that there should be two categori es of generating resources that a multi-state company could allocate freely across its generation network: 1) new and existing non-CO2 emitting resources; and 2) new natural gas resource s that commence construction after January 8,
2014. Commenters said neither of these resources fit with in the definition of affected EGU under the Proposed Rule. 79 Fed. Reg. at 34956. Commenter s said accordingly, the Proposed Rule does not require that these resources be accounted for in any state plan, and therefore allocation
of these resources within a multi-state area will n ot alter states' responsibilities under the final rule. Commenters said additionally, because these r esources are not required to be addressed under the rule, allocating them to another state wi ll not lessen the stringency of the established
state emission limits.

Fundamental Requirements. Commenters said under th e rule as proposed, there is a multitude of ways that states could structure their CAA section 111(d) plans in the context of meeting a ratebased requirement, and in light of this the exact m ethodology for allocating zero and low carbon generation across a multi-state system will vary. C ommenters said however, regardless of the allocation methodology, Basin Electric, or any othe r company using a multi-state plan, would need to comply with two fundamental requirements.352

Low or zero CO2 emitting electricity could only be used once to demonstrate compliance within the multi-state system. Therefore, the total amount allocated within the multi-state system could not exceed the total amount that the company produc ed or had rights to distribute. To ensure that there is no double counting, the multi-state plan w ould need to include a mechanism to accurately track both the amount of zero and low CO 2 electricity generated and where that generation is allocated within the overall multi-st ate area.

While companies would be able to freely allocate ze ro and certain low carbon resources across the multi-state area, they would need to demonstrat e compliance with each individual state plan on a state-by-state basis. Accordingly, a company c ould not establish its own multi-state emission rate or average emissions across multiple states to show compliance. In other words, companies using a multi-state plan approach would b e required to meet their obligations to each state where they operate just like they would in th e absence of a multi-state plan. The only substantive difference would be that a company woul d have the additional flexibility to use zero and certain low carbon generation from anywhere wit hin its generating system to demonstrate compliance with the various applicable state requir ements.

Commenters said this approach retains both the inte grity of the state-by-state limits and the flexibility afforded individual states in adopting plans to meet these limits, while providing companies operating across multiple states flexibil ity in complying with these state plans.

Comment 56: Consumption-based Targets and All-generation Certi ficate Tracking present advantages.

Response 56: See section V.A. of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA recognizes many of the adva ntages of using regional evaluations and approaches to setting emissions goals, has consider ed these approaches, and calls for comment on "on whether, and if so how, the EPA should incor porate greater consideration of multi-state approaches into the goal-setting process" (Proposed Rule, Sec. VII.E, pg. 34899). Commenters said from our perspective, the advantages of consum ption-based targets and compliance for states include the following.

1. Consumption-based compliance includes imports an d exports and accommodates interstate trading of electricity.

Commenters said electricity trading, purchasing, an d use across state borders is a reality of the U.S. market. Commenters said consumption-based comp liance will reflect states' imports and exports of electricity and demand for emissions fro m affected EGUs. Commenters said the integrated grid should be reflected in state goals and compliance to achieve efficient emissions reductions according to BSER and to avoid inconsist ent compliance that could result in double counting and underreporting. Commenters noted that the EPA acknowledges throughout the Proposed Rule that it, "believes that the BSER for CO2 emissions from existing EGUs should353

reflect this integrated character" (Proposed Rule, Sec. VI.E.3, pg. 34881), but it argues that, "this state-wide approach [...] harnesses the efficiencie s of emission reduction opportunities in the interconnected electricity system" (Proposed Rule, Sec. IV.B, pg. 34853 and Sec. VI.E.9, pg. 34891). Commenters said they disagree that the stat e-wide approach harnesses the full
effectiveness of demand-side measures and efficienc ies of emissions reduction opportunities in the interconnected electricity system precisely whe re the electricity system and market is interstate or regional. Commenters said it limits e fficiencies unless state goals are based on consumed electricity.

2. Harmony with BSER and increased options for redu ctions for states.

Commenters said building blocks 2-4 - re-dispatchin g, RE generation and demand-side EE measures - affect regional reductions, reductions f rom both in-state and out-of-state generation. Commenters said the EPA recognizes that, "the elect ricity system is physically interconnected or networked and operated on an integrated basis acros s large regions. System operators routinely increase or decrease the electricity output of indi vidual EGUs to respond to changes in electricity demand" (Proposed Rule, Sec. VI.B.3, pg. 34857), an d that "instituting measures in building blocks 2, 3, and 4, due to the interconnected and i ntegrated nature of the grid, would elicit the response of reducing generation at some or all affe cted EGUs" (Proposed Rule, Sec. VI.E.3, pg. 3488. As such, affecting generation without changi ng consumption will be difficult for states, while changing consumption leads to changes in gene ration; emissions from consumed generation are emissions that states can control an d influence: "dispatch decisions are based on electricity demand at a given point in time" (Propo sed Rule, Sec. VI.C.2.a, pg. 34862) and "reduced utilization of the higher-emitting affecte d EGUs" is a "component" of BSER (Proposed Rule, Sec. VI.B.1, pg. 34856). Commenters said in o ther words, states can affect construction and use of electric generation, but use is what cau ses emissions, and emissions reductions in the case of RE, and use also affects construction.

Commenters said under the Proposed Rule, demand-sid e reduction efforts associated with building blocks 2-4 (e.g. efforts to use more natur al gas-derived electricity, more RE, or undertake more demand-side EE) will do less to achi eve compliance in states where there is significant importing and exporting of electricity: "For states that are net importers of electricity, the estimated reduction in the generation by the st ate's affected EGUs was scaled down to reflect an expectation that a portion of the generation avo ided by the demand-side energy efficiency would occur at EGUs in other states" (Proposed Rule , Sec. VII.C, pg. 34896). Commenters said the EPA has created a difference between state goal s and the pool of regulated emissions (instate only), on the one hand, and BSER and the pool of emission reductions (could be either or both in state and out-of-state), on the other. Comm enters said this difference limits the ability of states to comply and reveals that state goals are n ot aligned with the intent of regulation, which is to reduce emissions from power plants in accordance with BSER, as easily and cheaply as possible.

3. More accurate and complete state goal calculatio ns.

Commenters said with respect to building block 4, d emand side EE, the EPA has invited comment on an alternative to, "(scale) up the estim ated reduction in the generation by affected EGUs in net electricity-exporting states to reflect an expectation that a portion of the generation354

avoided in conjunction with the demand-side energy efficiency efforts of other, net electricityimporting states would occur at those EGUs, analogo us to the proposed adjustment for net electricity-importing states described in Step 5. W e also request comment on the alternative of making no adjustment in Step 5 for either net elect ricity-importing or net electricity-exporting states" (Proposed Rule, Sec. VII.C, pg. 34897). Com menters said this again recognizes the interstate nature of reductions achieve through dem and-side measures. Commenters said but under the Proposed Rule, there is no reason to expe ct states to help other states meet targets, so we do not recommend that the EPA adjust exporting a nd importing states' goals anticipating this. Commenters said rather, the EPA can make each state responsible for its own consumption with consumption-based targets.

Commenters said the EPA also invites comment, "on w hether the regional or state scenarios should be given greater weight in establishing the appropriate degree of re-dispatch to incorporate into the state goals for CO2 emission r eductions, and in assessing costs" (Proposed Rule, Sec. VI.C.2.c, pg. 34865). Commenters said ag ain, regional scenarios are likely more accurate in terms of actual effects of re-dispatchi ng, but since state targets under the Proposed Rule are for in-state generation only, the EPA shou ld not anticipate in state goal calculations that states will pursue policies that achieve regional r eductions without significant in-state reductions. Commenters said state goals and compliance are idea lly consumption-based, which accommodates regional reduction scenarios and which better reflects the effect that states may have using building blocks 2-4.

4. Market efficiencies for RE.

Commenters said to the extent that generation-based compliance incentivizes more development of RE in state and less development of RE out of st ate, which could potentially be claimed for 111(d) compliance in that other state, this could r esult in an inefficient distribution of resources to serve regional electricity markets as renewable energy is no longer being built where it makes the most sense. Commenters said as a result, RE dev elopment and 111(d) compliance is likely more expensive under the current proposed rule than it would be with consumption-based targets, which more strongly incentivize regional a pproaches.

5. Fairness.

Commenters said all imports displace in-state gener ation or allow for in-state generation not to be built, and if the in-state generation is or woul d have been emitting, then imports displace instate emissions as well. Commenters said states sho uld be responsible for what they pay for and consume, regardless of whether that is in or out of state. Commenters said states should be held accountable for what they do. Commenters said a con sumption-based compliance system will allocate responsibly for emissions by what states d o about what resources they use and not only what resources they have. Commenters said in so doi ng, consumption-based targets would also give states more control over their own compliance.

Commenters said for example, "The EPA has not devel oped goals for Vermont and the District
of Columbia because current information indicates t hose jurisdictions have no affected EGUs" (Proposed Rule, Sec. VII.C, pg. 34895). Commenters said consumption-based goals and compliance would solve this problem. Commenters sai d Vermont and Washington DC consume355

electricity and are therefore responsible for emiss ions from power plants and can affect reductions from power plants through demand-side me asures. Commenters said yet neither state must take any action under the Proposed Rule.

Comment 57: There is a potential for double counting if a mix of generation- and consumptionbased compliance is used

Response 57: See sections VII and VIII of the final rule preamb le of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Commenters said states must not have flexibility to choose which generation to include, or to select either a generation-based or a consumption-b ased target. Commenters said all states must use either generation- or consumption-based goals a nd compliance, otherwise tracking of emissions with generation will be necessary for all states to avoid double counting.

Comment 58: Discusses all-generation certificate tracking syst ems to be used for compliance with consumption-based targets, and provides Wyomin g as an example

Response 58: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said consumption-based compliance would require tracking MWh from affected EGUs and emissions with those MWh to the point of c onsumption in order to avoid double counting and underreporting. Commenters said region al all-generation certificate tracking systems - which issue a certificate for each MWh of generation in a region from all sources (as opposed to only RE sources) - can satisfy this need where states and compliance entities are required to report emissions based on the certifica tes that they had acquired and retired. Commenters said such systems are already being used in the Northeast for fuel source disclosure requirements: PJM-GATS and NEPOOL GIS are both all- generation tracking systems. Commenters said as explained by the Environmental T racking Network of North America (ETNNA) in a 2010 white paper:

"Utilities purchase these certificates to substanti ate use of electricity from the facility specified on the certificate. At the end o f each reporting period the certificates in a utility's account are tallied to determine the mix of resources that utility used for the year. Any electricity used by a utility in the region in excess of the number of certificates held by all utilities is assigned an average emissions figure, which is based on the total number and type of certificates that are left unpurchased by load serving entities ["residual mix"] . Regional system mix calculations can then be applied to any MWh purchas ed by a utility that do not356

have the attributes of generation [certificate] ass ociated with them, allowing the utility to factor the regional system mix into thei r particular overall system mix along with MWh from identifiable [specified] facili ties."

Commenters said this would allow states and the EPA in this case to calculate emissions based
on the direct emissions of each certificate and the residual mix of unused certificates.

Commenters said existing RE-only tracking systems c overing the rest of the country could be modified to be all-generation tracking systems, or at least systems that track both RE and MWh from affected EGUs for this purpose. Commenters sai d if consumption-based targets were adopted, the EPA should ensure that this technology is available to all states. Commenters said tracking systems could include a flag for 111(d) to identify which subset of instruments and generators could be used for compliance (e.g. exist ing rather than new generators, to reflect vintage requirements, etc.). Commenters said there should also be coordination between tracking systems around imports and exports.

Commenters used Wyoming as an example to demonstrat e how an all-generation certificate tracking system could work. Commenters said according to the Energy Information Administration (EIA), "Wyoming sends ne arly two-thirds of the electricity it produces to nearby states. High-volt age transmission lines carrying electricity from Wyoming are often operating at max imum capacity, and the state government is encouraging transmission expansion. S ix major interstate projects are under way to transmit more power out of Wyoming to western population centers." Commenters said in addition, "Coal-fired power plants dominate Wyoming electricity generation, producing about 8 o f every 9 kilowatt-hours of net generation. Wind energy's share has increased r apidly, to nearly one-tenth of net electricity generation."

Commenters said consumption-based targets and compl iance for Wyoming and its neighboring states that import its coal-fired electricity would look very different than the proposed state goals, but would more accurately reflect each state 's responsibility for emissions from existing power plants. Commenters said it would also afford Wyoming more control over its compliance (as it would only be responsible for emissions from the subset of in-state generators that serve load in the state) and its neighboring states would have more options and a greater ability to reduce emissions through demand-side measures.

Commenters said in Wyoming's case, the WREGIS track ing system could be modified to track
MWh from affected EGUs. Commenters said the EPA wou ld calculate Wyoming's emissions performance based on the direct emissions of each c ertificate acquired and retired by compliance
entities in the state and the residual mix of uncla imed certificates for any electricity used in
excess of the number of certificates held.

Comment 59: Economic modeling can show that a carbon excise ta x is at least as stringent as the EPA's emissions guideline. With the EPA's help , states can develop carbon tax programs and show the programs are likely to achieve the emissio n targets.357

Response 59: Thank you for the comment, state flexibility in st ate plan is discussed in section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters described how a state carbon tax approac h can be used to meet the proposed emissions guidelines. Commenters said a state can demonstrate through economic modeling that its carbon tax program is likely to achieve the emi ssions standard set by EPA. Commenters said to demonstrate equivalence, states can employ the E PA's regional air pollution methodology, which the Supreme Court recently upheld in EPA v. E ME Homer City Generation, L.P. with a 6- 2 majority. Commenters said States' authority to us e economic modeling is even stronger in the section 111(d) context than it is under section 110 , as Section 111(d) explicitly gives states the authority to consider economic conditions. Commente rs said moreover, in the section 111(d) context, the EPA has endorsed "open market concepts ," like carbon taxes, when they are designed to "achieve environmental limits," "minimi ze costs," and facilitate monitoring.

Commenters said in EME Homer, the Supreme Court uph eld an EPA program that set emissions limits based on the power sector's simulated respon se to cost thresholds, hailing the approach as a cost-effective way to solve a complex problem. Commenters said the EPA's economic model assumed that regulated entities would reduce emissi ons in response to emissions pricing. The commenters said to set the emissions price level, E PA modeled emissions reductions at different emissions pricing thresholds and then identified th e price points at which emissions fell significantly. Commenters said as the Court explain ed, these price points reflected the threshold at which "a certain type of emissions control strat egy bec[ame] cost-effective." Commenters said accordingly, the EPA used these cost thresholds to allocate emissions budgets to states; evidence showed that the emissions pricing-based budgets wou ld compel regulated entities to reduce emissions. Commenters said each budget represented the "quantity of pollution" a state would produce in a year "if its in-state sources implemen ted all pollution controls available at the
chosen cost thresholds."

Commenters said the EPA process for designing a cap -and-trade program reviewed in EME
Homer shows that states can demonstrate that carbon taxes, which are in essence cost thresholds, will achieve the EPA's emissions guideline. Comment ers said to do so, they need only develop a model similar to that used by the EPA in EME Homer and in the EPA proposal. Commenters said states can do this regardless of the formula f or emissions guideline, including rate-based and
mass-based standards. Commenters said states can wo rk with the EPA to vet economic modeling approaches and tax options. Commenters said finally , just as for any other state implementation strategy, if a carbon tax for some reason failed to produce the forecast emission reductions, a state must increase the stringency of its policies, for example by increasing the tax trajectory. Commenters said in any case, there exists longstand ing EPA precedent for the idea that a tax or
other cost-based threshold can be used to show that power sector emissions will fall to a predetermined level.

Comment 60: Final regulation should allow a cap and trade prog ram based on mass emissions with compliance based either on a lb/MW rate basis, a mass basis, or a combination of both, at election of utility.358

Response 60: The final CPP rule establishes both rate and mass options. These are discussed in section VI and VII of the final rule preamble of th e CPP. Sections V and VIII of the final rule preamble of the CPP describe state flexibilities.

The following are summaries of the specific public comments under this comment:

The commenters requested that the EPA allow states to have the option for a cap and trade program based on mass emissions with compliance bas ed either a pound per MW rate basis, a mass basis, or a combination of both, at the electi on of the utility. The commenters said that with further analysis, it may be appropriate to include other industry sectors and perhaps mobile sources as part of a cap and trade program.

Comment 61: RGGI is an adequate compliance mechanism. Comment er's analysis indicated RGGI-driven CO emissions reductions were greater th an emission reductions that would result from the Existing Source Performance Standard, supp orting the contention that RGGI can be an adequate compliance mechanism.

Response 61: States have the flexibility to use existing progra ms to demonstrate compliance. See section VIII of the final rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters expressed their general support for the EPA's efforts to curb greenhouse gas emissions, and support the nation's first cap-and-t rade program for CO, emissions, the Regional Greenhouse Gas Initiative (RGGI) and stated that th e RGGI is an adequate compliance mechanism for the Existing EGU standard.

Commenters said the attached technical support docu ment compares the RGGI-driven CO,
emission reductions to the emission reductions that would result from the Existing Source
Performance Standard. Commenters said the calculati ons show that the RGGI reductions are the greater of the two supporting the contention that R GGI can be an adequate compliance
mechanism.

Commenters said to construct the table, the methodo logy used in the EPA June 2014 Goal Computation Technical Support Document and the EPA "tsd-state-goalcomputation" spreadsheet was adapted to calculate a nationwide difference be tween the initial unadjusted 2012 state fossil
emission rate for covered sources and a final emiss ion rate to determine a percentage reduction. Commenters said the nationwide Existing Source Perf ormance Standard reduction of 42.9 percent was calculated by summing all the state val ues and using the sums in the goal calculation methodology. Commenters said RGGI uses a pre-compli ance period of the average of 2006-2008 for its analyses of RGGI effectiveness and reductio ns. Commenters said the RGGI states lowered the overall allowable CO, emission level starting i n 2014 and as the EPA notes the revised program reduced emissions by 45 percent. Commenters said subsequent to 2020 the RGGI cap will be 78,000,000 tons and that represents a 45.2 percent reduction from the 2006-2008
baseline. Commenters said because that reduction is greater than the nation-wide reduction, RGGI is an appropriate compliance mechanism.359

Comment 62: Although the EPA identifies them as "state-specifi c goals", they do not in reality take into account specifics of the states as they a re based on regional or national averages

Response 62: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said that although EPA states that they have developed "state-specific goals" using data specific to each states' EGUs and other attrib utes of its electricity system, in reality BSER for each of the building blocks has been based on s ome method of averaging whether at a regional or national level, and therefore the EPA i s forcing a regional approach.

Commenters said in no way is EPA proposing a goal o r standard that is state-specific or allows for the states to apply the standard in a state pla n based on what has been and can be achieved in the state itself. Commenters said justifying this a veraging for all affected EGUs rather than a
national uniform rate is in consideration of Sectio n 111(d)'s requirement for standards of performance to be on a state rather than national b asis is actually counterintuitive to what actually is intended. Commenters said states are ch arged with developing a standard of performance, taking into account remaining useful l ife, for their individual units based on U.S.
EPA's determination of a cost-effective and technic ally feasible BSER for those unit types. Commenters said states have the ability to a make a djustments based on remaining useful life and apply a standard of performance to each unit ra ther than an average across units, yet EPA has failed to give consideration to this very speci fic element of the CAA.

Comment 63: The EPA has proposed that if any section of propos ed rule is deemed beyond authority of CAA, that the rule would stay in effec t and be based on the provisions of the rule that remain - this is not an appropriate or realist ic scenario

Response 63: Severability is discussed in section V.A of the fi nal rule preamble of the CPP.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA has proposed that if any se ction of this Proposed Rule is deemed beyond the authority of the CAA by the courts, that the rule would stay in effect and be based on the provisions of the Rule that remain. Commenters said this cannot be an appropriate method for dealing with the highly legally speculative nat ure of this rule, and indicated from a practical standpoint the inter-connected nature of the plans means it is probably not workable.

Commenters said the EPA has proposed state specific goals that are based on a systemic approach that takes into account the totality of th e energy delivery system. Commenters said states, as they develop state plans, are anticipate d to incorporate into their plans compliance mechanisms that will necessarily be integrated, and affected entity compliance strategies may be completely upset should a BB be determined illegal. Commenters said the elimination of one component can reasonably be anticipated to directly impact another to a degree that will360

necessitate EPA's reconsideration of, at minimum, s tate goals and affected entity compliance obligations.

Commenters urged the EPA to consider a scenario whe re a state chooses to meet the obligation of all four BBs by transitioning from existing coal to new NGCC generation. Commenters said should BB2 be determined to be illegal but the othe r BBs are maintained, then the state's compliance with the existing goals is highly unlike ly - the EPA must be prepared to address this.

Commenters said along these lines, EPA contemplates a regulatory structure where compliance obligations can only be applied 'inside the fence.' Commenters said the EPA proposes that in such a scenario, it would be appropriate for EPA to utilize 'beyond the fence line' measures to develop a calculation of BSER that would apply to a ffected units on the grounds that reduced generation remains BSER, but such an approach canno t withstand scrutiny. Commenters said
activities that lie outside the control of the affe cted unit cannot possibly be proven "technically feasible." Commenters said additionally, because EP A is relying on BB measures (such as RES or EE mandates) that have not been adopted in many states, it is arguable whether these measures are "adequately demonstrated."

Comment 64: The EPA should consider excluding under constructi on NGCC units for purposes of goal computation.

Response 64: The EPA has included under construction units in its qu antification of BSER as described in sections V and VI of the final rule pr eamble of the CPP. These units are both likely affected sources and have the cost-effective potent ial to reduce CO 2 emissions.

The following are summaries of the specific public comments under this comment:

Commenters said that the EPA should consider exclud ing under construction NGCC units for the purposes of goal calculation, to result in calculat ions that better reflect reality. Commenters said the decision to build a new NGCC plant does not hap pen in isolation and is generally motivated by another change within the system (such as an inc rease in electric demand, the retirement of another resource, or the addition of variable resou rces). Commenters argued that the EPA's failure to account for future unit closures, while simultaneously including under construction units, potentially overestimates the size of the NG CC fleet, as new NGCCs could be replacing
older units scheduled to retire. Commenters said th e fact that EPA was forced to make production assumptions about new NGCCs further illu strates the unnecessary difficulty of including plants not fully in operation, as well as the inevitability of erroneous analytical outcomes. Commenters said removing units that were not operational by January 1, 2012, will result in calculations that better reflect reality.

Comment 65: Commenters are a generation and transmission coope rative and states that a small or not-for-profit utility exemption or a provision for less stringent standards or longer compliance schedules should be available for small public and cooperative EGUs

Response 65: States have the flexibility to accommodate unit-spe cific concerns by assigning separate emission rate or reduction requirements fo r units. As described in section V of the final361

rule preamble of the CPP, the EPA believes its BSER provides compliance options that are available to every source.

The following are summaries of the specific public comments under this comment:

Commenters said on September 29, 2014, Arizona Elec tric Power Cooperative, Inc. (AEPCO) filed comments on the CPP requesting that the EPA c onsider creating a separate category for "small public and cooperative electric generating u nits" within the framework of the larger rule. Commenters said that Dairyland Power Cooperative ag rees with AEPCO that a small or not-forprofit utility exemption or a provision for less st ringent standards or longer compliance schedules should be available to address the unique difficult ies such utilities will have complying with the proposed rule. Commenters said as noted in the NREC A comments on this proposed rule, Section 111(d) of the CAA instructs EPA to allow st ates to "take into consideration, among other factors, the remaining useful life of the existing source to which the standard applies." (42 U.S.C. Section 7411(d) (1)). Commenters said furthermore, NRECA noted that EPA regulations (40 C.F.R. 60.24(f)) state that:

"States may provide for the application of less str ingent emissions standards or longer compliance schedules than those otherwise re quired [under the paragraph setting emissions standards for designated pollutan ts the Administrator determines may cause or contribute to endangerment of public h ealth], provided that the State demonstrates with respect to such facility (or clas s of facilities): (1) Unreasonable cost of control resulting from plant age, location, or basic process design, (2) Physical impossibility of installing necessary cont rol equipment, or (3) Other factors specific to the facility (or class of facil ities) that make application of a less stringent standard or final compliance time signifi cantly more reasonable."

Commenters said electric cooperative consumers, suc h as the rural electric members served by the member cooperatives of Dairyland, cannot afford the high cost of electricity and capital required if Dairyland must replace its existing coa l-fired generation before its remaining useful life and build new transmission and gas pipeline in frastructure to support that new generation. Commenters said our unique non-stock, not-for-profi t structure does not lend itself to the sort of flexibility the CPP requires.

Commenters said small, not-for-profit utilities, in practice, have fewer resources and therefore fewer options to comply with the CPP. Commenters sa id a large utility with many power plants will likely have numerous avenues to adapt to and a ddress the CPP rules resulting in a smaller impact on affordability and reliability for their c ustomers. Commenters said they own two coal plants and a portion of a third plant; they have tw o natural gas combustion simple-cycle turbines, with operating time restrictions. Commenters said t herefore, their options for response to the rule are extremely limited.

Commenters said that due to the unique challenges f aced by them, the EPA should exempt small and/or not-for-profit utilities from the CPP or off er modified compliance pathways taking special regard for the unique challenges of such utilities.362

Comment 66: Proposal does not provide credit for emissions red uctions achieved prior to the 2012 baseline or for any reductions that could be a chieved between the 2012 baseline and initial compliance (2020) timeline

Response 66: See sections V, VI, and VIII of the final rule pre amble of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Commenters said that the proposal does not provide credit for emission reductions achieved prior to the 2012 baseline or for any reductions that cou ld be achieved between the 2012 baseline and initial compliance (2020) timeline.

a. Pre-2012 Reductions

Commenters said the EPA should recognize and allow states to provide credit for unit efficiency improvements (uprates), including nuclear uprates, made prior to 2012. Commenters said in the period leading up to EPA's 2012 baseline year, comp anies have undertaken a variety of initiatives that directly or indirectly reduce the carbon intensity of the electric generating system. Commenters said these actions include: upgrades at existing fossil- fired power plants, uprates at nuclear power plants, new plant construction, inclu ding NGCC facilities and renewable energy projects, and energy efficiency investments. Commen ters said these "early actions" should not be penalized in the goal computation, nor should they be penalized in the state compliance plans. Commenters requested that the EPA develop a process where a state can evaluate these efficiency improvements and include these avoided e missions in a state compliance plan.

b. 2012- 2019 Reductions

Commenters said as proposed, EPA's Clean Power Plan would not allow any CO2 emission reductions occurring between now and the end of 201 9 to be eligible for compliance with the state emission performance standards. Commenters sa id the EPA should encourage entities to make investments in reductions prior to 2020 by pro viding an opportunity to use these emission reductions and avoided emissions in state complianc e plans, which will spur early investments. Commenters requested that the EPA allo w for "early action" credit for emission reductions achieved through any additional unit eff iciency improvements and new energy efficiency programs as well as unit retirements pri or to 2020.

Commenters said creditable early reductions should include any activities within the four BSER building blocks or any other measures identified in the state plans, such as deployment of electric vehicles or distribution efficiency from deployment of smart grid technology for example. Commenters said furthermore, if states are allowed to demonstrate compliance with a final target (whether 2030 or the alternative 2025 emission rate goal), without reference to the interim average goal, they can include the reduction benefi ts of activities that occur after 2012. Commenters said this provides incentives for states to implement pre-2020 reduction measures, particularly new renewable, end-use and supply-side efficiency programs, which would provide additional environmental benefits more quickly.363

Commenters recommended that EPA should allow states to tailor their compliance timelines to their unique circumstances, and should be able to a pply early emissions reductions resulting from existing laws and regulations towards compliance. Commenters said Nevada Senate Bill 123 (SB123) will result in the early retirement of a co al-fueled EGU (starting in 2014 and final unit retirement in 2017), and SB123 has also resulted in the addition of incremental gas and renewable resources being added to the utility port folio. Commenters said thus, SB123 will allow Nevada to realize emission reductions apart f rom BB 1 and BB2 prior to the beginning of the interim compliance period, and states like Neva da should be allowed the flexibility to implement existing laws and regulations aimed at re ducing emissions on the state-specified schedule, thereby demonstrating progress toward the final goal in an alternative manner.

Comment 67: As an incentive to engage in carbon reduction meas ures prior to the beginning of the plan performance period (2020) and get a jump o n achieving final goals, the EPA should allow credit for new carbon reduction actions and p rovide limited banking for carbon reduction
actions taken in 2017-2020 timeframe.

Response 67: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said in order for states to fully levera ge renewable energy as a compliance tool, the EPA should provide limited banking for carbon reduc tion actions taken after January 1, 2017, and before the plan performance period begins.

Commenters said the EPA should allow credit for new carbon reduction actions (i.e., increasing existing policies, enacting new programs and/or add ing new qualifying facilities) taken after January 1, 2017, and before the beginning of the pl an performance period (2020), to count toward achievement of the state's emissions goals. Commenters said this would help ensure that states have an incentive to engage in carbon reduct ion measures prior to that period and get a jump on being better positioned to achieve their fi nal compliance goals.

Comment 68: Proposed rule should be based on an "all-of-the-ab ove" energy supply based on maintenance of a diverse energy supply

Response 68: The EPA RIA analysis suggest the generation divers ity will increase in response
to the CPP.

The following are summaries of the specific public comments under this comment:

Several commenters said that energy consumers benef it most from an "all-of-the-above" energy strategy, and that diversity of energy supply is no t only critical in keeping energy costs reasonable, it is essential in ensuring steady and reliable streams of energy and is vital to the country's economic survival.364

Comment 69: The EPA should utilize marginal analyses in constr ucting its targets, both for the nation and for the individual states, to ensure tha t the people of the United States receive
emissions reductions benefits commensurate with the costs to achieve them

.
Response 69: The EPA’s BSER quantification relies on the averag e emission profile for a generating technology that is replacing and/or bein g replaced. It does not attempt to conduct a replacement calculation based on identifying the ma rginal source. However, the EPA compliance modeling does operate on a least-cost li near programing framework that takes these considerations into account, and states have the ab ility to take this into account when determining a compliance pathway.

The following are summaries of the specific public comments under this comment:

Commenters said that the proposed rule does not ade quately address policy alternatives such as a 70% reduction, or a 48% reduction, and said that th e question of CO2 emissions is sufficiently complex that the marginal cost and marginal benefit curves may not be enough to characterize an optimum.

Commenters said since emissions abatement carries c osts to the consumer, it is important
to ensure that those costs are commensurate with th e benefits that consumers are receiving from this abatement policy. Commenters said by not consi dering the relationship between the marginal costs and marginal benefits of abatement f or each state, the EPA's methodology cannot be considered sufficient for determining the optima l level of CO2 reduction for society. Commenters encouraged the EPA to utilize m arginal analyses in constructing its targets, both for the nation and for the individual states, to ensure that the people of the United States
receive emissions reductions benefits commensurate with the costs to achieve them.

Comment 70: To encourage nuclear generation to operate at peak performance, the EPA should allow the energy from any nuclear power plant in ex cess of the 81.6 % average lifetime capacity factor for all current nuclear plants to be used fo r compliance with the states' carbon emission rate goals, and because this is meant to be an ince ntive for peak performance of the nuclear fleet, none of the nuclear generation should be used to ca lculate the states' goals.

Response 70: The EPA has revised the goal calculation to exclud e nuclear generation, however, some nuclear generation can be included in the stat e plan for compliance with the final goals. See section VIII of the final rule preamble of the CPP for more information about nuclear generation in the state plan.

The following are summaries of the specific public comments under this comment:

Commenters said in the proposal, EPA stated "Increa sing the nuclear capability relative to the amount that would otherwise be available to operate is therefore a technically viable approach to365

support reducing CO2 emissions from affected fossil fuel-fired EGUs." Commenters said while EPA states in the proposal that it estimated a 90 p ercent average utilization rate for U.S. nuclear units, APS, which operates the Palo Verde station, has different information. Commenters said based on industry data, the average lifetime capaci ty factor of the 100 nuclear plants currently operating is 81.6 percent. Commenters said of these , based on the three year average between 2011 to 2013, the plants in the fourth quartile onl y operated at an average capacity factor of 70.8 percent.

Commenters said therefore, to encourage nuclear gen eration to operate a peak performance, EPA should allow the energy from any nuclear power plan t in excess of the 81.6 percent average lifetime capacity factor for all current nuclear pl ants to be used for compliance with the states' carbon emission rate goals. Commenters said because this is meant to be an incentive for peak performance of the U.S. nuclear fleet, none of the nuclear generation should be used to calculate the states' goals. Commenters said this nuclear gen eration, like renewables, is a zero carbonemitting generation resource, and added this approa ch adds flexibility to the program and assists the states that have nuclear capability in achievin g their final carbon emission rate goals.

Comment 71: Proposed rule includes performance standards that are completely inconsistent with the Standards of Performance proposed for new sources, and instead adopts an approach that relies primarily on other, unrelated sources w ithin each state

.
Response 71: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters said that the proposed rule includes per formance standards that are completely inconsistent with the Standards of Performance prop osed for new sources, and should be modified to be consistent. Commenters said the pro posed rule ignores the EPA's past approach to Section 111(d), which mandated that the BSER ana lysis conducted for new sources under Section 111(b) be followed for sources to be regula ted under Section 111(d). (40 Fed. Reg. at 53, 342). Commenters said instead, the BSER analysis i n the Proposed Rule impermissibly relies on reductions outside the fence line, effectively maki ng entire states into emissions "sources" through regulation of the entire energy sector.

Comment 72: The EPA should create a dynamic distribution syste m that includes a Distribution System Operator as the local balancing authority.

Response 72: See section VIII of the final rule preamble for di scussion of state plans.

The following are summaries of the specific public comments under this comment:

Commenters stated that more electrical power is bei ng generated in homes, businesses, and commercial buildings and used locally, and this jum p in power production at the distribution366

level presents a challenge to the traditional elect rical transmission and distribution system based on centralized power generation and control. Commen ters said the centralized system operated by utilities was not designed for the flexible load tracking required by renewables or the control of large numbers of distributed electrical energy r esources. Commenters suggested an alternative approach that holds promise is a dynamic distributi on system that includes a Distribution System Operator as the local balancing authority.

Commenters said as conceived, the dynamic distribut ion system uses local sources to track loads, stabilize voltage and frequency, and smooth intermi ttent renewable energy generation providing a predictable, constant load profile to the utility . Commenters said this new dynamic distribution system connects central and local electricity gener ation, storage, microgrids, and loads with a marketplace that enables energy transactions, such as payments passing between buyers and sellers of energy at the local distribution level. Commenters said this new system provides a promising framework for distributed energy resource s to deliver the same services at a better price, with decreased power losses, decreased emiss ions, and better reliability.

Commenters said a dynamic distribution system, base d on a new balance in structure and
function between centralized and decentralized arch itecture, requires a new market model which combines a regional and locally tailored market mod el.

Comment 73: Create a "better than BSER" option with a longer c ompliance period

Response 73: The EPA is retaining the 2030 final goal complianc e date, however the EPA has modified the interim goals in response to comments and our further consideration. The interim period covers the years 2022-2029 and includes illu strative interim emission values for the periods of 2022-2024, 2025-2027, and 2028-2029. Sta tes have the flexibility to use different steps than those included in the final rule if the state demonstrates in its state plan that the value s chosen for the 3, 3, and 2 year increments are equi valent to the interim goal included in the final rule for the 2022-2029 period. See sections V and V II of the final rule preamble for discussion of the BSER and statewide goals.

The following are summaries of the specific public comments under this comment:

Commenters stated in practice, the "better than BSE R" approach would provide a State with the flexibility to work with utilities to develop long range resource planning that would allow a true glide path for affected EGUs in exchange for less c arbon intensive resources replacing those higher intensity resources at times that could acco unt for particular situations in a State. The commenters said for example, a State would be allow ed to work with a utility for a guaranteed shutdown of a coal plant that would occur in 2032 a nd up until 2032 the State would not be in compliance with its State goal; but, after shutting down the coal plant, the State would be well beneath its compliance goal and its cumulative CO2 emissions over the 20 year compliance period (2020-2040) would be significantly lower tha n what would occur if the coal plant continued to run thru 2040 with reduced output to c omply with the State's proposed goal. The commenters said there is precedent for EPA acceptin g a cumulative approach to a reduction in pollution emissions over a period of time; EPA reli ed on such a cumulative approach to367

accounting for emission reductions that would be ac hieved by the Navajo Generating Station (NGS) when approving the shutdown of the three unit s at NGS and deferring the installation of pollution controls by recognizing the cumulative po llutant reductions would be greater if the pollution controls were required in the near term o n all three units without a guaranteed shutdown for the units. The commenters encouraged E PA to permit more creative approaches for States to employ, such as UAMPS' "better than BSER" approach in order for States to work with
affected EGUs to afford these sources with true com pliance glide paths.

Comment 74: The EPA Should Expressly Allow States To Use A Hyb rid Approach that can
include both mass-based and rate-based standards

Response 74: The EPA is giving states the flexibility to choose to comply with rate-based goals or mass-based goals. See section VIII of the final rule preamble for more information regarding state plans.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA should clearly and expressly allow states to use a hybrid approach that
can include both mass-based and rate-based standard s, in addition to allowing states to use new natural gas capacity in compliance demonstrations; an example of this approach could be as
follows:

• In Step One, a mass-based cap-and-trade program cou ld be developed for existing fossilfueled plants. The commenters said the cap for this program could be based on annual average emissions from existing fossil-fueled plant s from 2007 through 2012 reduced by an amount that reflects BSER for those plants, taki ng into account any heat rate improvements available to them (considering the cos t of making such improvements, the remaining life of the plant, etc.). The commenters said the cap-and-trade approach would allow those plant owners/operators to decide whethe r to make the heat rate improvements or simply run less (or shut down) if doing so would make an equivalent level of reduction
at a lower rate.

• In Step 2, the state would calculate an emission ra te (in pounds per megawatt-hour) that the state would commit to achieve starting in 2030. The commenters said the rate would be established by calculating the numerator to be t he annual CO2 cap discussed above plus the projected annual emissions from new natura l gas plants starting in 2030 and the denominator would be the projected annual megawatt- hours of generation in the state from all of these plants. The commenters said when making its compliance demonstration, the state would also be allowed to i nclude all forms of carbon-free generation (i.e. wind, solar, hydropower, and nucle ar) in the denominator as an incentive to encourage investments. The commenters said such an approach would provide states with an incentive to move to cleaner generation wit hout either EPA or the state running afoul of the jurisdictional limitations.368

Comment 75: Include all GHGs, including all reductions since 2 005

Response 75: The final rule goals are based on emission reducti ons of only CO 2 . The EPA is not using 2005 as the baseline year, see section VI of the final rule preamble of the CPP for more information about the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated in judging whether a state has ac hieved the GHG reductions, the EPA should be required to take into consideration all reductio ns in greenhouse gases in each state, including those from power plant retirements that have occurr ed since 2005. The commenters said President Obama has publicly called for the reducti on of greenhouse gases by 17% from the 2005 level by 2020. The commenters said in calculat ing whether states have met their requirements to help achieve that federal objective , all reductions in GHG since 2005 should be
included.

Comment 76: T&T supplementary rule - EPA takes comment on the issue of RE across international borders, and specifically in Canada, in the supplemental proposal. The commenters are affected by this issue since they have current and possible future power purchase agreements with hydroelectric facilities in Canada - Increment al or new hydro capacity installed any time after the base year, not just after the proposal da te, should be eligible for compliance

.
Response 76: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment more information about RE measures tha t occur outside the U.S.

The following are summaries of the specific public comments under this comment:

Commenters said incremental or new hydro capacity i nstalled any time after the base year of 2012 (or other base year/range of years used in the final rule) - not only after the date of proposal - should be eligible for compliance. Commenters sai d the emissions benefits of such investments should be counted not only beginning in 2020, but b eginning in the year that hydro capacity goes into service and therefore begins displacing emissi ons from 111(d)-affected EGUs. Commenters said for facilities that go into service before 202 0, EPA should allow banking of these MWh for use after compliance begins, as EPA suggested in th e October 30,2014 Notice of Data Availability (79 Fed. Reg. at 64,545- 64546).

4.9 CHOICE OF BASELINE OTHER THAN 2012

Section 4.9 covers public comments related to the c hoice of baseline other than 2012.369

Commenters have raised a number of issues related t o this subsection which are organized by topics (comments) below. Responses are provided for these topics.

Comment 1: 2012 does not represent typical year; multi-year a pproach should be used for baseline; 3 or 5 year period suggested as baseline; the EPA has used multi-year averages in other programs; support for NODA 3-year average.

Response 1: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment. EPA had made adjustments to fossil genera tion in the NorthWest to reflect a more representative generation profile.

The following are summaries of the specific public comments under this comment:

2012 Not A Representative Year. Several commenters stated that 2012 should not be used as baseline year because it was not a typical, represe ntative year for the industry. Commenters stated that 2012 does not accurately represent GHG emissions because in 2012 GHG emissions rates from coal-fired generation were atypically lo w due to: above average hydropower electricity generation, mild weather, historically low natural gas prices, and a changing portfolio (additions and retirements) of available units for dispatch. Commenters stated that single-unit issues present in 2012 also significantly affected state baseline emissions, including extended outage periods for major sources of CO2 and partial year operation of new NGCCs, and the EPA did not adjust for any of these events. Supporting their argument that 2012 was not a representative year for gas prices, Commenters indi cated that natural gas prices are historically very volatile and are expected to rise faster than coal prices relative to 2012. Commenters said that 2012 is not representative for the Northeaster n states because due to Super Storm Sandy, energy consumption was atypical.

Commenters stated the selection of 2012 as the base year is also non-representative of the current energy markets in that natural gas prices were unsu stainably low due to the mild weather and the significant growth in the new gas drilling regions.

Commenters stated EPA chose a baseline year of 2012 ; in that year, the price of natural gas hovered at historically low rates. The commenters s aid the price differential between coal and gas was very nearly zero; and some coal units with dual fuel capability actually elected to burn gas for much of the summer generating season. The c ommenters said other coal units were laid up as NGCC units dominated the market; yet even und er these most favorable market conditions, EPA data indicate that NGCC units in the Midwest op erated only at about 30% capacity factor (28% in Missouri). The commenters said there may be some price signal that would further augment NGCC gains and produce the desired 70% capa city factor, but EPA hasn't demonstrated that it exists, nor given any indication of what it might be; and added, this is an important factor because a large portion of the imputed benefits of the proposal flow from this market displacement.

Several commenters supported using a multi-year ave rage rather than any single year, but indicated that if the EPA does choose to use a sing le year they must, at a minimum, correct for the types of anomalies discussed above. Commenters indicated that for example, to adjust for370

variable hydropower production, the EPA could emplo y a common regulatory practice among
investor-owned electric utilities in the Pacific No rthwest region that involves "normalizing," or "averaging", hydroelectricity generation across per iods and scenarios. Commenters said that ratemaking processes assume average hydroelectricit y generation, irrespective of actual hydrological conditions. Commenters said that if th e baseline had been established on the basis of a "normalized" year, instead of raw emissions da ta from 2012, Washington's baseline would have been 5.7 million tons higher, or approximately 36.2 million tons. Commenters said that the EPA should defer to states that have a long history of normalizing for hydrogenation, since the EPA has no experience or authority with respect to normalizing for hydroelectricity generation in different markets across the country.

Commenters stated EGU's operations will vary greatl y over the course of any given year
and EPA must correct for those anomalies.

Single Year Not Representative. Commenters stated u sing a single year as the basis for the calculations is inconsistent with the way the indus try operates. The commenters said electric generating units require regular maintenance and mu st be taken out of service for extended periods of time to complete maintenance and upgrade s. The commenters said for example, Laramie River Station, which is comprised of three generating units, is on a three-year maintenance schedule, with each unit being shut dow n for maintenance on a rotating basis. The commenters said many utilities in the industry adhe re to a three-year maintenance schedule and, regardless of the specific schedule, selecting any single year is likely to fail to reflect the actual capability of the generating fleet. The commenters added variations in weather have a significant impact on not only the demand for electricity, but also the type of electricity generated in a given year. The commenters said for example, the amount o f fossil generation in the Upper Great Plains region is significantly affected by the amou nt of hydropower generation: In high water years there is more hydro and less fossil generatio n, and likewise in low water years, there is less hydro and more fossil generation. The commenters sa id averaging the baseline will tend to reduce the impact of weather anomalies as well as u nit outages.

Commenters stated EPA should start with a baseline period that is reasonably representative of actual generation and carbon emission levels. The c ommenters said specific to the Pacific Northwest, a single year is unlikely to be represen tative of a fair "starting point" because of when some plants began operation and hydroelectric varia bility. The commenters did not believe that the baseline should be the same for all states; rat her the states should have, within their authority, the ability to determine the appropriate baseline p eriod.

Multi-year Baseline. Several commenters indicated t hat using a single year as the baseline is inappropriate, and that instead a multi-year approa ch should be used. Several commenters stated that using a single year will produce anomalies, ma ny of which could be ameliorated by the use of a multi-year baseline.

Several commenters indicated using a single year fo r baseline is inappropriate because variations in weather have a significant impact on not only th e demand for electricity, but also the type of electricity generated in a given year. Commenters said that for example, the amount of fossil generation in the Upper Great Plains and the Pacifi c Northwest regions is significantly affected by the amount of hydropower generation: during high water years, there is more hydro and less371

fossil generation, and likewise in low water years, there is less hydro and more fossil generation. Several commenters indicated that becau se of historically high hydropower availability in 2012, Oregon's only coal-fired powe r plant ran at an unusually low capacity factor of approximately 50 percent. Several commenters ind icated that across the region, hydropower generation was 110 percent of average in 2012. Seve ral commenters stated that in Washington specifically, hydropower production ran at 127.7 pe rcent in 2012, as compared to long-term average hydropower generation rates.

Commenters stated that the EPA noted in the proposa l that using a four-year average instead of a single year average would not alter the national ba seline operating and emission rates significantly. Commenters countered that at the na tional level relying on a single year may not strongly influence the baseline, but for individual states a single year may deviate substantially from normal or average conditions.

Commenters stated that EGUs require regular mainten ance and must be taken out of service for extended periods of time to complete maintenance an d upgrades, potentially making a one year average non-representative. Commenters also indica ted that a single year would not be representative because in a particular year units m ay be running for only part of the year due to unplanned outages such as those resulting from stor ms or floods.

Suggested Multi-year Periods. Several commenters of fered suggestions regarding how many years should be used to establish baseline. Commen ters suggested 3-year, 3 to 5 year, or 5-year multi-year baselines.

3-year baseline. Commenters suggested the EPA shoul d allow a state to choose any three years within the most recent ten-year period for which em issions data is available and then average those three years to establish a baseline for its e mission reductions and compliance plan.

Commenters stated the EPA should allow states to us e as their baseline the average of any three consecutive years from 2008 through 2013.

Commenters recommended that EPA use at least the av erage of the last three available years as a baseline period, rather than using the baseline yea r of 2012. Several commenters agreed that a 3- year average would be reasonable, but cautioned tha t states should not be allowed to pick which three year period is used, and suggested the most u p-to-date data available should be used. Commenters further indicated that using the average of the three most recent years would also align the baseline with the rolling three year aver age EPA is proposing for compliance.

Several commenters suggested that the EPA use a 3-y ear average when using historical data to determine a baseline. Commenters specifically sugg ested using an average of total generation
from 2003-2005 to calculate individual state emissi on budgets. Commenters said that U.S. policy
statements for domestic and international carbon re duction goals are all measured from a 2005 baseline. Commenters suggested that the EPA should also use 2005 as a baseline in this rulemaking and allow reductions that have been made since 2005 to be excluded from goalsetting but available for use in demonstrating comp liance.

Commenters recommended using a 3-year average of da ta between 2005 and 2012 to calculate
baseline emissions.372

Commenters suggested a baseline average of years 20 02-2005 should be utilized to best capture early reduction efforts.

Commenters suggested a baseline average of years 20 10 through 2012 should be used.

3-5 year and 5-year baseline. Commenters stated tha t a multi-year average of three to five years
should be used to establish baseline. Commenters i ndicated that three-year averages are better baseline proxies than the single year of 2012, but still may not represent a "typical" year. A fiveyear average provides a better representation of a typical year, and therefore, commenters recommended establishing a baseline period for all states of between three to five years (using the most recent period for which complete data can be acquired).

Several commenters felt EPA should expand the basel ine period from one year to five years in order to minimize the impact of anomalies that inev itably arise during a one-year period. Commenters suggested a 5-year baseline peri od of 2008-2012, and indicated that reaching back to 2008 would reduce somewhat the pen alty imposed on early acting states that implemented aggressive RE policies.

EPA's Use of Multi-year Averages. Several commenter s stated that in other programs, EPA uses multiple years of data to establish baseline and de monstrate compliance. Commenters indicated that EPA uses multiple years for baselines in other programs and for compliance purposes because of the variability issues associated with t he use of a single year.

Commenters stated that modeling for regional haze p rogram analyses typically use three or more years of meteorological data, as does stationary so urce modeling done by Washington. Several
commenters noted that in the Notice of Data Availab ility (NODA) published October 30, 2014, EPA provides data for calendar years 2010 and 2011, suggesting the use of a three-year average
of 2010-2012. Commenters recommended that EPA revie w the discussion in 40 CFR Part 51, Subpart W [Determining Conformity of General Federa l Actions to State or Federal Implementation Plans] when evaluating the appropria te number of years to include in establishing the baseline for this rule proposal.

Several commenters stated that the EPA has noted in previous rulemakings that an EGU's operations (and consequently, its GHG emissions) wi ll vary greatly over the course of any given year. Several commenters indicated that as a resul t, under the New Source Review program, the EPA applies a presumption that any 24-month period in the five years preceding a project is representative of normal operations. Several commen ters stated that a multi-year baseline period also would be consistent with how the EPA expects s tates to demonstrate compliance under the Proposed Rule. Several commenters noted that the EP A is proposing that during the final performance period, 2030 and thereafter, states mus t meet the final emission performance level on a three-calendar year rolling average starting J anuary 1, 2030. (Proposed 40 CFR 60.5775(d)). Several commenters stated that a three-year rolling average accounts for the natural variation that occurs within a single-year period, and further not ed that a multi-year baseline period is consistent other existing EPA programs and guidance . Several commenters indicated as an example, the Cross-State Air Pollution Rule ("CSAPR ") used an eight-year (2003-2010) historic emissions baseline period established for SO2, NOx, and ozone-season NOx.373

2012 was an atypical year - multi-year baseline pre ferred. Commenters stated EPA has proposed that state plan reductions be based on a single yea r, 2012, of reported emissions and electric generation data from affected EGUs. The commenters asserted states should be given the flexibility to consider other baseline years that m ore accurately reflect each state's specific circumstances or averaging over several years to ad dress the concern that 2012 was an unusual year for electric generation for a number of reason s.

Commenters stated in 2012 dispatch of the electric generation fleet was atypical. The
commenters said while electric demand remained low after suffering a significant decline in 2008 as a result of the economic recession, natural gas prices dipped to a historic low (April 2012: $1.95) close to 70% below the December 2014 ( $6) average price and 50% lower than the 2014 low price (July: $4.05). The commenters said t he 2012 annual average price of natural gas of $2.75 was nearly $6 less than the 2005 average o f $8.69. The commenters said each of these disparate data points identifies a weakness in pick ing one single year (2012) for analysis: it builds into the model an emissions bias resulting f rom low gas prices in 2012. The commenters asserted the decision to choose a single year imbed s into the program an operational bias which can create a programmatic disparity in impact among affected entities. The commenters said by selecting a single base year, EPA creates winners a nd losers based on individual operating characteristics from that one year. The commenters said utilities with major base load coal units off line for retrofit or repair would see a disprop ortionately negative impact on base case emissions compared with utilities that were operati ng plants at maximum capacity for 2012. The
commenters said EPA should allow states and utiliti es to offer alternative baseline years that includes averaging of multiple years or identifying years where operation accurately reflects maximum fleet capacity for the purposes of setting a baseline.

Three-year baseline. Commenters supported the sugge stion raised in EPA's ESPS NODA 27 that the Agency use three years of data for averaging a baseline (2010-2012) or allow the states to develop an average baseline that works best for the state for any three years from 2005 to 2013.

2012 was atypical year - multi-year baseline prefer red. Commenters stated EPA's proposal establishes a single year - 2012 - as the baseline for calculating a state's CO2 performance goals. The commenters stated Dynegy has made significant i nvestments and undertaken a series of steps prior to the baseline year that must be consi dered; for example, Dynegy has upgraded turbines on numerous units, at a significant capita l cost, resulting in efficiency improvements - all prior to 2012. The commenters added Dynegy prev iously retired 10 EGUs in Illinois during the period October 2011 to January 2013. The commen ters said the CPP should recognize these previous reductions, which have helped the state re duce its carbon emissions.

Commenters asserted the baseline should be at least a two- or three-year period to ensure that the baseline is representative and does not arbitrarily penalize a state and generators due to inherent variabilities that impact electric generation emiss ions in any single year (e.g., weather, equipment outages, fuel prices, the overall economy ). The commenters said a multi-year emissions baseline period would be consistent with other EPA air regulatory programs that recognize the inherent variability in EGU emissions from year to year, including NSR (40 C.F.R. Section 52.21(r)(21) defines "actual emissions" in terms of emissions during any consecutive 24- month period), CSAPR (allowance allocations methodo logy for existing units utilizes baseline periods ranging from three years to eight years to reduce the likelihood that any single year's374

operations determine allocations), and the Acid Rai n Program (allowance allocations based on a unit's average fossil fuel consumed from 1985 throu gh 1987).

Commenters stated a single year 2012 emissions base line is not representative of coal-fired EGU CO2 emissions; among other reasons, year 2012 is no t representative given historically low gas prices, which reduced capacity factors of coal-fire d plants. The commenters added using only 2012 fails to recognize significant coal plant shut downs that occurred in the immediately preceding years. The commenters said by limiting th e emissions baseline to the single year 2012, EPA skews the state targets and increases both the unrealistic nature of those targets and the burden on states and emitters to comply. The commen ters said a multi-year emission baseline period would help to smooth out the inherent variab ilities in any one year and help ensure that reduction targets are more realistic. The commenter s said a multi-year emissions baseline period would be consistent with EPA's proposed requirement s for a state's demonstration of compliance with the proposed emission targets, which would be based on a three-calendar year average. Proposed Section 60.5775(d).

3-year baseline. Commenters stated with this propos al, EPA has determined that if the reductions are made using 2012 data as a baseline, the mass em issions of GHG from EGUs will be approximately 30% less than emissions in 2005. The commenters said this estimation takes into
account the measured effects of all actions that ha ve reduced CO2 emissions from EGUs between 2005 through 2012; however, the use of a si ngle year in establishing the baseline does not account for unusual operational situations and conditions driven by the economy. The commenters said a single year baseline might occur in a year where there were unusually high or low amounts of rainfall impacting hydroelectric pro duction; likewise, abnormally low or high natural gas prices can skew the normal dispatch ord er of EGUs. The commenters said in 2012, due to low natural gas prices for the LG&E and KU f leet, simple cycle combustion turbines were called into service at almost twice the average run time as the previous 10-year average rate. The
commenters said EPA should allow states to use a th ree-year average period to set the baseline rate for calculating the goal (e.g. a consecutive 3 -year period between 2005 and 2012 or perhaps the period from 2010 - 2012) to help alleviate any anomalies that may result from specifying a single year baseline period. The commenters said EP A should permit the state plans to begin counting reductions immediately following the end o f the baseline period; also, EPA should allow states to count reductions from any actions t hat occur after the baseline period which support meeting the final 2030 goal.

Commenters stated it is surprising that U.S. EPA ch ose to use just one calendar year of data as the baseline, effectively ignoring variables such a s weather, unplanned and planned outages, fuel price variability and other factors that result in shifts among generation sources. The commenters said in 2012 natural gas prices were at historical lows and NG-fired EGUs ran at higher capacity
factors than would otherwise have been the case. Th e commenters said using a year that is not representative of generation patterns results in co mpliance with emissions targets appear more achievable. The commenters said because no single y ear can be representative of electricity generating patterns, the commenters recommended tha t U.S. EPA use at least the average of the last three years as the baseline period. The commen ters said this approach would allow use of the most current data while at the same time developing a baseline that recognizes annual variations in generation source and emissions, as well as alig ning with the proposed rolling three year average compliance period in the proposal. The comm enters appreciated the fact that U.S. EPA,375

while originally taking the position that any poten tial changes to state goals using a multi-year base year would be minimal, has noted the concerns of states and regulated entities and has requested comment on a multi-year approach in the r ecent NODA. The commenters recognized that each baseline approach presents its own advant ages and disadvantages, but final state baselines should be representative and not penalize states or entities and its members who have taken responsible early actions. The commenters sai d if U.S. EPA maintains its approach of using 2012 as the baseline, the rule should be draf ted such that the baseline can be adjusted for
individual states where it can be demonstrated that certain anomalies may have had an undue
influence on the baseline.

Commenters stated EPA should set emission rate goal s based on a multi-year baseline period, rather than historic generation in a single year. T he commenters said as EPA has noted in previous rulemakings, electric demand and resultant utility operations fluctuate greatly within a single year. The commenters said in 2012, Lewis & C lark Station had a major outage year resulting in much lower generation from the unit th an routinely occurs. The commenters said using this lower generation value arbitrarily and c apriciously lowers the State of Montana emission rate goal. The commenters said utilizing a multi-year baseline would correct for scheduled maintenance outages and similar anomalies . The commenters recommended that EPA use an average of emissions between 2003 and 2006, as this time period also would provide
consideration to utilities that have invested in re newable energy.

Commenters stated 2012 was an anomal year for gener ation and EPA should average three (3) years of data to establish a base.

Commenters stated it is inappropriate to use any si ngle year as a baseline to represent the electric power sector; sources and amounts of electricity ge neration can and do vary from year to year. The commenters said the variability is due to many factors that include economic conditions, weather variability, year-to-year fluctuations in f uel prices, and significant unplanned and planned unit outages. The commenters said with rega rd to fuel prices, natural gas prices in 2012 were at their lowest level since before 2000 (the 2 012 annual average Henry Hub price was $2.75 per mmBtu), lower than today's price, and low er than any natural gas price the EIA projects into the future; this one fact alone disqu alifies 2012 as a single baseline year to represent the electric power sector. The commenters said the EPA clearly recognizes that there is year-toyear variability in the electric power sector, and has taken steps in previous power sector rulemakings to address it. The commenters asserted the failure of EPA to address power sector variability in its selection of a baseline period i s a gross oversight that must be corrected.

Commenters stated the use of 2012 as the single-yea r baseline also limits the ability of states to receive credit for early actions that reduce CO2 em issions, such as the retirement of coal-fired
EGUs. The commenters said coal-fired EGUs that reti red during the period 2009 - 2011, for example, would not be recognized under the EPA's pr oposed 2012 baseline; a multi-year baseline would allow states to capture and get cred it for more early actions in their implementation plans than using 2012 as a single ye ar. The commenters said the EPA made 2010 and 2011 eGRID data available as part of its Octobe r 30, 2014 Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electri c Generating Units Notice of Data Availability. The commenters used that data to calc ulate CO2 emission rates for each year for the states in which it operates, using the same methodo logy the EPA used to calculate 2012 CO2376

emission rates for each state. The commenters found that the use of either 2010 or 2011 would in fact produce significant changes to state baselines that would be carried through to significant changes in some state goals. The commenters recomme nded that the EPA use a multi-year baseline consisting of 2009 through 2012. The comme nters said specifically, the EPA should calculate state's baselines for each of these years and select for each state's baseline the average of their highest three of four years. The commenter s said this will produce a far more representative baseline for the utility sector than any single year. The commenters said all the EPA has offered with respect to a multi-year baseli ne is that it "also considered the possibility of using average fossil generation and emission rate v alues over a baseline period (e.g., 2009 - 2012), but determined that there would be little va riation in results compared to a 2012 base year data set due to the rate-based nature of the goal." The commenters said this one statement, unsupported by any data or analysis, is hardly just ification for the EPA to not use a multiple year baseline period and it makes the EPA's selection of 2012 as the baseline arbitrary and capricious.

Commenters stated to set realistic and equitable st ate goals, EPA must start with a baseline period that is representative of actual generation and CO2 emission levels. The commenters said the 2012 baseline period in the Proposed Rule is no t representative, in part because EPA did not correct for anomalous events that impacted total CO 2 emissions in that single year. The
commenters said EPA should consider alternative mul ti-year baseline periods to minimize the impact of anomalies in 2012; at minimum, EPA should address certain anomalies to 2012 data that unfairly penalize some states and/or companies

.

Commenters stated numerous anomalous events can occ ur during any single year, as demonstrated by 2012; these anomalies include incre ased utilization of certain affected EGUs due to extreme weather events, atypically low CO2 e missions from coal-fired generation due to historically low natural gas prices, a changing por tfolio (additions and retirements) of available units for dispatch, abnormally high levels of hydro electric generation, and unit outages for repair or retrofits. The commenters said for example, in A rizona, one affected EGU, Springerville Unit 3, operated at a reduced capacity factor of approxi mately 54% in 2012 due to unplanned outages for steam turbine work; this much lower capacity fa ctor should not be deemed to be representative of typical operations for this basel oad unit.

Commenters stated another example is the unusually high hydroelectric production experienced in the Pacific Northwest during 2012 resulted in un usually low fossil power generation; in that region, fossil resources dispatch only after all hy droelectric and wind resources have been fully
allocated. The commenters said because of historica lly high hydroelectric availability in 2012, Oregon's only coal-fired power plant ran at an unus ually low capacity factor of approximately 50%. The commenters said across the region, hydroel ectric generation was 110% in 2012, as compared with average levels; this equates to 14.3 gigawatt-hours of carbon-free energy generation above an average water year, which lower ed Pacific Northwest emissions by 5.7 million tons, or 22%. The commenters said in Washin gton, hydroelectric production ran at 127.7% in 2012, as compared to long-term average hy dropower generation rates. The commenters said by mandating emission reductions fr om the 2012 baseline, EPA has proposed goals for states in the Pacific Northwest that are artificially skewed relative to states that rely more on thermal generation. The commenters said aro und the country, there are other examples of such anomalies in 2012, as would be the case for any single-year baseline.377

Commenters stated as EPA has noted in previous rule makings, an EGU's operations (and, consequently, its CO2 emissions) will vary greatly over the course of any given year. "A cold winter or hot summer will result in high levels of 'normal' operations while a relatively mild year will produce lower 'normal' operations... [E]lectri city demand and resultant utility operations fluctuate in response to various factors such as an nual variability in climatic or economic conditions that affect demand, or changes at other plants in the utility system that affect the dispatch of a particular plant." The commenters sai d as a result, under the New Source Review program, EPA applies a presumption that any 24-mont h period in the 5 years preceding a project is representative of normal operations.

Commenters stated a multi-year baseline period woul d smooth out the anomalies associated with 2012 and more accurately represent the natural vari ations inherent in the electric industry. The commenters said while anomalous events occur every year, these events do not all have the same impact on operations and emissions; as a result, an y single-year baseline period will not accurately represent normal operations of the energ y industry. The commenters said a multi-year baseline would better represent the natural yearly variation and, thus, better depict normal operations. The commenters said in the NODA publish ed on October 30, EPA acknowledged
stakeholder concerns about use of 2012 as the basel ine year for state goal calculation and asked for comment on whether the agency should use a diff erent single data year or the average of a combination of years, such as 2010, 2011, and 2012. The commenters supported the use of an alternative multi-year baseline for purposes of goa l setting.

Commenters stated EPA chose 2012 as the baseline ye ar for its emission reduction goal calculations, but that year was not representative for New Mexico, resulting in unnecessarily stringent goals that may be unachievable and result in risks to reliability. The commenters said as proposed in its recent Notice of Data Availability, EPA should allow states to choose a baseline using an average of several years to ensure the bas eline for the goal calculations is representative and results in appropriately stringent emission red uction goals.

Commenters stated variability of the generating lev els for fossil generation in New Mexico is much more significant than EPA suggests -the averag e variation in generation on an individual unit basis is nearly 100 percent; more importantly, however, the analysis above confirms that 2012 was not a representative year for New Mexico f or several reasons. The commenters said first, 2012 was the second lowest year for total ge neration, which means 2012 is a poor representation of peak demand; second, 2012 was the lowest year for coal generation because Escalante was operating at an unusually low capacit y factor during that year (49.7 percent), even though Escalante is expected to return to capacity factors as high as 88 percent in the future. The commenters said accordingly, EPA's goal calculation relies on an already depressed value before applying building blocks 1 and 2, which lowers New Mexico's interim and final goals unfairly.

Commenters stated unfortunately, any single year th at EPA might select as a baseline for the entire country will likely result in an unrepresent ative analysis for at least some states; relying on a single-year baseline also fails to reflect the va riability in dispatch of individual generating unit s from year to year within the same state. The commen ters said because maintaining sufficient generating resources capable of serving a wide rang e of possible demand levels and respond to any unexpected variations in demand is critical to grid reliability, EPA should at least account for historical variability in establishing its goals. T he commenters recommended EPA reevaluate378

whether an average of several years might help avoi d unrepresentative values for individual states and better reflect the variability in indivi dual generating unit operating levels from year to

year.

Commenters recognized that a 2010-2012 baseline, as suggested by the NODA, may not be representative for all states. The commenters encou raged EPA to provide as much flexibility to states as possible on selecting an appropriate and representative baseline, particularly since states are responsible for establishing the "standards of performance" for existing units under Section 111(d).

Commenters stated EPA chose the year 2012 as the ba seline year as it represented the most recent year for " ... which complete data were avai lable at the time of the analysis." The commenters said EPA did not attempt to determine wh ether 2012 was representative of normal operations for power plants across the U.S. The com menters said individual states and regions like Utah are more likely to have experienced anoma lous years in the operations of their power system and this can impact the states' emissions ra tes and EPA's calculation of the goals. The commenters said consideration of a multi-year base period is likely to smooth out the anomalies arising from the use of 2012 as a base year by prov iding a more realistic average, or normal, baseline from which to develop the proposed Utah st ate emission rate goals. The commenters said to ensure a more representative baseline perio d and provide some partial credit for early actions, EPA should set the baseline levels for com puting the state goals based on a multi-year period prior to 2012.

Commenters stated a single-year baseline period wil l not accurately represent normal operations of the electric generation industry; numerous opera tional and system anomalies can occur during any one-year period. The commenters said these anom alies include increased utilization of affected units due to extreme weather events, unexp ected plant shutdowns, atypically low Greenhouse Gas (GHG) emissions rates from coal-fire d generation due to historically low natural gas prices, a changing portfolio (additions and retirements) of available units for dispatch, and abnormally high levels of hydropower generation. The commenters said in order to set realistic state goals and avoid inequities that a single year base year creates between states, EPA should expand the baseline period from one year to five years. The commenters said a multi-year baseline period would smooth out anomali es and accurately represent the natural variations inherent in the operations of coal-fired generation.

Commenters stated in 2012, the largest coal-fired g eneration plant located in Utah, the Intermountain Power Plant, had a mechanical failure that reduced its capacity factor to 46.7%, far below its average capacity factor of 85.3% for the years 2008-2011; this is a clear example of how 2012 was not a typical or average energy genera tion year. The commenters said as EPA has noted in previous rulemakings, an electric generati ng unit's operation and GHG emissions will vary over the course of any given year; "A cold win ter or hot summer will result in high levels of 'normal' operations while a relatively mild year wi ll produce lower 'normal' operations ...[E]lectricity demand and resultant utility opera tions fluctuate in response to various factors such as annual variability in climatic or economic conditions that affect demand or changes at other plants in the utility system that affect the dispatch of a particular plant." The commenters said under the New Source Review program, EPA appli es a presumption that any 24-month period in the five years preceding a project is rep resentative of normal operations.379

Commenters stated EPA should allow Utah the flexibi lity to select the average of the five years from 2008-2012 or the three years 2010-2012 as its baseline. The commenters said for Utah, using a three-year or a five-year baseline to calcu late the 2030 emissions rate goal creates a less stringent goal than using the 2012 baseline. The co mmenters said changing Utah's base period to a five-year period (2008 - 2012) would change the 2 030 emissions rate goal 43 lbs/MWH to 1,365 lbs/MWH and a three-year base period would ch ange the 2030 emission rate goal 7 lbs/MWH to 1,329 lbs/MWH. The commenters said if th e EPA is going to establish an emission target, the commenters asserted states should be gi ven the opportunity and flexibility to set baseline years that are representative of normal op erations of electricity generation in the state.

Commenters stated the base year for EPA's proposal is 2012; however, the existing electric generation system in the U.S. is much too complex t o be adequately represented by one calendar year. The commenters said variables such as fuel pr ices, equipment outages and de-rates, weather, and demand changes due to industry or resi dential fluctuations can significantly impact generation and the dispatch of specific units with varying emission profiles. The commenters said variables impacting one region of the nation m ay not impact others. The commenters said
the use of 2012 to establish baseline carbon dioxid e (CO2) emissions is especially problematic for the State of Michigan as 2012 was both a mild y ear in terms of temperature and Michigan experienced the lowest natural gas pricing in the l ast decade. The commenters said the combination of these variables led to significant C O2 emission reductions in comparison to preceding as well as subsequent years. The commente rs said using U.S. Energy Information Administration (EIA) data for Michigan's electric p ower sector generation, the 2012 Total Net Generation for Michigan was 105.8 million megawatt hours (MWhs). The commenters said the average yearly Total Net Generation data from the t en year preceding period (2002 to 2011) was 113.8 million MWhs and ranged from a high value of 121.6 million MWhs (2005, a year of economic growth that we hope to see again in the fu ture) to a low of 101.2 million MWhs (2009, a year significantly impacted by the deep national recession). The commenters said similarly, 67,877 thousand metric tons of CO2 were emitted in 2012, whereas the ten year average preceding 2012 was 76,000 thousand metric tons. The commenters said a high value of 80,228 thousand metric tons was experienced in 2007 (a yea r of significant economic growth); and a low value of 69,301 thousand metric tons occurred i n 2011 (also a year impacted by the recession). The commenters said the EIA data quoted above proves that use of a single calendar year is not representative; an appropriate and fair method to develop a baseline would include multiple years to account for the numerous variable s associated with different states and regions. The commenters requested that EPA bracket calendar year 2005 (the year quoted as the baseline in EPA's press releases) through and including cale ndar year 2012 (the baseline year actually used by EPA), and allow each state or multi-state c ompact to choose from 12 to up to 60 consecutive months (a total no greater than 5-years ) within this bracket to develop its own baseline for the state's compliance plan percent re duction target. The commenters said such an approach is far more equitable and truly representa tive of the dynamic situation encompassing
CO2 emissions in the U.S.

Commenters stated numerous anomalous events can occ ur during any one-year period as was the
case in 2012. The commenters said these anomalies i nclude increased utilization of affected units due to extreme weather events, atypically low GHG e missions rates from coal-fired generation due to historically low natural gas prices, a chang ing portfolio (additions and retirements) of380

available units for dispatch, unit outages, and abo ve normal levels of hydropower generation; following are some examples:

• The unusually high hydropower production experience d in the Pacific Northwest during 2012 resulted in unusually low fossil power generat ion; across the region, hydropower generation was 110 % of average in 2012. The commen ters said by mandating emission reductions from the 2012 baseline, EPA has proposed goals for states in the Pacific Northwest that are artificially skewed relative to states that rely more on thermal generation. The commenters said South Dakota's tota l energy production in 2012 was one of the highest on record; therefore, the mandate to increase renewable energy generation and decrease usage through energy efficiency mechan isms (goals that are tied to the state's total generation in 2012) is more onerous t han it otherwise would be had a multiyear approach been used or had another year be en selected as the baseline.

• South Dakota's one natural gas combined cycle plant was undergoing test firing in 2012. EPA considered it an existing unit under its propos al. Using data from an earlier year would reduce its impact on South Dakota's state goa l or eliminate it from being considered as an operational unit depending on what year is selected

• Wind generation in South Dakota increased significa ntly between 2008 and 2012 and, by EPA using 2012 as the baseline, is receiving no cre dit for this increase.

• The Colstrip Plant in Montana ran 23% less than wha t would be expected during a representative normal year.

Commenters said in order to set realistic and equit able state goals, EPA must start with a baseline period that is statistically representativ e of generation and GHG emission levels. The
commenters said EPA must address certain anomalies that arose in 2012 to avoid the unfair and arbitrary impacts that penalize some states and/or companies. The commenters said EPA uses multiple years for baselines in other programs and for compliance purposes because of the variability issues associated with use of a single year. The commenters said at a minimum, EPA
must address corrections related to other data anom alies, such as affected units that were off-line for most or all of the baseline year.

Commenters stated using 2012 or any single year as a baseline does not capture the variability of operating conditions and emission rates that are ex perienced as a part of operating and maintaining a reliable electric system from year to year. The commenters said specifically, use of 2012 as the baseline is inappropriate because durin g that year Gulf Power had very low CO2
emissions. The commenters said 2012 had the lowest CO2 rate (pounds per net MWh) and the lowest mass (tons) emitted by the Gulf Power Florid a-units in any year since 1990, which is the last year of readily available data. The commenters said the low 2012 CO2 emissions were due to historically low natural gas prices resulting in economic dispatch increasing natural gas generation while lowering coal-fired generation.

Commenters stated EPA's Proposed Rule uses a single calendar year - 2012 - as the default base year for calculating a state's emission rate and th e corresponding CO2 reduction goals. The commenters said in 2012, CO2 emissions were unchara cteristically low due to three factors: (1) a381

fuel mix for electrical generation based on histori cally low natural gas prices, (2) low economic activity due to a slow recovery from the 2007-2008 financial crisis, and (3) abnormally moderate weather throughout that year. The commenters said t hose circumstances are unlikely to be repeated individually, much less in combination. Th e commenters said Virginia's CO2 reduction goal of 810 lbs/MWh is particularly onerous and doe s not appear to accurately reflect Virginia's normal generating conditions. The commenters recomm ended that EPA use a representative period as the basis for calculating the CO2 emissio n reduction goals. The commenters said one alternative would be to follow the approach that EP A has used in other EPA programs such as the Prevention of Significant Deterioration program where an average annual emission rate based on any consecutive 24 months in the past 5 years is used to calculate a baseline for past actual
emissions from EGUs.

Commenters stated the EPA should also allow the Sta tes flexibility in developing baseline emissions to include variability of individual unit operations from year to year. The commenters recommended that the average of three years around 2005, or another year demonstrated as being more representative by the entity to the State agen cy, be considered.

Commenters EPA should abandon its use of 2012 as th e baseline year for the Clean Power Plan's emission reduction goals in favor of a five-year av erage (2008-2012) to better reflect average baseline emissions; EPA should also adopt a rolling multiyear average for compliance with the final emissions targets.

Commenters stated EPA should consider using a multi -year average baseline rather than the single year 2012 to account for the fact that some generating units may have been out of service for lengthy periods in 2012 thereby skewing the bas eline data.

Commenters asserted that consideration of a longer baseline period may have merit given the anomalies that can arise through use of a single ba seline year; however, before a longer baseline period can be used to calculate emission rate requi rements for the final rule, EPA must analyze the data from this longer period to determine new b aseline emission rates and apply the building block analysis to these new baseline rates to calcu late new proposed emission rates for each
state. The commenters said EPA must also conduct th e requisite technical and economic analyses necessary to adequately demonstrate that the new pr oposed rates represent BSER. The
commenters said this cannot be done in the context of a final rule, but rather EPA must delay issuance of the final rule and issue a revised prop osed rule. The commenters suggested that as an alternative to issuing a new proposed rule, EPA cou ld include a provision in the final rule allowing states to adjust the emission rate require ments to account for any anomalies that resulted from using non-representative 2012 data.

Commenters recognized that choosing any single year for the baseline in the Proposed Rule is problematic; various anomalies and unanticipated ev ents occur in any single year that render that year unrepresentative of the performance of generat ing units within a state, and often within a single utility. The commenters said at the extreme, there are situations where a plant was out of service for the entire year - such as the case with Minnesota's newest and most efficient coal plant, Sherburne County Plant #3 (Sherco 3), a unit jointly owned by Xcel Energy and Southern Minnesota Municipal Power Agency (SMMPA). The comme nters said in other cases plants were only running for part of the year due to both plann ed outages, such as for maintenance, and for382

unplanned outages due to weather anomalies such as storms or floods, equipment failures, or other unanticipated contingencies. The commenters a dded changes in electricity demand, such as the loss of an industrial or large commercial custo mer, can result in reduced output from a generating unit, even though it is still operationa l.

Commenters stated the final rule should allow state s to establish a baseline that the state believes correctly represents its circumstances, utility gen eration, and related emissions. The commenters said in the Notice of Data Availability (NODA), com ments are requested on allowing states to average 2010, 2011 and 2012, to determine a baselin e; but this method would still undercount the emissions from Minnesota's Sherco 3 plant, sinc e the plant was off-line for all of 2012. The
commenters said the Final Rule should allow a state to choose any three years within the most recent ten-year period for which emissions data is available and then average those three years to establish its baseline for its compliance plan. The commenters said an acceptable alternative would be to allow a state to choose a single year t hat accurately represents its circumstances, utility generation, and related emissions.

Commenters stated basing state goals on a single ye ar cannot capture all sorts of variability of outages (both planned and unplanned), fuel prices, weather, and other factors that may affect generation and emissions. The commenters said in it s NODA, EPA has solicited comments on whether it should consider a multi-year baseline pe riod as the starting point for goal computation. The commenters agreed with the suggest ion that the base year should be an average of three representative years, such as 2009 , 2010, and 2011. The commenters said adopting this approach would take into account coal generation from the Pella Municipal Power Plant, allowing that retirement to be meaningfully reflected in the calculations, would more accurately reflect the output of LRS as well as She rco, and could correct the issue with Deer Creek, as well as account for maintenance outage sc hedules and weather variations that affect generation; this will result in more accurate calcu lation of state goals.

Commenters asserted it would be totally arbitrary t o base the entire future performance requirements of an entire industry on any single ba seline year. The commenters said if that particular year were abnormally hot or dry (as was 2012) or dry (as was 2012) or if the relative price of fossil fuels were abnormally skewed (as th ey were in 2012), then any extrapolations derived from that year would result in unattainable targets in the future. The commenters said
EPA should base future reductions on a baseline ext ending over at least a five-year period.

Commenters stated in the proposed Clean Power Plan, EPA inappropriately uses a single-year
baseline of 2012. The commenters said a number of e vents can happen during any given oneyear period that results in misrepresentation of ac tual generation and emissions levels. The
commenters said factors that should be taken into a ccount include unit operation variances due to extreme weather or maintenance, fluctuating natural gas prices, and changes in the types of units available for dispatch. The commenters said in Kans as, several large electric generating units (EGUs) experienced lengthy outages in 2012 for main tenance and installation of pollution control equipment to ensure compliance with other C lean Air Act obligations. The commenters suggested that using a three-year averaging methodo logy would smooth out the various anomalies and would be more appropriate for setting state CO2 emissions reductions goals.383

Commenters stated a three-year baseline period woul d be consistent with how EPA expects states to demonstrate compliance under the proposed Clean Power Plan. The commenters said as currently proposed, the rule would require states t o meet the final emission performance level on a three-calendar-year rolling average starting Janu ary 1, 2030. The commenters said EPA even states that "[t]he rolling three-year performance p eriods for measuring actual plan performance against the final goal performance level are propos ed in light of year-to-year variability in economic and other factors, such as weather, that i nfluence power system operation and affect
EGU CO2 emissions." The commenters said furthermore , a three-year baseline methodology would be consistent with how EPA has developed and implemented other existing programs using multiple years (e.g., Acid Rain Program, Clea n Air Interstate Rule, Cross State Air Pollution Rule, and permitting and modeling require ments).

Commenters stated selection of a representative bas eline year or period is an important first step in the process to calculate state emission rate and reduction goals. The commenters said the Proposed Emission Guidelines rely on a single calen dar year of 2012 as the default base year for this purpose; however, reliance on one year can ove rly influence the resulting calculations when the year in question is not representative of the n ormal generating conditions. The commenters
said this method also does not account for the norm al variation that occurs in both generation and emissions from year to year.

Commenters stated for example, 2012 was the highest year on record for electricity generation from natural gas sources in Virginia due to increas ed generation capacity and low natural gas prices. The commenters said in fact, the generation from natural gas units was 46% higher than the next highest year on record in Virginia. The co mmenters asserted that the selection of this year misrepresents the normal generation profile fo r Virginia and may result in a more stringent goal.

Commenters stated in many other EPA programs such a s the Clean Air Interstate Rule and the Cross-State Air Pollution Rule, a period of five ye ars was considered when establishing a generation baseline; then the two or three highest generation and emissions years within the five year period are identified and averaged to determin e individual unit and collective emissions targets. The commenters recommended that EPA adopt a similar approach for setting the emissions rate goal in the final rule; in this way, the yearly variation and the impact of unusual years can be better addressed.

Commenters stated the Final Rule should allow state s to choose a baseline that accurately reflects their unique circumstances, possibly a 3-5 year average; this would allow for years where a plant may have been out of service, which w ould skew the baseline. The commenters said a plant may have been out of service for plann ed maintenance, or for unplanned reasons resulting from generator failures, storms, or flood s; the result is that the emissions for that year would have been lower than a normal, average operat ing year. The commenters said using a multi-year average rather than a single year baseli ne provides correction for such operating
anomalies.

Commenters stated the Final Rule should also provid e full credit for investments already made
that reduce or offset CO2 emissions. The commenters have added a number of renewable energy resources in recent years and has provided signific ant financial incentives through its Sustainable384

Energy Program to promote energy efficiency in the community; the commenters should receive
full credit for these investments to the extent tha t they reduce or offset the utility's CO2
emissions.

Comment 2: Multi-year baseline recommended; not enough time b etween release of NODA and close of comment period

Response 2: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Several commenters said that 2012 should not be use d as the baseline year. Commenters said that choosing 2012 as the baseline year skews the calcul ation of baseline emissions given the unusual deviation from the average in 2011 and 2012 due to extremely low natural gas prices and backto-back good water years. Commenters indicated that changes in economic conditions, weather, and relative prices of energy feedstocks can all af fect the amount of electricity that is generated in a given year, as well as the allocation among di fferent energy sources. Several commenters indicated that one year of data doesn't take into a ccount random, unplanned EGU outages, variability in fuel pricing, anomalous weather patt erns, and host of other factors that determine which generation is used at any given time or that may shift generation of electricity from one
fuel source to another. Commenters said that becau se natural gas prices were near all-time lows in 2012, NGCC units in Arkansas generated more than 25 percent more megawatts in 2012 than they did in 2010, 2011, or 2013. Similarly, comment ers said because of the stark reduction in natural gas prices in 2012, there was uncharacteris tically low usage of coal and uncharacteristically higher use of natural gas. Co mmenters indicated, however, that while 2012 represented a dip in goal generation from 2011, coa l generation largely returned to pre-2012 levels in 2013 and the price of gas rose closer to recent historical levels. Several commenters said that adopting a multi-year baseline would smoo th out some of the year-to-year variability that occurs in the electricity sector. Several com menters indicated that the EPA should use a 3- year average (2010-2012). Commenters suggested tha t a two or three year average (e.g., 2010, 2011, 2012) should be used for baseline, and emphas ized that in any event, the baseline year should not include calendar year 2013 or later, as this would exclude credit for 2013 CO2 reduction measures that have occurred after the pro posal's release in June 2013. Commenters noted that use of multiple years of data for regula tory baselines by the EPA and state agencies has longstanding precedent.

Several commenters said that the EPA's selection of 2012 as the base year is arbitrary, and said that given the dynamic nature of the electricity sy stem and the national economy, no one year, or even several years combined is representative of cu rrent conditions in an individual state for the purpose of establishing a baseline. Commenters not ed that nothing in Section 111 of the CAA mandates a particular year be used for baseline. C ommenters stated that Standard-ofperformance determinations historically have not be en based on historic emissions on any particular date, but instead have been based on sta ndards achievable considering the relevant statutory factors. Commenters stated that for this proposal the EPA has completely departed385

from this process and has incorporated one that is flatly illegal. Commenters indicated that states should be able to appropriately credit CO2 mitigati on activities both concurrent with and backdated before the plan towards state goal accomp lishment or allow appropriately adjustment of state goals

Commenters stated that the use of 2012 data (which had higher than average natural gas usage at EGUs) for a baseline has the potential to result in lower goal projections and higher costs of compliance than would otherwise be estimated with a more representative starting year. Commenters therefore recommended a three-year avera ge of data between 2005 and 2012 as being more appropriate for goal computation. Commen ters said that this would not only assist in eliminating fluctuations in energy demand and produ ction but would also give credit for actions taken prior to the 2012 baseline. Commenters also indicated 2012 was an anomalous year because of the low price of natural gas, and indica ted that natural gas prices have historically been highly volatile. Commenters stated it would b e more appropriate to establish states' goals using a five-year or three-year average, rather tha n a single year.

Commenters said the use of a single year for baseli ne establishment verses a multiyear baseline is inconsistent with current U.S. EPA practice and is inappropriate for the energy market. Commenters said some Indiana units, such a s NIPSCO's R.M Schahfer Generating Facility's Units 14 and 15, were involved in major construction projects to install FGD units to comply with MATS and SCAPR, and many base load coal -fired units id not operate at their highest capacity during 2012 because of low natural gas prices. Commenters recommended that the EPA use a 3-year average baseline for emissions , generation, and capacity factors, as opposed to relying on only 2012 data.

Commenters said using any single base year may resu lt in anomalies due to unplanned shutdowns, among other things, and indicated the EP A should carefully consider comments from states documenting any anomalies or consider replac ing a single year baseline with a three year
baseline.

Commenters suggested that the EPA allow states to s elect either a single year or average taken from a group of consecutive years between 2005 and 2012 for purposes of determining targets and measure compliance credit. Commenters said tha t allowing reference year flexibility allows states to receive credit for early actions taken. Commenters said that if EPA does not provide for reference year flexibility in this manner, the EPA should accept technical corrections that provide for recognition of unusual operating circum stances for affects EGUs and the recognition of early action measures for satisfying state targe t-setting and compliance. Commenters said if the EPA elects to not use a multi-year baseline app roach, they recommend that the EPA define a mechanism for obtaining credit towards meeting Buil ding Block 1 targets for early actions. Commenters recommended using a baseline timeframe of the average of calendar years 2005 through 2012, as this would take into account years with both high natural gas prices and low natural gas prices as well as other factors suc h as weather variability and forced unit outages.

Several commenters supported greater flexibility in determining the emissions baselines for the proposed rule. Several commenters said the use of an average of several years to establish a baseline has been employed by the EPA in previous r ulemakings (i.e. NSR and CAIR) and is superior to a single 2012 baseline year. Commenters indicated that if a single year is used for386

baseline, 2010 or 2011 would be more appropriate th an 2012. Commenters also supported a multi-year baseline period, and indicated it would maintain consistency with historical practices, smooth out year-to-year variability, and provide a more level playing field for states and affected sources. Commenters suggested the use of a represe ntative three-year average out of 10 years (2002 to 2012) would be reasonable. Commenters add ed that if a single year is used to establish baseline, 2005 should be considered since it is the baseline for the much-publicized 30 percent
emission reduction for both the Clean Power Plan an d the Climate Action Plan. Commenters suggested states should be able to use an average o f two years out of five or ten recent years to
calculate baseline.

Commenters indicated that in 2012 dispatch of the e lectric generation fleet was atypical because while electric demand remained low after suffering a significant decline in 2008 as a result of the economic recession, natural gas prices dipped to a historic low. Commenters stated that the states should be given the flexibility to consider other baseline years or even averaging over several years to address the concern that 2012 was an usual year for electric generation. Commenters indicated that a multi-year baseline would be preferable, because by selecting any single base year, the EPA creates win ners and losers based on individual operating characteristics from that one year. Commenters said that utilizes with major base load coal units off line for retrofit or repair would see a disprop ortionately negative impact on base case emissions than utilities that were operating plants at maximum capacity for 2012. Commenters
said that the EPA should allow utilities to offer a lternative baseline years that includes averaging of multiple years or identifying years where operat ion accurately reflect maximum fleet capacity for the purposes of setting a baseline.

Several commenters also indicated the EPA should us e a multi-year average as the baseline in its goal setting methodology, and commenters suggested a 3-year average be used, and Commenters suggested either a 3-year or 5-year multi-year base line period. Commenters analyzed various scenarios and found if a multi-year baseline is use d Utah's emission rate targets increased. Commenters said that the EPA should allow Wyoming t o select as their baseline the average of the 5-years for 2008-2012, and indicated this corre ction alone would result in a 5% adjustment of the EPA's proposed Wyoming compliance rate. Commen ters said that given that the compliance period extends to 2030, it is more prudent to use a multi-year historical average emissions and generation timeframe to mitigate bias any one year may have in establishing baselines and state goals. Commenters emphasized that this is especiall y relevant due to the effect that the recent recession had on general economic activity and subs equent emissions from the power sector. Commenters added that furthermore, it is not withou t precedent for EPA to consider a broader look-back period to determine actual emissions from the electric generating sector.

Commenters also suggested that the EPA should use a 3-year average to calculate baseline, and suggested that data for 2010-2012 be used for the c alculation. Commenters said that using any single year can result in emissions and generation that are not typical or representative, and indicated that in other rules, such as the Clean Ai r Interstate Rule and the Cross-State Air Pollution Rule, the EPA has considered a range of y ears and has used an average instead of a single year.

Commenters supported the EPA's decision in the NODA to release additional data for 2010 and 2011. Commenters did indicate, however, that becaus e of the limited time between the release of387

the NODA and the close of the comment period, they have not been able to fully evaluate the new data or make a recommendation with respect to a n appropriate baseline. Commenters therefore urged the EPA to consider reopening the c omment period or issuing a supplemental rulemaking as necessary to ensure that interested s takeholders have sufficient time to evaluate and comment on the appropriate baseline for this ru lemaking.

Commenters stated EPA should not have chosen a sing le year to calculate state goals (2012). The commenters said EPA should recalculate state goals based on an average of several years to account for year-to-year variations in the economy and weather which both significantly impact electricity generation and demand.

Comment 3: Support for three (3) year average

Response 3: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters supported using a three-year (2010-2012) average of generation and emissions as the starting point for the EPA's goal calculations. The commenters said using a three year average is a more accurate reflection of operating conditions, maintenance cycles/outages,
economic conditions and weather.

Commenters stated despite a severe drought in the M idwest in 2012, data shows that energy use was down in 2012, in part due to a mild winter; for example, in review of all the Illinois affected Acid Rain Units' heat input from 2009-2011, compare d to 2012 data, 2012 heat input is approximately 10% lower than the average of 2009 th rough 2011. The commenters said applying the same analysis for EIA Illinois generation data from coal units, 2012 generation data is approximately 11% lower than the average of 2009 th rough 2011. The commenters said this is especially important as the reduction target provid es the floor for each building block of each plan, especially if the state proceeds with a mass based goal (CO2 tonnage) as the GHG Rule allows a state the option to do. The commenters sai d utilizing data from a year that is already significantly lower than the norm to set a "target" from which carbon emissions are to be reliably and affordably reduced is not credible. The comment ers said EGUs operate variably from yearto-year due to variable factors such as weather and the economy, which influence demand, and planned maintenance outages. The commenters said a credible carbon reduction target for each state would average at least three (3) years of dat a, such as the USEPA did in recent air rules for EGUs. The commenters said another credible option w ould be to utilize the highest three (3) years of the last five (5) years of data, as the US EPA has done before. The commenters can recall no recent USEPA air emission rule applicable to EGU s in which it utilized only one (1) year of data, nor where it utilized data from a year that w as demonstrably below the norm to set an even
lower emission limit.

Commenters stated a three year (2010-2012) average of generation and emissions should be used as the starting point for the EPA's goal calculatio ns. The commenters said a multi-year averaging period is appropriate because of yearly variation i n wind, solar, and hydrological conditions;388

maintenance cycles for affected and nuclear units; weather variations; economic conditions; and fuel prices; all of which can affect the dispatch o f fossil and carbon free resources from year to

year.

Comment 4: 2012 should not be used as baseline, multi-year ba seline going back to 2005 (in some instances to 2000) would be better and would a llow credit for early action; support NODA's multiyear suggestion

Response 4: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters said that rather than using a single yea r (2012) to establish the baseline year for emissions reductions, the EPA should instead use a multi-year baseline that is more representative of normal system operation, addresse s the considerable year-to-year variability in the power sector, and is more reflective of early a ctions to reduce CO2 emissions. Commenters indicated that use of a multi-year baseline would b e consistent with EPA precedent.

2012 was Unusual Year for Power Industry. Commente rs are inappropriate because this was a highly unusual year for the power system - because natural gas prices were at a record low in 2012, that year is not representative of past opera ting conditions for the power system. Commenters said that in 2012 natural gas EGUs were dispatched much more than usual in 2012, and coal units operated at lower capacity, which re duced their efficiency and increased their emissions rates. Commenters said as a result, the a verage CO2 emissions rate at Wisconsin power plants was 4-6% lower in 2012 than it was in either 2011 or 2013. Commenters said however, emissions rates at coal units in the state were 2% higher in 2012 than they were in
either 2011 or 2013 because these units ran less ef ficiently with decreased usage. Commenters
said that if the EPA will not extend the baseline b ack to 2005, the EPA should at least include the most recent year of available data in their calcula tion of state goals, which would be a more moderate year than 2012.

Commenters said that 2012 was not a representative year for Wisconsin or the power industry. Commenters said that in Wisconsin during the period between 2005 and 2013, 2012 had the lowest natural gas prices and the greatest percentage of electric generation from natural gas, and the highest level of renewable generation.

Significant year-to-year variability in Power Indus try. Commenters said the use of a single year as a baseline is inappropriate because there is sig nificant year-to-year variability in power system characteristics (EGU operation, renewable electrici ty generation, weather variability, etc.) that cannot be represented in a baseline based on a sing le year. Commenters provided Table 1 which showed changes in Wisconsin's interim and final goa ls using three different
baselines. Commenters said that Wisconsin's final rate-based goal would increase 5 % using a 2011 baseline, and if the goal was calculated based on a three year baseline including 2010-2012, our goals would be between those calculated using e ither 2011 or 2012, and would be more389

representative of the power sector in the state. Co mmenters said the use of a multiyear baseline would average out much of the inter-annual variabil ity in the power sector.

Using 2012 does not allow credit for early action. Several commenters said using 2012 fails to credit states, like Wisconsin, that took action bef ore that year to reduce their CO2 emissions via measures such as plant closures, fuel switching to natural gas, installation of renewable electricity capacity, etc. Several commenters said by using 2012 as a baseline, these early actions are included in the starting point, and for many of the building blocks, this results in the perverse outcome that states that have already acted to redu ce CO2 emissions are required to do even more going forward than are states that have not ta ken similar steps. Commenters said that another consequence of the failure to give credit f or early action is the creation of inequity between the states. Commenters said that the propo sed rule often requires deeper cuts by states that took early action to reduce GHG emissions than states that took little or no such action, disproportionately distributing responsibility for what should be a shared goal.

Commenters said that power sector CO2 emissions pea ked in 2007 nationwide and in 2005 for Wisconsin, largely because many of these emission-r educing measures and programs were initiated or expanded after these years. Commenters said use of a multiyear baseline that includes 2005 would therefore credit much of the early actio n taken by states and utilities. Commenters indicated that the EPA should allow states to adjus t their baseline to account for specific actions back to 2000. Commenters said that to give credit for pre-2012 emission reduction measures, using a baseline using 2005 data would be the best approach. Commenters said, however, that they could also support the use of 2010-2012 as des cribed in the NODA, although they prefer the incorporation of earlier years into the baseline.

There is precedent for the EPA using a multi-year b aseline. Commenters said that in its rulemakings, the EPA routinely uses a range of year s to determine representative operating levels for EGUs (e.g., the use of the highest three years out of five used for the Clean Air Interstate Rule, CAIR). Commenters said that the EPA specifica lly does this to address variability due to
EGUs that are offline for maintenance or installati on of operating or pollution control equipment
and other variations in loads and fuel use. Comment ers said accordingly, the EPA's current argument that these issues are not important and th at one year is adequate to represent EGU operation is inconsistent with the EPA's past actio ns. Several commenters said further, the EPA is requiring compliance demonstrations in 2030 and beyond based on a rolling 3-year average, demonstrating further that the use of a single year baseline is not consistent with compliance for
this rule.

Re-dispatch already occurring. Commenters stated cu rrent fuel prices are already driving the redispatch from coal to existing NGCC. The commenters said in North Carolina, this transition occurred starting in 2010 through the beginning of 2014. The commenters said North Carolina has replaced 27 coal units with large NGCC plants o perating at over 60% capacity in both 2012 and 2013. The commenters said these plants are newe r and were designed to function as base
load units. The commenters said North Carolina has essentially completed most of Building Block 2 in 2014; however, EPA's selection of the 20 12 base year penalizes early action states.
The commenters said North Carolina is unable to tak e credit for pre-2012 reductions and are expected to do more than states that took no action . The commenters requested that EPA modify390

its one-year, 2012 baseline reference to a three-ye ar baseline in order to allow credit for the pre2012 coal EGU retirements.

Earlier, 3-year baseline recommended. Commenters st ated EPA developed the proposed guidelines using 2012 emissions and generation data . The commenters said based on a review of data from the U.S. Energy Information Administratio n (EIA), the commenters do not believe 2012 is representative for establishing a baseline. The commenters said between 2005 and 2013, 2012 had the lowest natural gas prices, the greates t percentage of electric generation from natural gas, and reflects the highest level of renewable ge neration and energy efficiency savings in
Wisconsin. The commenters said to address some of t hese concerns, it would be a better approach to use a multi-year average baseline. The commenters said an earlier alternate baseline period would allow some credit for early emission r eductions. The commenters asserted that an alternative multi-year baseline such as 2010-2012, or earlier, could be developed; this would be consistent with the final goal, which is measured o n a three-year rolling average basis (i.e., 2030- 32, 2031-33, 2032-34, etc.). The commenters added a three-year baseline period reduces the impact of abnormal conditions during any one partic ular year, such as low natural gas prices or atypical weather. The commenters said to the extent that a state decides to develop its plan using the same methodology as EPA, the use of a single ye ar could also skew the distribution of a state's goal between covered utilities, if for exam ple, one utility had an unusually large number of outages during the single year.

Commenters stated the emission rate goals in the pr oposed rule were developed using 2012 emissions and generation data as a baseline; the us e of a 2012 baseline for the purpose of setting state goals fails to recognize emission-reducing ac tions taken by states and utilities prior to 2012. The commenters said 2012 was not a representative y ear for Wisconsin and does not fairly reflect typical operations. The commenters said bet ween 2005 and 2013, 2012 had the lowest natural gas prices, the greatest percentage of elec tric generation from natural gas, and the highest level of renewable generation and the highest level of energy efficiency savings, as shown in the tables below. The commenters said a baseline period earlier than 2012 would allow some credit for early emission reductions. The commenters suppo rted EPA's approach proposed in the Notice of Data Availability (79 Fed. Reg. 64,543) to use a multi-year baseline such as 2010-2012, or alternatively for states to be able to elect this o ption. The commenters said the use of a three-year average for the baseline would be consistent with t he final goal, which is measured on a threeyear rolling average basis (i.e., 2030-32, 2031-33, 2032-34, etc.); furthermore, a three-year baseline period reduces the impact of abnormal cond itions during any one particular year.

Commenters stated the EPA's use of a 2012 baseline for the purpose of setting state goals generally fails to recognize emission-reducing acti ons taken by states, utilities and energy users prior to 2012. The commenters said an earlier alter nate baseline period would allow some credit for early emission reductions. At a minimum, the co mmenters asserted that an alternative multiyear baseline such as 2010-2012, or earlier, could be developed. The commenters said this would be consistent with the final goal, which is measure d on a three-year rolling average basis (i.e., 2030-32, 2031-33, 2032-34, etc.). The commenters sa id a three-year baseline period reduces the impact of abnormal conditions during any one year, such as low natural gas prices.

Commenters are not aware of a legal requirement tha t the EPA must use 2012 as a baseline; EPA's explanation for why it chose 2012 i s basically that this was the most recent year391

for which it had complete data. The commenters said as part of that explanation EPA also states: "The EPA also considered the possibility of using a verage fossil generation and emission rate values over a baseline period (e.g., 2009 - 2012), but determined that there would be little variation in results compared to a 2012 base year d ata set due to the rate-based nature of the goal." The commenters said for at least Wisconsin, EPA's statement is incorrect, since using 2012 only versus a 2010-2012 baseline period for Wi sconsin results in an interim goal and a final 2030 goal that are 4 percent and 3 percent more str ingent, respectively.

Commenters stated 2012 is not representative for es tablishing a baseline. The commenters said for example, in Wisconsin, between 2005 and 2013, 2 012 had the lowest natural gas prices, the greatest percentage of electric generation from nat ural gas and reflects the highest level of renewable generation and energy efficiency savings. The commenters said to address some of these concerns, it would be potentially a better ap proach to use a 3-year average baseline from
2010 - 2012.

2005 baseline year. Commenters stated states should be given discretion in meeting the technically and economically achievable CO2 emissio ns reduction goals based upon 2005 emissions levels, in lieu of the proposed 2012 base line year. The commenters said establishing 2012 as the baseline year fails to recognize factor s that may have impacted generation and resulting emissions as a result of anomalous condit ions. The commenters said 2012 as the baseline year would not provide a representative pi cture of a typical year for Black Hills operations. The commenters said state compliance pl ans should tie reductions to goals based upon 2005 as the baseline year.

Commenters recommended EPA pursue evaluation of usi ng a different data year as proposed in the notice of data availability (NODA) released on October 30, 2014; generally, EPA will likely find that less renewable energy and less NGCC resou rces existed in the early years, thus, increasing each state's goal and reducing overall C O2 emission reductions. The commenters said this approach will alleviate a small portion of the impacts this proposed rule may have on large, complex generation asset states, but will most like ly have a profound effect on small generation asset states, like South Dakota. The commenters sai d EPA's close review of data year could eliminate "problematic" micro-situation states with out significant impacts to the overall proposed rule. The commenters encouraged this analysis on a national basis, but emphatically encourage EPA to allow this data year shift on a state by sta te basis where dramatic goal changes occur.

Multi-year baseline (of at least 3 years) recommend ed. Commenters stated in the proposed rule, EPA calculated state goals by applying all four Bui lding Blocks to each state's 2012 electric generation to determine the extent to which the sta te could - according to EPA - reduce its carbon dioxide emissions rate by 2020. The commente rs said EPA states that it chose the year 2012 because it represented the most recent year fo r which complete data were available at the time of its analysis. The commenters said EPA consi dered the possibility of using average fossil generation and emission rate values over a 4-year b aseline period, such as 2009 - 2012, but
determined that there would be little variation in results compared to the single year (2012) approach. Commenters added EPA's proposed rule does not adequately credit states for taking early action to reduce carbon emissions. The commen ters said though EPA claims that early emission reductions (e.g., reductions from 2005-201 2) are reflected in the 2012 baseline, this notion is not reflected when comparing Georgia's pr e-2012 reductions in CO2 emissions (30%)392

with the additional amount of reductions required b y the Proposal (48%). The commenters said while part of this problem is the improper inclusio n of under construction nuclear units in Georgia's state goals, the problem also stems from EPA's sole use of 2012 data as a baseline. The commenters urged EPA to use a multi-year baseline o f at least 3 years or to otherwise make adjustments to the 2012 data, to make the data more accurately reflect typical operating conditions in Georgia. The commenters added EPA sho uld make clear that each state has the discretion to use those data years that best reflec t historical operations and that are most appropriate - in the state's view - for use in the development of the section 111(d) plan. The commenters said for other rulemakings, EPA has prov ided a range of years within which each state has the flexibility to pick the specific year (or years) that best represents the state and that addresses specific state concerns. The commenters s aid this Proposal would seem to be ideal for that type of approach.

2012 not representative. Baseline of 2005-2009 rec ommended. Commenters stated the EPA's
use of 2012 data to establish baselines for affecte d EGUs is problematic for a number of reasons; EGUs demonstrate considerable variability in capaci ty factor and emissions rate from year to year due to a variety of factors, including planned and unplanned shutdowns and maintenance. The commenters said selecting one year in most case s will not accurately reflect an EGU's actual average capacity factor and emissions. The commente rs said 2012 happened to be an "off" year for a coal plant in UAMPS' portfolio resulting in a 69% capacity factor in the proposed rule when the plant has run at an average capacity facto r of 77% for the past decade. The commenters said another coal plant in UAMPS' portfolio experie nced a forced outage due to an equipment failure, resulting in significantly fewer MWh and C O2 emissions from this resource in 2012. The commenters said using 2012 as the baseline year als o skews emissions rate data for this plant as artificially low, with the end result being excessi vely stringent guidelines for the State (Utah) in
which the EGU is located.

Commenters stated the selection of 2012 as the base line year effectively ignores the significant emissions reductions achieved by the power sector i n recent years. The commenters said between 2005 and 2012 energy-related CO2 emissions in the U .S. were reduced by a total of 13.2%, declining in 5 of the past 7 years. The commenters said the EPA should recognize the efforts the electric utility industry has proactively taken to reduce carbon emissions as part of the emissions rate calculations in the proposed rule. The comment ers suggested a more equitable approach by utilizing an average of EGU data from 2005-2009 to establish more accurate values for capacity factor and emissions and to recognize in part the C O2 reductions achieved during that time frame. The commenters did not believe using an aver age of 2010, 2011, and 2012 emission data is the best approach for determining baseline emiss ion data for affected EGUs subject to the
CPP.

Commenters stated in the Notice of Data Availabilit y (NODA) released October 28, 2014, EPA acknowledges stakeholder concerns surrounding the s election of 2012 as a single baseline year and published additional emissions data for 2010 an d 2011. The commenters said in reviewing emissions data for UAMPS' coal resources over the p ast decade (2003 through 2013) one plant's emissions ranged from a low of 2.7 million tons of CO2 to a high of nearly 4.4 million tons for a range in variation of 1.7 million tons. The comment ers said another coal-fired plant in UAMPS' portfolio saw a range in variation of 930,000 tons CO2 in the same time period. The commenters said this wide range in emissions illustrates the e xtreme variability in EGU CO2 emissions from393

year to year and the need for a different methodolo gy for determining reduction targets. The commenters said adding emissions data for 2010 and 2011 for consideration, in addition to 2012 data, is still inadequate and arbitrary. The commen ters said utilizing this data fails to credit the significant reduction in emissions the electric ind ustry has made since 2005. The commenter's proposed approach of using an average o f EGU data from 2005-2009 would more accurately reflect actual emissions of each EGU, pa rtially crediting CO2 reductions achieved over this time period, and would resolve the proble m of artificially low emissions targets driven by outside factors such as unplanned outages.

5-year baseline recommended. Commenters stated EPA should change the methodology for calculating carbon intensity in the proposed rule a nd expand the baseline period (e.g. from one year to five years) in order to minimize the impact and disparities associated with basing emissions targets on a single year. The commenters said EPA should also start with an earlier year (e.g., 2005) to address the punitive impact of the proposed rule on states and companies that have taken early action to reduce GHG emissions and address climate change.

States should be able to select from at least 2 or 3 years. Commenters stated rather than using
2012 emissions data to establish the baseline as in the proposal, the commenters suggested that
EPA allow utilities to select from at least two or three different years to establish a representative
baseline for each of its units. The commenters said because an individual unit could have been down for maintenance or had a lower-than-normal ope rating rate during the 2012 baseline year selected by EPA, the baseline could be artificially low. The commenters added if a utility took measures to reduce its greenhouse gas emissions ear ly, before 2012, the proposed program would not provide any credit. The commenters said F lorida installed most of its renewable energy capacity before 2012, including the increase d use of biomass as well as rooftop and utility scale solar; the City of Lakeland, for example, ini tiated a solar project in 2008. The commenters said because the goal of the proposed guidelines is to reduce greenhouse gas emissions, early action reductions and carbon-free nuclear generatio n coming online after the 2012 baseline
should all be treated the same.

Multi-year average of years before 2012. Commenters stated choosing a baseline emission start date of 2012 punishes early efforts of states such as Colorado. The commenters said EPA should
allow states with RES mandates to choose a start da te prior to the implementation of the RES mandates; alternatively, the Plan should allow for an average of years prior to 2012 to account for early emission reductions.

Multi-year baseline. Commenters stated EPA should s et emission rate goals based on a multiyear baseline period, rather than historic generati on in a single year. The commenters said the 2012 baseline period in the Proposed Rule is not re presentative of normal operation for the electric generating industry. The commenters said n atural gas prices were at a record and unprecedented low in 2012, which resulted in greatl y reduced generation from coal-fired generating units; the commenters said the U.S. econ omy was still in a tough economic recovery. The commenters said as EPA has noted in previous ru lemakings, electric demand and resultant utility operations fluctuate greatly within a singl e year; utilizing a multi-year baseline, such as 2010, 2011 and 2012, would correct for anomalies, a nd provide some credit to early actors.394

Commenters stated many utilities and states have ta ken steps to curb carbon emissions well
before 2012. The commenters said that the EPA shoul d give some recognition for early movers in the Plan; possible fixes could include allowing states to pick a year earlier than 2012 for a starting value or some averaging of prior years to calculate the starting point.

Commenters stated as the last year of available dat a, the year 2012 appears to be an appropriate starting point for CO2 reductions from EGUs for mos t states; however one of IPP's generating units was off-line for an extended period in 2012 r esulting in the generation data used to develop Utah's state goal being non-representative of IPP's operations. The commenters suggested that EPA set the baseline levels for computing the state goals based on multi-year periods. The commenters said following the approach used in thes e other CAA regulatory programs, the Agency should allow affected EGUs to select as thei r baseline the average of any 3-year consecutive years from 2008 through 2013; such an a pproach will ensure a more representative baseline period and provide some partial credit for early actions.

Comment 5: 2005 should be used as baseline, to account for re ductions already achieved

Response 5: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated the rule talks about achievement of a 30% reduction from 2005 CO2 emissions nationwide; however, the state goals are calculated using the actual emissions data from 2012. The commenters said the consequence is t hat this methodology completely ignores what a state has already achieved in reducing its c arbon emissions. The commenters said in South Carolina, the statewide CO2 emission reductio n from EGUs has been 31% since 2005 for which the proposed rule gives no credit. The commen ters said this not only creates a disincentive for the states that had a plan to implement a carbo n reduction strategy but it also places a disproportionate burden on the people within that s tate that are already paying for the carbon reductions achieved to date and who must now pay ag ain for the additional resources necessary to achieve the EPA prescribed carbon intensity stat e goal. The commenters said in South Carolina, the state goal requires another 51% reduc tion from the 2012 baseline which is also a decrease of 815 pounds of CO2 per megawatt hour; th e largest in the nation. Commenters stated in order to be fair, any goals that are ultimately put in place need to give credit for the CO2 emission reductions that have already been achieved by retirements, conversions, and other utility industry responses in anticipation of GHG r egulation; to that end, the baseline average
annual CO2 emissions should be tied to the annual e missions of 2005, as referenced by the President's Climate Action Plan, or an appropriate statistical average of annual emissions during the preceding years.

Commenters stated considering certain states such a s Texas have made substantial investments in renewable energy since 2005, the final emission goa ls for 2030 should be adjusted upward to account for these projects. The commenters said Tex as Public Utility Commissioner Kenneth W. Anderson, Jr. states in his written testimony befor e the House Energy and Power Subcommittee395

that: "The EPA's proposed Clean Energy Plan rule ig nores the significant renewable energy development that has occurred in Texas during the p receding decade. Even with the extreme variations in wind generation that can occur over t he course of the year, in 2013 Texas wind generation produced 35.917 million MWh (16.24% of t he nation's non-hydro renewable generation). However, the 2012 base year selected b y the EPA for the proposed Clean Power Plan rule does not give Texas credit for the societ al and financial commitments to facilitate renewable energy. From 2005 through 2011 Texas adde d over 8,500 MW of wind capacity, of which 8,300 MW were built within ERCOT."

Commenters stated the manner in which EPA calculate d Nevada's emission limit front-loaded
the emission reductions. The commenters said EPA us es a 2012 baseline to calculate the state emission limits, despite public statements referrin g to reductions from the 2005 emission
baseline. The commenters said the use of a 2005 bas eline would more accurately account for the
substantial reductions in CO2 emissions in Nevada o ver the last 10 years. The commenters said since 2005, Nevada has experienced over a 30% decre ase in energy-related CO2 emissions - the largest percentage decrease in the country. The com menters said this is due to the shutdown of the Mojave Plant (two 800 MW units) in Laughlin, Ne vada as well the deployment of a significant portfolio of renewable generation. The commenters said by relying on a 2012 baseline, EPA gives the State no credit for any of these reductions. The commenters said EPA should instead use a 2005 baseline to give full cre dit to states that have taken a proactive approach to reducing carbon emissions.

Commenters stated EPA's Section 111(d) proposal rel ies primarily on 2012 data to set state emission reduction targets for Pennsylvania generat ion including coal and gas-fired facilities and nuclear generation. The commenters said by establis hing a 2012 base-line period, EPA ignores the emission reduction benefits achieved by generat ion resources prior to that period; however, the EPA has indicated that, under its plan, carbon dioxide emissions will be reduced by 30% from 2005 levels. The commenters urged the EPA to r e-examine the appropriate baseline for its proposed emissions standards for fossil fuel genera tion and utilize 2005 as the baseline instead of 2012. The commenters said a 2005 baseline would pro perly capture all of the benefits achieved by: (i) Pennsylvania fossil-fuel generation achievi ng emission reductions through investments made in coal plant retrofits and environmental comp liance activities; (ii) increased deployment of gas-fired generation utilizing domestic natural gas resources; and (iii) uprates of nuclear
facilities.

Commenters stated the EPA has selected 2012 as the baseline year for implementation of the emissions standards as opposed to an earlier baseli ne year, such as 2005; PA also states that the goal of its CAA Section 111(d) proposal is to achie ve a 30% reduction of CO2 below 2005 levels. The commenters said by setting 2012 as the base year for its emission reduction calculations, EPA fails to account for and credit P A for the emissions reductions achieved by PA generation facilities from 2005 forward during whic h time PA-based generation facilities invested heavily in environmental compliance retrof its that achieved significant emissions
reductions. The commenters said EPA should consider resetting the base year for establishing
emissions standards from 2012 to 2005.

Commenters stated existing sources in the state of Georgia, including MEAG generation, have actually already achieved a 33% reduction in carbon dioxide emissions, in tons, in 2012396

compared with 2005. The commenters said while this emission reduction between 2005 and 2012 is significant, the proposal would require an additional 44% reduction in the carbon dioxide emission rate (lb/MWH) by 2030 compared with 2012 - or about a 45% reduction in tons of carbon dioxide from affected units in 2030 compared with 2005. The commenters said EPA's mass-based equivalent goal would require an even gr eater emission reduction in tons for affected units in Georgia - 63% below the 2005 level.

Commenters stated EPA requests comment on the optio n of selecting a baseline date starting from a specified date prior to the initial plan per formance period. The commenters said EPA states a number of options including 2005. The comm enters recognized that EPA has stated that its proposed plan will achieve GHG emissions reduct ions of 30% below the 2005 level by 2030 if implemented as proposed; however, EPA utilizes t he baseline date of 2012 throughout its BB approach. The commenters said EPA's analysis for BB 1 relies on a review of 2012 data for 900 coal generation facilities. The commenters said sel ecting 2012 as a baseline unnecessarily penalizes states, such as PA, that have benefitted from emission reductions from environmental compliance measures taken by coal plant operators s ince 2005. The commenters said these
measures include addition of SO2 and NO2 scrubbers and other upgrades that were designed to improve heat rate and general operating efficiency. The commenters urged the EPA to consider utilizing a 2005 baseline year for the calculation of emissions reductions to be consistent with its stated objective for 30% emissions reductions from a 2005 level by 2030 and to recognize benefits in emissions reductions already achieved b y PA generators.

Commenters stated it is imperative that Minnesota r eceive full credit for the costs of all early action in order for the Minnesota economy to remain competitive both nationally and internationally. The commenters said it is also imp erative that the EPA considers the cost of any supplementary action when setting Minnesota's CPP t argets. The commenters said the Minnesota Next Generation Energy Act of 2007 ("NGEA") establi shed a statewide renewable energy standard. The commenters said Minnesota's early act ion by adoption of legislation such as the NGEA led to significant repowering and emission red uction requirements which continue to successfully reduce statewide CO2 emissions. The co mmenters said Minnesota regulators also require all utilities in the state to file an Integ rated Resource Plan ("IRP") that includes
consideration of CO2 environmental externalities. T he commenters said all Minnesota filed IRPs must demonstrate that recently deployed and propose d environmental control retrofits deliver emission reductions that comply with recent environ mental regulations addressing regional haze, fine particulates, ozone and mercury as well as inc luding a range of CO2 emission costs. The commenters urged the EPA to consider that these ear ly action and nation leading policy
decisions have a true cost to current and future Mi nnesota ratepayers. The commenters said early renewable energy deployment actions, along with dem and side management conservation and efficiency programs, should allow Minnesota to be r ewarded and credited for existing programs. The commenters said using the year 2005 as a baseli ne for the CPP assures Minnesota credit for their existing programs and avoids any punishment f or the more recent Minnesota early action
initiatives. The commenters said Minnesota's NGEA r eferenced 2005 as a baseline year for setting and tracking progress of the state's greenh ouse gas emissions extending through 2030. The commenters said the magnitude of CO2 emission r eductions in the state from Minnesota's early action more than satisfies Minnesota's "fair share" contribution towards meeting overall United States climate policy objectives for improvi ng the electric generating sectors emissions profile through 2030.397

Commenters stated the selection of 2012 as the base line for measuring improvements, furthermore, fails to account for substantial impro vements that have already been achieved and at the same time ties reduction goals to data from a p eriod of economic recovery. The commenters said during that intervening period, industrial con sumers in Indiana diligently pursued energy efficiency initiatives that, under the proposed reg ulations, would not be properly credited toward the achievement of the Indiana goals. The commenter s said in many other respects, Indiana would be penalized for earlier efforts to achieve h eat rate improvements in coal-fired generation, to increase gas-fired and renewable energy resource s and to promote efficiency. The commenters said in 2012, moreover, economic conditions in Indi ana and the United States were still recovering from a serious recession, and for a manu facturing-intensive state such as Indiana in particular, the level of energy consumption in 2012 was not representative of productivity at full strength. The commenters said locking in emission r eduction goals to a baseline period in which consumption was down due to economic adversity is i nconsistent with the objective of supporting a vibrant and growing economy. The comme nters said an earlier baseline period such as 2005 would better reflect both measures already implemented and reasonably expected conditions moving forward.

Comment 6: Must allow credit for early reductions for BB3 and BB4 (RE & EE)

Response 6: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year. See sections V .A and V.E of the final rule preamble for discussions of demand-side energy efficiency and re newable energy, respectively. See section VIII of the final rule preamble for discussion of s tate plans.

The following are summaries of the specific public comments under this comment:

Commenters stated in its Proposed Rule, EPA propose s to use 2012 as the baseline year to develop the state-specific carbon emission reductio n goals based on the BSER. The commenters said each of the Building Blocks is a separate comp onent to the BSER, developed using a distinct proposed methodological approach based on a cost-benefit analysis for each GHG abatement measure; for example, for Building Block 3, EPA applied a regional annual growth rate to each state's 2012 level of renewable energy generation to derive the future renewable energy generation in that state from 2017 to 2029; for Building Block 4, EPA used a "best practices scenario" by determining each state's inc remental annual savings as a percent of retail sales for the most recent year of data (2012) and t hen applying a series of other inputs to arrive at a level of sustainable performance. The commenters said EPA's proposed baseline of 2012 for Building Blocks 3 and 4 does not provide full credi t for investments already made that offset CO2 emissions, including numerous efforts over the last decade by Heartland and Heartland's customers to proactively and responsibly reduce the ir carbon footprint.

Commenters requested that EPA push back the 2012 ba seline in the Proposed Rule to 2005 for Building Blocks 3 and 4. The commenters said using 2005 as the baseline year for Building Blocks 3 and 4 would appropriately enable entities to be credited with measures they have taken in the last decade to reduce their carbon footprint through the increased use of renewable energy and energy efficiency. The commenters said EPA shou ld recognize the efforts by entities that398

were forward-thinking on renewable energy and energ y efficiency measures over the past decade, and it should not use a baseline in its Bui lding Blocks that essentially penalizes states that have already invested in these areas by not co unting their past measures toward their carbon emission reduction targets. The commenters said use of a 2005 baseline year for these two Building Blocks would be more consistent with the P roposed Rule's selection of 2005 as the year against which the goal of 30 percent reduction in c arbon emissions from EGUs by 2030 will be compared. Commenters respectfully requested EPA rev isit its 2012 baseline for Building Blocks 3 and 4, and instead allow states to capture the be nefits of any renewable energy and energy efficiency projects and programs that have the effe ct of reducing carbon emissions. The commenters said using 2005 as the baseline year wou ld enable entities to be credited with voluntary, proactive measures they have taken in th e last decade to reduce their carbon footprint.

Commenters stated the proposal fails to provide cre dit for early adoption and implementation of programs; as a result, programs already incorporate d into the calculations of a state baseline
cannot be relied on to meet a state's future emissi on reduction goals. The commenters said those programs may be put at a comparative disadvantage w hen competing for future funding against newer initiatives or requirements that can be relie d on to meet the new emission reduction standards. The commenters said states may also choo se to postpone the adoption or extension of energy savings initiatives. The commenters said thi s disincentive to maintain successful voluntary DSM programs again runs counter to the go als of the Clean Power Plan and undermines the achievements builders have made in p artnership with utilities in bringing energy
efficient homes to market.

Commenters urged EPA to redesign the BSER to elimin ate the incongruent treatment of early action by states on energy efficiency. The commente rs said under the current BSER, early adopters that have deployed DSM programs widely at the state level may be closer to achieving a reduction in electricity generation equal to 1.5% o f prior year retail sales; however, the inclusion of existing energy efficiency programs in the basel ine not only affects the rate of emission reduction expected from the state, but also the abi lity to credit the impact of those programs on compliance with the state emissions performance sta ndard. The commenters said if the proposal is finalized as drafted, these early adopter states will be forced to incorporate more aggressive program measures to ensure they achieve the necessa ry emissions reductions during the compliance periods. The commenters said these measu res will not be targeting the so called lowhanging fruit but will instead be measures that are more stringent, contain more prescriptive requirements, and represent less cost-effective mea ns of achieving end-use energy efficiency.

Commenters stated EPA's assumptions about the build out of renewable generation unfairly penalize Texas for taking the lead on new zero-carb on generation and are arbitrary and capricious. The commenters said under Block 3, the baseline again puts Texas at an unfair disadvantage. The commenters said EPA does not give Texas adequate credit for billions of dollars of renewable generation development, includ ing the necessary transmission infrastructure, made since 2001, much less 2005. Th e commenters said by ignoring the efforts already undertaken by states to reduce CO2 EPA erre d in setting BSER; the result is a higher cost of compliance and fewer alternative choices fo r those states which chose to implement policies that reduced carbon emissions prior to the EPA proposal.399

Commenters stated Utah has increased its renewable energy generation, primarily wind energy, from 301,862 MWH in 2008 to 1,099,724 MWH in 2012, a 2.6 times increase in generation over five years. The commenters asserted this commitment to renewable energy should be recognized in EPA's rule. The commenters said one way EPA coul d give some early action credit would be to create a five-year average baseline from the yea rs 2008-2012; this would give partial credit to the commitment Utah has already made to develop ren ewable energy.

Commenters stated credit for early action should be expanded for energy efficiency programs already implemented by states. The commenters said states that have taken early action in EE are penalized by the Proposed Rule because goals are ba sed on a higher starting point, due to the electricity generation savings already accomplished , leading to a higher ramp-up rate than if the
state had started at zero.

Commenters suggested that the rule give credit for 2005 to 2012 renewables and energy efficiency in setting the goal or that EPA clarify that these resources can be used to demonstrate compliance in the state plan.

Commenters stated Minnesota has undertaken early ac tion measures for customer energy efficiency deployment that already delivered signif icant conservation and process efficiency improvement gains for Minnesota electricity consume rs. The commenters said Minnesota Power's analysis of energy efficiency and conservat ion improvement measures through 2005, as reported to the EIA 1605(b) voluntary reporting of greenhouse gas emissions program, show cumulative efficiency improvements of over seven pe rcent relative to MP's annual electricity customer demand. The commenters said the "timing ou t" of earlier conservation and energy efficiency measures contributing to cumulative cons ervation estimates has been such that new measures being implemented under Minnesota's energy efficiency program are approximately sustaining this magnitude of cumulative conservatio n. The commenters said in the CPP proposal, EPA has now reset the basis for calculating cumulat ive conservation by assigning 2012 as a new reference year for conservation and energy efficien cy improvements, effectively nulling out the
indicated benefits from Minnesota Power's conservat ion and energy efficiency actions through 2012. The commenters said additionally, Minnesota u tilities are now challenged by needing to sustain energy efficiency gains by implementing new measures from a depleting list of candidate projects so that expiring earlier measures can be r eplaced.

Commenters stated renewable energy projects develop ed prior to 2012 should not be used to lower the regional average rate used by the CPP. Th e commenters said it is understood the CPP grouped states into regions and applied regional av erages to establish renewable energy targets. The commenters said states who voluntarily or throu gh renewable portfolio standards (RPS) constructed renewable energy prior to 2012 are pena lized under the current EPA model with higher renewable energy requirements and lower stat e emission rates.

Commenters stated as EPA recognized in its proposed rule, Minnesota has already been a leader among states in passing legislation that promotes c lean energy development. Commenters said that Minnesota has "worked collaboratively with its investor-owned utilities to develop multipollutant emission reduction plans on a utility-wid e basis. This approach enables utilities to determine the least cost way to meet long term and comprehensive energy and environmental goals." The commenters said Minnesota adopted a man datory renewable energy standard400

("RES") in 2007. The commenters said under this sta ndard, utilities were required to obtain 12% of their retail sales of electricity in 2012 from r enewable sources, and Xcel Energy, Minnesota's largest utility, was required to reach an 18% level . The commenters said more recently, in 2013, the Minnesota Legislature passed legislation requir ing utilities to ensure that, on top of the existing RES, at least 1.5% of their retail electri city sales in 2020 come from solar energy. Commenters stated these policies have been quite su ccessful in moving Minnesota toward a cleaner energy economy; for example, in 2000, 4% of the electricity generated in Minnesota came from renewable sources; by 2011, renewable ele ctricity jumped to 16% of total generation. The commenters said this has resulted in approximat ely 15,300 clean-energy-sector jobs in 2014 and this sector is growing at a significantly faste r pace than others in the state; clean energy sector average wages are also significantly higher that state average wages.

Commenters stated when a state or federal carbon re duction plan is adopted, the EPA should credit new renewables, gas generation or energy-eff iciency reductions that have occurred since
2012:

• Texans have built 48,000 MW of new generation since 1999; about 25%, or more than 13,000 MW, has been wind energy; Texas has installe d over 11,800MW since 2005.

• 12,754 MW of renewable generation is committed for the future; Texas has obtained transmission contracts and this capacity is likely to be completed before the state plan is submitted or approved.

• Texas's generation grid has the potential to accomm odate over 18,000 MW of wind and solar energy and storage.

• 51,100 MW of active generation requests under are r eview, more than half of which are for gas-fired plants that can replace retiring coal plants; this number includes more than 24,200 MW of wind Electric co-ops should be treated

Commenters stated EPA should give credit for early investments in renewable energy, zeroemitting energy including baseload nuclear and hydr opower generation, and energy efficiency by properly adjusting the baseline period. The comment ers said EPA's failure to give appropriate credit for early action creates a harmful precedent . The commenters said a program that fails to recognize efforts by states and companies to show l eadership in reducing emissions will have the long-term "chilling" effect of discouraging states and companies from implementing beneficial environmental measures unless and until mandated by EPA. The commenters said equally important, consumers - the ratepayers and customers - of those companies, along with owners, already are paying for those investments. The comme nters said EPA could correct this by utilizing an earlier baseline period, or by explici tly giving states credit for early actions to reduc e GHG emissions when they demonstrate compliance with their interim and final standards; further, EPA could provide credit for early investm ents in EE by employing the same baseline electricity savings rate for all states. The commen ters said finally, EPA should allow hydropower generation to be credited towards compliance. The c ommenters said an earlier baseline period would recognize and reward state and company leader ship in reducing emissions; displacement of fossil-fuel fired generation by early investment s in RE, EE, and natural gas generation would401

not be "built in" to the standard calculation, so s tates that made these investments will not be assigned overly restrictive reduction standards and compressed compliance periods.

Commenters stated in order to set realistic and equ itable state goals, EPA must start with a baseline period for each state that is representati ve of actual generation and GHG emission levels
in that state. The commenters said the 2012 baselin e period in the Proposed Rule is not necessarily representative in each state, in part b ecause EPA did not correct for anomalous events that impacted total GHG emissions in that si ngle year. The commenters said a better approach would be to expand the baseline period fro m one year to five years in order to minimize the impact of anomalies that inevitably ar ise during a one-year period. The
commenters said EPA must address certain anomalies that arose in 2012 to avoid the unfair and arbitrary impacts that penalize some states and/or companies. The commenters said a multi-year baseline period would smooth out the anomalies and accurately represent the natural variations inherent in the electric industry. The commenters s aid while anomalous events occur every year, these events do not all have the same impact on ope rations and emissions; as a result, any singleyear baseline period will not accurately represent normal operations of the energy industry. The commenters said a multi-year baseline would better represent the natural yearly variation and, thus, better depict normal operations.

Comment 7: 2012 not representative; need a more representativ e year; need to credit early
actions.

Response 7: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year. See section VI II of the final rule preamble for a discussion of state plans.

The following are summaries of the specific public comments under this comment:

Commenters stated the EPA's Plan proposes to use a single year, 2012, as the baseline year for measuring CO2 emission reductions. The commenters s aid if a single year is chosen, it must be more representative of annual emission levels. The commenters said for New York and other states affected by Super Storm Sandy, 2012 is decid edly not a typical year and would result in an artificially low baseline. The commenters said the Plan's choice of a baseline period must take
into account anomalous weather events or other occu rrences that would render the baseline inappropriate; if 2012 ultimately is chosen as the baseline year, adjustments must be made to
account for such anomalous circumstances.

Commenters recommended that emission reductions ach ieved from September 25, 2008 (the date of the first RGGI allowance auction) to December 31 , 2019 be credited, banked and applied toward New York's compliance with the EPA's Plan du ring the interim and final performance periods. The commenters said compliance entities un der the RGGI program need continuity to retain the value of allowances sold to them in good faith. The commenters said this approach would reward early movers like New York, provide an incentive for additional early emission reductions, and allow a more gradual emission impro vement trajectory during the interim performance period of 2020-2029.402

Commenters stated the EPA uses 2012 as a baseline y ear for the rule. The commenters said many state carbon reduction programs went into plac e prior to 2012 such as RGGI, and Delaware's RPS and efficiency programs. The comment ers asked that the EPA consider an earlier baseline year, to the extent possible given legal and regulatory authorities, to reflect early
state actions.

Comment 8: 2012 not representative year; multi-year baseline (5 year) would be better; if 2012
is used as baseline must correct for anomalies

Response 8: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters said that CO2 emissions in 2012 were not representative, in part because the EPA did not correct for anomalous events that impacted total CO2 emissions in that single year. Commenters said the EPA should expand the baseline period from one year to five years to minimize the impact of atypical events that inevita bly arise during a single-year period. Commenters said if the EPA does not expand the base line period to five years, EPA must, at a minimum, correct for anomalies like those discussed below. Commenters said one way that the EPA could do this, as the Agency recognizes, NODA, 79 Fed. Reg. at 64,553, is to use different data years for individual states, as opposed to usi ng the same data year, or combination of years, consistently across states. Commenters said such an approach would account for atypical events
that affected individual states or a subset of stat es.

Commenters said that numerous uncharacteristic even ts can occur during any single year, and
such was the case in 2012. Commenters said these an omalies include increased utilization of affected units due to extreme weather events, atypi cally low CO2 emissions from coal-fired generation due to historically low natural gas pric es, and a changing portfolio (additions and retirements) of available units for dispatch. Comme nters said additionally, as the EPA has recognized in previous rulemakings, an EGU's operat ions (and, consequently, its CO2 emissions) will vary greatly over the course of any given year due to unusual weather and its impact on
demand. Commenters said in addition to nationwide a nomalous events that occurred during 2012, single-unit issues also significantly affecte d states' 2012 emissions, including extended outage periods for major sources of CO2 emissions a nd partial year operation of new NGCCs, and the EPA did not adjust for any of these events.

Commenters said a multi-year baseline period would dilute the disparate impact that an atypical event can have on a single year and would more accu rately represent the natural variations inherent in the electric industry, and would be con sistent with how EPA expects states to demonstrate compliance under the Proposed Rule. Com menters said further, a multi-year baseline period is consistent with other existing E PA programs and guidance.403

Comment 9: 2012 not representative, multi-year baseline shoul d be used, use of multi-year baseline can make big difference in translating rat e-based goal into a mass-based goal, states must get credit for early reductions, the EPA needs to clarify exactly what state and federal programs were relied upon in calculating state goal s so public can make informed comments

Response 9: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year. See sections V I and VII for discussion of calculation methodology for subcategory-specific emission perfo rmance rates and state goals, respectively.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA should adopt an aver aging approach to establish the base year. Commenters indicated that the EPA considered using average fossil fuel generation and emission rate values over a baseline period but det ermined that there would be little variation in the results compared to a 2012 base year data set d ue to the rate-based nature of the goal. Commenters said in fact, many variables affe ct the amount of generation and emissions in a particular year, including the level of hydroelec tric generation, natural gas prices, and weather variability. Commenters added that notwithstanding EPA's rationale, the baseline generation assumptions do impact the ultimate emission target goal. Commenters therefore recommended the use of an averaging approach in order to accoun t for yearly differences in generation.

Commenters said that over the last decade, the land scape of energy use in the U.S. has fluctuated significantly, and the EPA's use of the year 2012 a s a baseline for the states' budgets is arbitrary and leads to anomalous results. Commenters provided a graph and stated it showed that on a national level, carbon emission levels and coal use were at a seven-year low in 2012. Commenters said that due to the severe cold, CO2 emissions increased 2.5 percent from 2012 to 2013, and that despite this increase over 2 012 emissions, emissions in 2013 were still
10% below their 2005 level. Commenters said that th is shows that 2012 is not a reasonable baseline for any power usage statistics-it reflects reduced power usage due to a well-documented downturn in the economy. Commenters said that on a state level, some states had anomalous carbon output in 2012 - a fact that the EPA did not take into account. Commenters said for example, Minnesota's Sherburne County coal-fired po wer plant went offline beginning in November 2011 due to extensive turbine damage and r emained offline for all of 2012, thereby reducing Minnesota's carbon emissions significantly for that year. Commenters said similarly, while a coal-fired power plant in West Virginia was named the most efficient plant in the U.S. in 2011, its efficiencies fell in 2012 due to "restart s" and other issues "typical of the first year of operation of any power plant ... " Commenters indic ated these types of issues can likely be found in the data from any year, but said they should not control the states' budgets or be viewed in a vacuum. Commenters said that instead of using one y ear of emission statistics, the EPA should at the very least aggregate the data in order to produ ce averages for each state that more accurately
reflect the emissions trends.

Commenters said the baseline year selection is an i mportant issue for some states, because some states already have regulations or policies that wo uld directly (e.g., emissions cap) or indirectly (e.g., renewable portfolio standards) reduce CO2 em issions, and some of these state requirements were in place well before 2012. Commenters said und er the EPA's proposal, states may only apply emission reductions achieved under an existin g state requirement or program and404

attributable to actions taken after the date of the proposal towards their individual state goal. Commenters said the EPA does not explain, no r is it clear from the proposal, what "actions" taken under an existing state requirement or program might include. Commenters asked that the EPA provide examples of what it considers "actions" taken under a state requirement or program to include.

Commenters asked that the EPA clearly show what sta te and federal programs it relied upon in calculating state goals so the public can make info rmed comments. Commenters said the state goal emission rate will not be changed once the EPA issues the rule as final and it must therefore rely on accurate data and recognize early adopters of carbon reduction strategies such as heat rate improvements at coal units or existing state energy efficiency programs. Commenters said these efforts should be recognized and rewarded in each i ndividual state's goal.

Commenters indicated a multi-year baseline should b e used. Commenters said despite using a single year's worth of data to represent the baseli ne emission rate, the proposal allows EGUs - after 2030 - to measure actual plan performance aga inst the final goal by using a three-year rolling average. Commenters said the EPA reasons th at a three-year average will account for "year-to-year variability in economic and other fac tors, such as weather, that influence power system operation and affect EGU CO2 emissions." Com menters said for these same reasons, the EPA should rely on a multi-year average for determi ning the initial performance level rather than only 2012 data.

Commenters said moreover, even if there may be litt le variation between a single vs. multi-year baseline when viewing the rate-based goal, a multi- year baseline may make a big difference when translating that rate into a mass-based goal f or any given state. Commenters said the EPA should allow multi-year baselines when a State choo ses to utilize mass emissions targets rather than rate-based targets. Commenters said the rule should account for the economic and other factors discussed above by using a multi-year basel ine period to calculate both rate-based and mass-based goals. Commenters said as these numbers show, using a multi-year average provides a more accurate snapshot of a state's performance l evel against which states can compare future
carbon emission reductions.

Commenters said that states should be able to utili ze at least a 3-year average to calculate state goals. Commenters said that in addition, the EPA s hould consider adjusting the baseline emission levels to reflect plant shutdowns and othe r early reductions, particularly if bankable emissions credit is not otherwise provided for such emissions reductions.

Comment 10: Multi-year baseline needed; for NC 10-year period 2002-2012 is best, would be more representative and allow some credit for early reductions; other multi-year baseline possibilities

Response 10: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:405

Multi-year Baseline. Commenters disagreed with the concept of using a baseline year, but said that if a baseline year is established it should be a multi-year average and not a single baseline year. Commenters said the selection of a single bas eline year merely provides a snapshot of a state's energy and emission profile at a given time and, for North Carolina, gives an inaccurate picture of the State's overall profile. Commenters stated that failure to utilize an average when establishing the baseline for the Proposed Rule is incongruous with the building blocks fashioned largely by "averaging" data across states.

2002-2012 Baseline Best for NC. Commenters said th at while there are numerous yearly combinations that would yield a more equitable resu lt than the singular year of 2012, the most appropriate baseline for North Carolina is an avera ge of years 2002 through 2012. Commenters said there is precedent for the EPA's usage of a te n year period. Commenters said using an average of this ten year period is both more accura te and more equitable for multiple reasons:

“A 10-year average balances out statistical variati ons that appear in the State's data for any given year arising from weather, outages, fuel cost, dema nd, retirements, economic conditions and dispatching. A multi-year baseline approach would be less sensitive to these types of variations.

Additionally, economic conditions varied significan tly throughout the previous decade, with significant growth followed by the Great Recession (2007-2009) and slow recovery. As economic conditions are a significant driver of ele ctricity consumption, it is important that economic trends be normalized and accurately reflec ted in any baseline calculation. A ten year average would level out significant economic fluctu ations experienced by individual states and ensure that any established standard would not be s kewed toward a good or bad economic
environment.

Using an average of the years between 2002 and 2012 also would give North Carolina ratepayers some credit for their significant investment in env ironmental measures and utility retirements that have reduced coal-fired electric generation in North Carolina during that time period. In 2002, the North Carolina General Assembly passed th e "Clean Smokestacks Act" (S.L. 2002-4). Under the Clean Smokestacks Act, NOx and SO2 emissi ons (and carbon emissions) were reduced by retiring older coal units, retrofitting some plants at a total cost of $2.89 billion, and building new natural gas-fired plants. An average w ould ensure that the baseline reflects North Carolina's trend of reducing emissions from coal-fi red power plants and would incorporate these ongoing efforts into the standard.”

Other Possible Multi-year Averaging Periods. Comme nters said that while they advocate for a baseline established using a 2002-2012 average, a 2 005-2012, 2007-2012 or 2010-2012 year average would be more accurate and preferable to th e singular year of 2012. Commenters said additionally, considering the EPA's focus on 2005 i n conversations prior to issuing the Proposed Rule, a 2004-2006 average (or similar average) woul d also present a more credible alternative to
2012.

Must Protect Investments. Commenters said that any standard that does not recognize and protect existing investments to improve air quality is unjust and unreasonable. Commenters said the Proposed Rule should be tailored to protect rat epayers and to avoid such uneconomic406

outcomes by using a multi-year average or by creati ng a mechanism by which states receive credit for investing in emissions control technolog y prior to 2012.

Comment 11: The EPA should use 5-year average over a 7-year pe riod for baseline; states should be allowed to select either 2012 or any 3 co nsecutive years out of the last decade for baseline; baseline should be average of 2010-2012; baseline of 2010-2012 better than just 2012, but 2008-2010 better; provide a range of baseline o ptions to states; baseline should be average of any 3-year consecutive years from 2005-2013 or 2008 -2013; baseline should be 2005 but if that is not possible then highest of 2010-2012; final co mpliance date should be extended to 2040.

Response 11: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Five-year Average over a 7-year Period. Commenters suggested that to calculate baseline emissions, the EPA should look towards an average o f at least five years of data over a seven year period, and said this is not unprecedented.

Commenters said that the EPA, in order to determine a unit's baseline emissions in Cross-State Air Pollution Rule (CSAPR), took the average of the three highest, non-zero annual heat input values within a 5 year baseline. Commenters suggest ed that the survey period and averaging time should be even greater in the Clean Air Plan becaus e, unlike SO2 and NOx under CSAPR, CO2 has not been previously regulated. Commenters said that even with experience in regulating SO2 and NOx, the EPA recognized that emissions vary and operators of power plants should be afforded sufficient time to account for operational and other variations. Commenters suggested that since CO2 has never been regulated from utilit ies, and since a Rule like this has never been implemented, additional time should be provided.

Commenters said that the purpose of the CSAPR avera ge timeframe was to reduce the likelihood that any particular single year's operations determ ines a unit's allocation. Commenters said that by not only taking the average, but also looking to wards the highest data within the five-year range, the EPA was attempting to minimize the risk in CSAPR that outlier years would skew emissions limitations in a way that disproportionat ely or inappropriately harmed emitting units.

2012 or any 3 Consecutive years out of last 10. Com menters stated that the selection of a single year for baseline is unreasonable, arbitrary and ca pricious. Commenters suggested that states should be allowed to select either 2012 or any thre e consecutive years out of the last decade on which to base an emission inventory. Commenters sa id that the EPA should utilize a multi-year average of at least three years or permit states to select and justify the use of the most representative years from the last ten. Commenters said using a multi-year average or other flexible year selection process will better account for normal year operations and allow for some recognition of early reductions over years directly prior to 2012.

3-year average. Commenters said that many variable s affect the amount of generation and emissions in a particular year, including the level of hydroelectric generation, unit outages,407

natural gas prices and weather variability, and not withstanding the EPA's conclusions, the baseline generation assumptions do impact the ultim ate emission target goals. Commenters recommended the use of 2010-2012 for baseline, whic h represent the most recent available data. Commenters supported use of multi-year baseline suc h as 2010-2012, or alternatively for states to be able to elect this option. Commenters did not suggest which years should be used for baseline, but indicated that a 3-year baseline woul d be more representative than using a single year, and said that 2012 was especially unrepresent ative for New Mexico as 2012 coal-fired emission levels were the lowest for any one year be tween 2001 and 2012.

2010-2012 Better than just 2012; 2008-2010 Better. Commenters said the use of any single year, and 2012 in particular, is not appropriate for base line. The commenters noted 2012 emissions were anomalous, as the New York system was impacted by Super Storm Sandy for much of
November and into December. The commenters said the use of a three-year average baseline of the years 2010, 2011, and 2012 is an improvement bu t the Alliance suggests that the appropriate baseline is before RGGI was implemented, i.e., the average of 2008 to 2010.

Range of Baseline Options. Commenters stated that f or many states, including Florida, the year 2012 was not representative of normal operations an d therefore should not be used as baseline. Commenters said instead, they recommend that the EPA provide a range of baseline year options that could be used by the states in de veloping their state specific emission limiting
standards. Commenters said these should include mu ltiyear averaging or use of any single year within 10 years of the ESPS proposal date of 2005.

Average of any 3 consecutive years from 2005-2013 o r 2008-2013. Several commenters said rather than using a single year for baseline, the E PA should follow the approach used in other CAA regulatory programs and should allow affected e lectric utilities to select as their baseline the average of any three-year consecutive years fro m 2005-2013 (Commenters) or 2008 through 2013. Commenters analyzed historic generation leve ls for affected EGUs in New Mexico and found that during the period 2008 through 2012 the ratio of low to high net generation varies by a factor of 1.2 up to 4.5. Commenters said the arb itrary selection of 2012 as the baseline year in calculating the State of New Mexico's goal does not capture each facilities high end dispatch needs, particularly for the states' coal-fired faci lities. Commenters said to correct this, the EPA should allow each state to determine the most repre sentative facility dispatch in establishing a state goal - in particular, affected electric utili ties should be allowed to select as their baseline the average of any three consecutive years from 2008 th rough 2013. Commenters added that hydropower-dependent states should be allowed to re quest a longer average baseline period to account for variations in hydroelectric power produ ction.

2005 or highest of 2010-2012. Commenters responded to the EPA's NODA in which they discussed potentially allowing 2010 and 2011 to be considered part of the baseline. Commenters said they believe that an appropriate baseline year is 2005 and that any emissions limitation set by the states should be based on this new baseline. But, commenters said, because the EPA seeks comment on whether 2010, 2011 or 2012 should serve as baseline years, EKPC recommends that the highest of these three years be used as the bas eline and that the time to come into compliance
be extended such that the final goal is effective circa 2040

.408

Highest of 2010-2012 as baseline. Commenters suppor ted consideration of 2010 and 2011 as baselines in the emissions rate goal calculations; the commenters recommended that the highest of 2010, 2011 and 2012 be used as the baseline and that any emissions limitation be set by the
states based on this new baseline.

Comment 12: Baseline did not credit early actions, resulted in more stringent targets.

Response 12: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters contended that early actions were not ad equately credited, but rather were used to produce more stringent state targets.

Commenters stated EPA used 2012 state-level emissio n rate data from fossil-fuel fired generating sources as the baseline for calculating the interim and final emission rate goals. The commenters said EPA did not adjust the 2012 baselin e emission rate to account for the fossil megawatts already being displaced by renewable gene ration; thus, the interim and final emission rate goals assume those displaced emissions. The co mmenters said prohibiting states from accounting for the emission rate reductions that ar e essentially "baked in" to the emission rate goal calculations would be inconsistent with EPA's own methodology and arbitrarily and capriciously increase the stringency of the emissio n rate goals.

Commenters stated EPA should consider efforts to mo ve to lower emitting resources in years prior to 2012 when setting goals. The commenters sa id by way of example, South Dakota would experience a goal change from an unrealistic 741 lb s. CO2/MWhr (2012) to 1,627 lbs CO2/MWhr (2005), by adjusting the baseline year. Th e commenters said though less dramatic, other states would realize material goal shifts sho uld EPA consider early actions that result in
reduced emissions rates.

Comment 13: The EPA offered no data or analysis to support tha t there would be little variation in results using 2009-2012 baseline period compared to a 2012 base year, and FCG-EC analysis showed 2012 was lowest possible value and not repre sentative. Price of natural gas in 2012 was at lowest level since before 2000, and for that rea son alone 2012 disqualifies as representative. Due to year-to-year variability in electric power sector, a multi-year baseline
should be used.

Response 13: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Several commenters said in the EPA's NODA dated Oct ober 30, 2014, the EPA requested comment on their approach to a specific baseline. Several commenters said the Florida Electric Coordinating Council Environmental Committee (FCG-E C), of which JEA is a member,409

and Seminole Electric Cooperative, agree with the E PA that a historic baseline is preferable to a projected year or a combination of historic and pro jected, but it does not agree with the EPA's decision to use a single year (2012) as the startin g point for calculating the state's emission rate goals. Several commenters said the EPA has offered no data or analysis to support its stated finding that there would be little variation in res ults using a 2009 - 2012 baseline period compared to a 2012 base year.

Commenters said the FCG-EC used data from 2009 - 20 12 to calculate alternative baselines for Florida. Commenters said using the EPA's methodolo gy, the FCG-EC found that EPA's 2012 baseline is the lowest possible value and does not reflect a representative year or average for Florida. Commenters said that in fact, 2012 was th e lowest mass and rate year recorded for CO2
emissions in Florida's emissions database.

Commenters said that in addition to the fact that s tate baselines using years other than or in addition to 2012 do in fact vary from a 2012 baseli ne, there is the fact that it is inappropriate to use any single year as a baseline to represent the electric power sector. Several commenters said sources and amounts of electricity generation can a nd do vary from year to year; the variability is due to many factors that include economic condition s, weather variability, year-to-year fluctuations in fuel prices, and significant unplan ned and planned unit outages. Several commenters said with regard to fuel prices, natural gas prices in 2012 were at their lowest level since before 2000 (the 2012 annual average Henry Hu b price was $2.75 per mmBtu), which is lower than today's price and lower than any natural gas price the EIA projects into the
future. Several commenters said that this fact alo ne disqualifies 2012 as a representative single baseline year applicable to the electric power sect or.

Commenters said that the EPA clearly recognizes tha t there is year-to-year variability in the electric power sector, and has taken steps in previ ous power sector rulemakings, such as the Cross State Air Pollution Rule (CSAPR), to addr ess the variability. Commenters said that in its Existing-Unit CO2 proposal, the EPA states that there is "year-to-year variability in economic and other factors, such as weather, that influence power system operations and affect EGU CO2 emissions." Commenters noted that the EPA has propo sed to include rolling three-year performance periods for compliance purposes, appare ntly in an effort to address the variability, yet makes no mention of power sector variability wi th respect to its proposal to use 2012 as the single baseline year. Several commenters said the E PA must address power sector variability by using a multi-year baseline, which will produce a m ore representative baseline than a single year.

Comment 14: A multi-year baseline should be used; use of 2012 as baseline dis-incentives action between now and 2017; should not use data fr om 2012 or other recession years

Response 14: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Use of 2012 as baseline dis-incentives action betwe en now and 2017. Commenters said that the decision to use 2012 as a baseline for energy consu mption is ill-conceived, because it effectively penalizes any efficiency initiatives that Indiana u ndertakes between 2012 and 2017. Commenters410

said because energy efficiency programs get more ex pensive as additional savings are realized, the most cost-effective option for states is to pre serve easy improvements until they can be counted towards compliance with the proposed rule. Commenters said Indiana would be incurring unnecessary costs if the state took steps to realize net energy savings between now and 2017 - the incentive structure of the proposed rule errs strongly towards inaction, precisely the opposite of its intended effect. Commenters said th e EPA has acknowledged this issue in the proposed rule, and is seeking comment on the best w ay to avoid a perverse incentive. Commenters suggested that one option is to give sta tes credit for programs that are already in place that will result in emissions reductions duri ng the compliance period.

Commenters also indicated that the Proposed Rule, i n essence, penalizes utilities that have already taken steps to reduce carbon emissions by u sing a 2012 baseline. Commenters said that instead of penalizing utilities that have already t aken steps to reduce carbon emissions, the EPA should adjust the baseline to provide credit for ea rly actions, or else few utilities will undertake voluntary emission reduction measures in the future . Commenters said the "penalty" will incentivize utilities to wait, instead, until such improvements are mandated by regulation.

Total demand in 2012 was relatively low. Commenter s indicated that 2012 was an anomalous year in natural gas markets because mild weather le d to large declines in residential and commercial gas consumption as well as electricity d emand. Commenters said that according to EIA data, Indiana's total energy supply was lower i n 2012 than in any year since 1996. Commenters said that due to decreased electricity d emand and other reasons, natural gas prices fell below coal prices in 2012, which led to increa sed dispatch from NGCC plants, relative to coal-fired plants. Commenters said that since 2012 , however, coal-fired plants have, for the most part, regained their market share in electricity ma rkets. Commenters said this effect is particularly noticeable in Indiana - a report by SN L Energy projects that gas generation's share of Indiana's electricity mix will decline from 13.6 pe rcent in 2012 to 5.3 percent in 2030.

Commenters said the EPA's computations assume that the state of affairs that existed in 2012 persists today, when data and market trends suggest that is not the case. Commenters said the
EPA should re-formulate its estimates for realistic NGCC utilization on the basis of a more representative multi-year average. Commenters said similarly, if the EPA expects Indiana to achieve net year-over-year energy savings relative to demand in 2012, the EPA should take into account the conditions that produced peculiar deman d-side conditions that year. Commenters said otherwise, the EPA's estimates for future cons umption will not reflect the restoration of "normalcy" to Indiana's energy markets in 2013 and 2014 and the state will be penalized for macroeconomic developments outside its control. Co mmenters indicated there is precedent for the use of a multi-year average in other EPA enviro nmental regulations.

Multi-year baseline and adjust for economic activit y. Commenters supported the use of a multiyear base period and suggested making some adjustme nts to reflect normalized U.S. economic activity. Commenters said that the establishment of a target based solely on an unadjusted year, or even an average of unadjusted years, after 2008, is ill advised. Commenters cautioned that such a target will represent electric generation se rving depressed economic activity, and said that cannot be in the best interest of the U.S. economy, and is particularly problematic for West Virginia.411

Commenters said that business customers, particular ly larger industrial customers, evaluate many factors when deciding where to locate their plants and where to increase production levels, and availability of reliable and economical electricity is an important factor in those decisions. Commenters stated that by setting 2012 as the targe t from which emissions must be reduced, the EPA is effectively condemning West Virginia and the nation to an electricity generation starting point from which reductions must be measured that r eflects power consumption during a severe
economic recession and a low level of industrial ac tivity in the State. Commenters acknowledged that all states may not have experienced West Virgi nia's slow recovery rate from the 2008 recession; however, this economic malaise continued to affect other states to varying degrees, and the EPA's choice of 2012 as a base year cements this malaise for years to come.

Comment 15: Other commenters contended that the proposal penal izes early actors by requiring early-acting states to meet more stringent interim performance standards sooner.

Response 15: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

Comment 16: Structure of proposed guidelines creates disincent ives for reductions between
2012 and 2020. The EPA should allow states to bank and use for compliance all emission reductions that are achieved between 2012 and 2020, regardless of whether they result from measures that were "on the books" before proposal. The EPA can't rely on existing state programs and measures to support assertion that pro posed goals are achievable, then deny states' rights to use those reductions to demonstrate compl iance

Response 16: See section VIII of the final rule preamble of the CPP for the EPA’s response to
this comment.

The following are summaries of the specific public comments under this comment:

Commenters stated that the structure of the propose d guidelines, particularly the approach to calculating the proposed state-specific emission ra te goals, does not recognize appropriately the
efforts of states and utilities to reduce emissions before 2012. Commenters also said the structure of the proposed guidelines serves to discount and c reates disincentives for reductions achieved
between 2012 and 2020.

Commenters said as a policy matter, the EPA should allow states to recognize all reductions that occur after 2012, the baseline year selected by the Agency for calculating the state emission rate goals, and the final guidelines should allow states to bank and then use for compliance emission reductions that result from state requirements, mea sures and programs instituted after 2012 and prior to 2020. Commenters said further, the final g uidelines also should affirm that states can include in compliance plans emission reductions tha t occur during the compliance period without
reference to whether these reductions were achieved by measures that were "on the books" at the time the guidelines were proposed412

Commenters said the EPA proposes two limits on stat es' ability to include reductions that occur after 2012 in state plans: first, states can only i nclude those reductions that occur during the interim compliance period, which starts in 2020; se cond, states can only include those reductions that result from actions taken after a specified da te. Commenters said according to EPA, reductions from "existing measures" that were "on t he books" at the time the proposed guidelines were issued cannot be included in state compliance plans, even if they achieve reductions during the interim compliance period. (See 79 Fed. Reg. at 34,918). Commenters said however, the EPA proposes that states can include generation that oc curs after 2019 from any renewable generating facility, regardless of the in-service date of the facility. (See Id. at n.293.)

Commenters said preliminarily, the EPA should not l imit states to those reductions that occur during the compliance period, but should allow stat es to bank and use for compliance the
emission reductions that are achieved between 2012 and 2020. Commenters said in advance of the proposed guidelines, many states and companies were contemplating - or did implement - strategies that would achieve CO2 reductions, and t o the extent that states and companies are able both to adopt and implement these strategies e arlier than 2020, allowing banking could provide an incentive for earlier emission reduction s. Commenters added that authorizing states to include in compliance plans reductions from these p re-2020 strategies also would allow states to begin demonstrating compliance earlier and could he lp states more gradually phase in other
emission reductions measures. Commenters said in re cognition of this, the EPA should allow the banking of reductions that occur between January 1, 2013 and December 31, 2019.

Commenters said in addition, the EPA should allow s tates to use reductions that occur during the compliance period, regardless of whether they resul t from measures that were "on the books." Commenters said the EPA states that it is necessary to discount reductions that result from measures that were "on the books" or that were impl emented before the guidelines were proposed (except for renewable generating units) be cause of the "forward-looking goal-setting approach." (See Id. at 34,918.) Commenters said tha t this is inconsistent with the EPA's assertion that the proposed emission rate goals are achievabl e because of existing state programs. Commenters said as the EPA notes in the preamble:

EPA proposes that a 2020 start date for the interim goal plan performance period is achievable in light of the following additional considerations. First, existing state programs will play a role in helping to achieve the rule's proposed emission performance levels. Second, in advance of this proposal, many states already were contemplating design of strategies that would achie ve CO2 emission reductions equivalent to those that could be required by CAA s ection 111(d) emission guidelines. (Id. at 34,905 (emphasis added)).

Commenters said the EPA cannot rely on existing sta te programs and measures to bolster the assertion that the proposed goals are achievable, b ut deny states the right to use the reductions that are achieved by these measures to demonstrate compliance.

Commenters said as a practical matter, measures tha t reduce emissions from existing affected units will be reflected in state average emission r ates, regardless of when they occurred. Commenters said for example, if a coal-based unit i s retired in 2015 to comply with other environmental regulations - and this retirement was "on the books" before June 2014 - this will413

be reflected when the state measures the emission p erformance of affected units in 2020, relative to the 2012 emission rate calculated by EPA, becaus e that unit will no longer be operating. Commenters said the EPA certainly could not mean to require states to add emissions from units retired before 2020 back into any compliance demons tration because the retirements were already "on the books". Commenters said yet, the d iscussion of "existing measures" in the preamble implies this. Commenters said the final gu idelines should make clear that the "existing measures" limitation, if applicable to any measure in a state's compliance plan, is not applicable
to actions that reduce affected unit emissions befo re 2020. Commenters said this includes not only unit closures, but also HRI projects and chang es in dispatch between existing coal-based units and natural-gas based units.

Commenters said similarly, the EPA should affirm th at it will not discount reductions from EE measures, other than to limit reductions to those t hat occur during the compliance period. Commenters said specifically, EE measures should be treated the same as RE measures. Commenters said for CAA purposes, it does not matte r when the EE measure was put in place - or whether that measure was in response to an exist ing state EE program or a new program - as long as reductions are achieved during the interim compliance period.

Commenters stated as proposed, states and utilities have an incentive to delay implementing some emission reduction measures until the complian ce period, which could lead to a relative
increase in CO2 emissions. The commenters said to a void creating this perverse and unintended consequence, EPA should allow states to bank credit s from reductions that occur during the period between the baseline year and the compliance period (e.g., 2013-2019) due to measures installed during this time period. The commenters s aid these measures could include, but are not limited to, plant retirements, fuel switching, new renewable energy installations and newly installed energy efficiency measures. The commenter s said states should not be required to
demonstrate that these reductions were "additional" to what would have occurred anyway (i.e., without the Clean Power Plan), as long as the measu res reduce CO2 emissions. The commenters said under Wisconsin's RPS, the ability to bank cre dits proved essential in allowing utilities to meet their individual requirements each year as wel l as meet the overall statewide goal two years
ahead of schedule.

Commenters stated concern that the draft rule provi des no benefit to taking action to reduce
emissions between the June 2014 release of the draf t rule and the end of 2019 since renewable energy deployed during this period would not be abl e to generate compliance credits until January 1, 2020. The commenters said EPA should pro vide states with flexibility to take credit
for actions taken after the NOPR was issued and bef ore the interim compliance period begins (2020) and count that credit toward achievement of the state's compliance obligation. The commenters said this early-action provision would h elp ensure that the states have an incentive to reduce GHGs prior to 2020. The commenters said i t would also help prevent a dip in market activity in the renewable energy sector, as obligat ed parties otherwise may delay projects until after the compliance period begins. The commenters said one option for ensuring states have an opportunity to begin compliance earlier than 2020 i s to give states the option to bank credits
from 2014 to 2020 for use in the 2020-2029 interim compliance period.414

Comment 17: Electric power system is dynamic so multi-year bas eline should be used, adjustments for power imports and exports requires same base year be used in every state, using 2013 data in state goal calculations resulted in di fferent goals and different rates of progress; NODA didn't provide enough information to evaluate impact of suggested changes; using threeyear average heat rate is more representative than 2012 average

Response 17: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Electric Power System is dynamic so multi-year base line needed. Commenters said the methodology used by the EPA to calculate target emi ssion rates for each state under the CPP relies on historical operating data from 2012. Comm enters said these data include existing generating units and their output levels, as well a s power demand and interstate power transfers. Commenters said however, the electric power system is dynamic, and its operation in one time period has little bearing on how it will operate in another time period. Commenters said factors such as fuel prices for power plants, demand variab ility, and the construction or retirement of electric infrastructure will all affect the generat ion levels for individual power plants. Commenters said selecting a single year as a starti ng point from which to calculate target emission rates will "lock in" any transient effects particular to that year, regardless of the year
chosen.

Adjustments for power imports and exports requires same base year in all states. Commenters said in its October 2014 NODA, the EPA released pow er plant operating data for years 2010 and 2011. Commenters said although the EPA did not rele ase sufficient data to recreate state emission rate targets using these years as the base , the data showed a substantial difference in power plant operations from those of 2012. Commente rs said certainly, some states will find their target rates higher or lower if a year other than 2012 is used as a base year. Commenters said importantly, the EPA's methodology includes ad justments for power imports and exports between states; for consistency, this requires the same base year to be applied to every state, and would not permit a state to choose its own base yea r without leading to inconsistent target
emission rates in other states. Commenters said the refore, the arbitrary and capricious nature of selecting a single year to determine emission rate targets cannot be mitigated without a fundamental change to EPA's methodology.

Influence of base year on goals. Commenters examine d the influence of the base year upon which the goals are calculated, and found changing the baseline year makes a substantial difference, but the direction and extent of that di fference are influenced primarily by local weather patterns, unit availability, and other unre lated factors. Commenters compared the renewable energy that would be included in the stat e goal calculations using 2013 data, with the results of EPA's calculations using 2012 data. Comm enters found that changing the base year resulted in different goals and different rates of progress toward the regional goals. Commenters found that in certain regions, using 2013 data inst ead of 2012 data allowed the state to meet the regional target for 2020-2029. Commenters said that the EPA's NODA suggests that other years may be used in the calculation of the final goals, but did not provide the kind of quantitative data415

necessary to evaluate the impact of such a change, and did not explain why any specific year or group of years is a more reasonable basis upon whic h to make such a calculation.

Commenters said that the EPA calculations for NGCC plants in Michigan used a heat rate of 810 lbs CO2/MWh based on 2012 data, and the proposed he at rate for new NGCC plants was 1,000 lbs CO2/MWh. Commenters said that the average heat rate for NGCC plants in Michigan based on the years 2010 through 2012 is 986 lbs CO2/MWh, which is more representative than the numbers used by the EPA.

Comment 18: The EPA should use a long-term baseline for BB1 ra te setting and compliance,
and should add 4% reduction

Response 18: See sections V.C. and VI of the final rule preambl e of the CPP for the EPA’s response to this comment.

The following are summaries of the specific public comments under this comment:

Commenters said that data from the 52-Unit Study, w hich was attached to their comment, demonstrates that selecting a single year's emissio n data to calculate the heat rate improvement (HRI) expected under a rule can result in an unfair allocation to certain individual units. Commenters said that for some units, 2012 represent ed the best performance year over the past decade, while other units had relatively high emiss ion rates in 2012. Commenters indicated that the EPA has asked whether it should address this pr oblem by permitting states or sources to choose 2010 or 2011 as a baseline year instead of 2 012, and commenters stated that this option is not an appropriate solution to the allocation probl em. Commenters said that any state or source that is allowed to choose its preferred baseline ye ar will inevitably select the year that minimizes its own compliance obligation, and this will invari ably reduce the effectiveness of the standard
and will result in a rule that does not reflect the best system of emission reductions.

Commenters said their approach to Building Block 1 resolves the allocation problem without degrading the efficacy of the standard. Commenters said that the EPA could calculate Building
Block 1 emission reductions on the basis of the dif ference between a source's best rolling annual average rate and its long term (2001-2014) emission rate, and an additional four percent reduction based on available plant upgrades. Commen ters stated that this approach minimizes the impact of any particular year of operation and, sin ce it is largely based on improved operation that has already been demonstrated by the source, i s feasible. Commenters said that States can thereafter allocate compliance obligations among in -state sources to address any issues that might remain.

Comment 19: States that have already enacted measures are requ ired to do more than states that have not - raises inequality issues

Response 19: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.416

The following are summaries of the specific public comments under this comment:

Several commenters stated that the proposed rule re sults in requiring states that have realized early emission reductions to do more than states th at have not, resulting in raising equity issues, including cost and reliability concerns. Commenters added that EPAs approach is inconsistent with the CAAs objective to achieve nationally consi stent standards. Commenters contended that states that produce the most emissions should be re quired to make the greatest reductions. Commenters added that states unknowingly increased the stringency of their Clean Power Plan emission targets by passing RPS laws to address GHG emissions. The commenters also stated that within and individual region, block 3 also imp oses a lesser standard for states that have low levels of existing renewables. Commenters added tha t electricity generation rates currently being accomplished provide little or no credit during the compliance period.

Comment 20: 2012 was outlier year for NGCC EGU operations, so the EPA should use 3-year historical average, or even exclude 2012 in calcula ting a 3-year average, in determining any capacity factor for BB2

Response 20: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters said the capacity factors of NGCC EGUs i n 2012 should be considered the
maximum achievable NGCC utilization for each state. Commenters said that in 2012, the electrical grid experienced both extreme summer pea king conditions and record low natural gas prices - both these conditions were optimal for NGC C use and resulted in historically high use of NGCCs system-wide.

Commenters said 2012 was followed by extreme winter weather conditions in 2013, during which natural gas prices increased and Wisconsin in dustrial customers were called on to curtail natural gas usage. Commenters said because of this series of events, natural gas supply reserves heading into the 2014-15 winter are still below 200 8 levels, even with increased production of natural gas. Commenters indicated this creates furt her challenges to increasing NGCC use as EPA has proposed. Commenters said this evidence str ongly supports that EPA should use a three-year historical average, or even exclude 2012 in calculating a three-year average, to determine any capacity factor for building block 2.

Comment 21: Baseline period should start earlier to avoid pena lizing early action. The EPA should improve the treatment of existing state prog rams

Response 21: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:417

Several commenters indicated that the baseline peri od used in calculations should start earlier than 2012 to avoid penalizing early action. Several commenters recommended using (or starting) the baseline period with an earlier year, e.g., 200 5, to address the punitive impact of the proposed rule on states and companies that have taken early action to reduce GHG emissions. Several commenters indicated an earlier baseline period wou ld recognize and reward state and company leadership in reducing emissions. Several commenter s indicated in that way, displacement of fossil-fuel fired generation by early investment in renewable energy, energy efficiency, and natural gas would not be "built in" to the goal cal culation, so states that made these investments would not be assigned overly restrictive reduction goals and compressed compliance periods. Commenters said that the EPA should inclu de guidance in its Proposed Rule to instruct states how they can include credit for early reduct ion efforts in their compliance plans.

Commenters indicated that the baseline year should be set somewhere in the 2005 to 2007 time frame to give states credit for early action. Comm enters stated that this baseline period would also be more appropriate since it predates the rece ssion and would therefore be more reflective of normal energy demand. Commenters noted that states that expanded their NGCC capacity prior to the proposal are being penalized by the BSER req uirements of Building Block 2. Commenters compared Georgia's NGCC capacity and 2012 NGCC util ization to that of other Region 4 states. Commenters found that 30% of Georgia's total CO2 em ission reduction goal is dependent on increased natural gas dispatch. Commenters found, however, that one Region 4 state is not required to do any natural gas dispatch - Kentucky. Commenters indicated that Kentucky has no NGCC units, so Block 2 BSER does not apply to Kentu cky. Commenters indicated that this example illustrates the unfairness of this proposal - states with the largest NGCC dispatch changes will incur the higher costs for their CO2 r eduction.

To demonstrate how the proposed regulation penalize s states that took early action, commenters examined the CO2 mass emissions in the years 2005, 2012, and 2030 and associated mass emission reductions for the Region 4 states. Commen ters included the year 2005 because EPA, in the rule preamble, states that the CPP will achi eve a nationwide 30% reduction in CO2 emissions between 2005 and 2030. Commenters project ed 2030 emissions for the southeastern states using values for the 2030 rate- based goals and generation from the CPP's Goal Computation TSD. Commenters determined that the pr ojection for Georgia reflects a 46percent
reduction in CO2 emissions between 2005 and 2020. C ommenters indicated that this is the highest percentage of CO2 reductions in the Region 4 states, and well above the 30% nationwide average that the rule is expected to achieve. Comm enters stated that in fact, Georgia already reduced CO2 mass emissions by 33% from 2005 - 2012. Commenters said that this example illustrates the unfairness of this proposal - state s that took early action to reduce CO2 emissions are being penalized by the proposed CPP. Commenters added that the wide range in projected CO2 mass reductions within the region has the poten tial to provide some states with an economic advantage over states with very high CO2 emission r eduction projections, like Georgia.

Commenters stated that the proposed rule must allow states to choose a baseline year between 2005 and 2012, or to use an average of any three co nsecutive years within that period. Commenters indicated that in that way stat es that took early action through programs such as Regional Greenhouse Gas Initiative (RGGI) c an get credit for emissions reductions already achieved.418

Several commenters stated that the application of t he Clean Power Plan should reward and encourage early acting states such as Maine and Ari zona for the results achieved to date by giving equitable treatment to recent emissions redu ctions. Several commenters stated that by investing in renewable energy and significant energ y efficiency measures over the past decades, they have already achieved significant reductions i n fossil fired emissions and emissions rate. Commenters indicated that in most cases, the investments needed to achieve these results
exceed those of other states. Commenters stated th at the emissions reductions achieved in Maine already exceed the national goals of 30 percent red uction set by the Clean Power Plan by a substantial degree when examined in the context of reductions since 2002. Commenters
indicated that the investments made in Maine increa sed renewable generation, extensive costeffective efficiency programs for residential, comm ercial and industrial sectors, and transitioning to use of less-carbon intensive fuels for generatio n - mirror the elements of the emission reduction building blocks. Commenters said that it would therefore be arbitrary to ascribe to Maine additional reductions beyond those applicable in states where no effort has been made and no expense incurred. Commenters indicated that Main e's RPS is already among the highest in the U.S. and that as a percentage of load, Maine genera tes more electricity from renewable resources than any other state east of the Mississippi. Comm enters added that Maine is a net exporter of electricity, renewable energy, and renewable energy credits to the northeast regional grid and markets. Commenters noted that as a result, Maine h as already achieved many of the goals of EPA's proposed rules. Commenters indicated that be cause of its actions and investments, Maine as an early actor state has fewer untapped opportun ities than late-starting states. Commenters said that the cost of achieving additional emission s reductions in states such as Maine may be higher than achieving the same amount of initial re ductions in a state that has not yet acted.

Commenters did not suggest a particular timeframe f or baseline, however, they indicated the importance of crediting early action taken before 2 012 and for resources that come on-line between 2012-2017. Commenters emphasized AMP's hyd ropower investments, as well as those in wind, solar, and landfill gas, were made knowing the likelihood of future carbon regulations and, as such, they should not be denied credit unde r any state plans simply because they are preexisting projects.

Commenters said the EPA should improve its treatmen t of existing programs. Commenters said the EPA states early emission goals (those that too k place before the date of the Proposal), are
reflected in the baseline for each state but are no t otherwise credited. Commenters said the EPA should improve its treatment of existing programs a nd early reductions by expanding the ways states can apply those goals to meeting their goals . Commenters said one way the EPA could do that is by adopting alternative approaches describe d in the Proposed Rule for taking existing EE programs into account. Commenters said specifically , the EPA should change the cutoff for the date by which actions to put EE into place may be t aken to at least 2005. Commenters said the
EPA should also allow emission reductions that occu r prior to the initial performance period - at least as early as 2005 - to count toward meeting st ate goals.

Commenters said that 2012 should not be used as bas eline for several reasons, one of them being that NGCC use was higher in 2012 due to reduced nat ural gas prices. Commenters said a key benchmark location for natural gas pricing througho ut the United States is at Henry Hub (HH) in Erath, Louisiana. Commenters said reviewing HH natu ral gas (pipeline) pricing data from 2002 to 2012, the electric utility industry benefitted f rom the lowest natural gas prices in a decade - in419

fact, in a single year, from 2011 to 2012, natural gas prices dropped 32 percent. Commenters said this anomalous low price point was predicated on th e fact that demand was far behind a steadily increasing production of shale gas resulting in an abundant natural gas supply in 2012. Commenters said that because EGUs operate on an eco nomic dispatch model, and not an environmental dispatch model, generation shifted fr om coal-fired EGUs to natural gas-fired EGUs during 2012. Commenters said from the EPA's fo rmula to calculate the 2012 "unadjusted fossil emission rate (or historical fossil rate)," it is obvious to see how a significant, albeit temporary, shift in generation from coal-fired to n atural gas-fired would result in a baseline
carbon emission rate that is much lower than would be calculated under normal source operations.

Commenters said not only is 2012 not representative of typical operations during this period in history, the selection of 2012 also negates, for th e purposes of calculating carbon emission reductions, the progressive moves made by the powersector through heat rate improvements, redispatch to NGCC units on a more widespread basis ( not just via economic dispatch over a single year), and the development of robust RE and EE prog rams initiated by the electric utility industry and assisted by the Energy Policy Act of 2 005.

Comment 22: Use of 2012 as baseline year does not give credit for early action

Response 22: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated that although the rule establishe s 2012 as the baseline year for calculating emission reductions, many states had already taken significant steps at reducing CO2 emissions prior to 2012. The commenters listed several energy efficiency and renewable activities, which are also components of the BSER building blocks, th at the state of Texas undertook and achieved prior to 2012. The commenters contended that their prior activities would make future compliance and future reductions more complicated t o obtain. The commenters stated that comparing 2012 emission to the 2030 emissions targe t without the benefit of reductions made prior to 2012 would result in Texas having more dif ficulty than any other state to comply with the requirements in the proposed rule.

Comment 23: The EPA's choice of baseline dates punishes states that have taken aggressive measures to reduce carbon emissions and promote inc reased use of renewable energy generation.

Response 23: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:420

Commenters stated EPA has defined reductions on a s tate by state basis. The basis was the existing power generation technologies, and policie s unique to each state; for example, some states relied more on nuclear generation, while oth ers relied more on coal combustion for their generation. The commenters said EPA then based each state's GHG reduction requirement on each state's natural gas electricity generation, nu clear generation, solar generation, wind generation, policies that incentivized energy effic iency, and policies that reduce consumption of electricity through demand side management. The com menters said since EPA based the potential improvements on the current energy portfo lio, the resultant rule requires the smallest GHG reductions from states with the highest coal us age; this outcome is a direct result of EPA's use of source categories for compliance other than that regulated by the proposed standard (i.e., coal-fired power plants).

Commenters stated by choosing a 2012 as the baselin e year, as opposed to the originally proposed 2005 baseline year, EPA is punishing state s like North Carolina that have undertaken aggressive and expensive new policies to reduce car bon emissions. The commenters said aggressive emission reduction policies by the State of North Carolina have led to the retirements of coal generation units, and extensive upgrades to increase efficiency and reduce emissions at the remaining operating units. The commenters said Duke Energy has retired 26 coal-fired units at eight (8) generation stations; seven (7) of thos e stations no longer generate electricity from coal; the Cliffside station is the exception, where all but units 5 and 6 at Cliffside were retired. The commenters said at the seven (7) remaining oper ating coal stations in North Carolina, there are 20 units, all with NOx controls and FGD scrubbe rs; in addition, as the only state in the southeast to adopt a renewable energy and energy ef ficiency portfolio standard (REPS adopted in 2007), North Carolina added significant new renewab le energy projects between 2005 and 2012, yet will receive no "credit" for undertaking such p rogressive policies. The commenters said the clear message to states like North Carolina is to p ostpone such strategies.

Commenters stated EPA set state goals based on the inclusion of not-yet-constructed renewable and zero-emitting generation; however, while the Pr oposed Emission Guidelines mandate future emission targets based on the carbon reduction pote ntial of a state's entire electric generating system, they do not consider the carbon intensity o f a state's electric generating system as it exists now when setting a state's baseline. The com menters said EPA's approach fails to recognize the achievements made by many states, inc luding Virginia, that have reduced CO2 emissions by making significant investments in zero and low carbon emitting generation, such as nuclear power, and rewards states that have not don e so by giving them substantially higher CO2 emission reduction targets. The commenters said it also compares apples to oranges by discounting the carbon intensity of a state's curre nt electric generating system but setting future requirements based on projected zero-emitting facil ities. The commenters said the BSER in the Proposed Emission Guidelines effectively requires t hat many existing fossil fuel facilities either be shut down or drastically curtailed and replaced with zero-emitting generation, but gives no credit for existing zero-emitting generation curren tly in a state's generating portfolio; it thus places states already having a large amount of zero -emitting generation at a disadvantage by skewing the analysis and requiring them to do more than states that presently have little or no zero-emitting generation. The commenters said the P roposed Emission Guidelines also create a perverse incentive to increase CO2 emissions becaus e states may be encouraged to prematurely retire zero-emitting nuclear generation and replace it with natural gas generation, which in some states may be credited to their carbon emission goa l.421

Comment 24: Early emissions reductions should be counted in ba seline.

Response 24: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated in choosing 2012 as a baseline fo r goal setting and applying the 4 building blocks to each state, the individual state-specific goals established by EPA fail to credit states that have taken early action that served to lessen the carbon intensity from their power sector. The commenters said EPA's goal setting methodology actually serves to penalize states that have taken early action. By arbitrarily choosing 2012 as the baseline year for use with EPA's building blocks, the reductions from New Jersey's "All Fuel Sources" (affecting all 4 building blocks) and "Fossil Source Only" (affecting building blocks 1 a nd 2) are not recognized and go uncredited.

Commenters stated the proposed standards give no cr edit for early action to reduce or offset carbon dioxide (CO2) emissions, which, in the comme nter's case, has been substantial. The commenters said EPA should revise its baseline year or period in the Proposed Rule and/or allow the use of fleet emission averaging to provide stat es credit for earlier beneficial actions taken by
affected entities and units.

Commenters stated EPA's goal-setting mechanism and its use of a 2012 baseline for the purpose of setting state goals generally fail to recognize emission-reducing actions taken by states and utilities prior to 2012. The commenters said many c ompanies implemented projects prior to 2012 that provided significant benefits related to green house gas reduction, but these companies are now being penalized for their early action. This re sult is not fair. The commenters made investments prior to 2012 to increase the efficienc y of its power plant fleet and to increase the use of renewable energy sources by: (1) adding new generation and state-of-the-art emission control technology to new and existing units; (2) r epowering older, less efficient coal plants to combined cycle natural gas plants; (3) adding the t wo largest wind farms in Wisconsin and a biomass plant; (4) increasing customer energy effic iency; and (5) investing in distribution upgrades. The commenters said these projects includ e:

• Repowering about 320 MW of coal retired in 2002 and 2004 to 1,090 MW of natural gas combined cycle in 2005 and 2008 at a cost of $664 m illion; and

• Constructing the two largest wind projects in Wisco nsin: 145 MW Blue Sky Green Field in 2008 at a cost of about $300 million and 162 MW Glacier Hills Wind Park in 2011 at a cost of about $364 million

The commenters said EPA's proposed rule does not ac count for any of the major initiatives undertook prior to 2012; this could result in stran ded costs for customers for some of power plant investments. The commenters added compared to state s that have not taken such actions, Wisconsin has more stringent interim and final emis sion targets under the proposed rule than
states with a similar fuel mix that did not take si milar actions prior to the 2012 baseline year; in order to create a more equitable baseline calculati on and goal setting process, early actions prior422

to 2012 should be excluded from baseline and target calculations, and allowed for compliance

purposes.

Comment 25: Do not support use of 2012 as baseline; credit mus t be given for early reductions.

Response 25: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Several commenters did not support the use of 2012 as the baseline, or benchmark, year as it does not credit early reductions/actions.

Commenters stated that clearly, the Proposed GHG ru le is designed to reduce the nation's CO2 emissions as a whole, and the EPA clearly contempla ted that each state will be affected differently. Several commenters indicated that year s ago Florida took the initiative to move to a lower carbon energy portfolio, and since then Flori da's ratepayers have funded plant upgrades that created cleaner utility plants and the constru ction of new plants that burn cleaner, more efficient fuels, such as natural gas and nuclear. S everal commenters said that Florida's CO2
emission rate in 2012 was 30% lower than 2005 level s, and Florida's ratepayers funded that reduction. Several commenters said that the Propose d GHG Rule would cause Florida's ratepayers to fund another 38% reduction, essential ly ignoring strides already made.

Several commenters stated that the rule should prov ide states with the option of utilizing an earlier baseline that would recognize the progress that has already been achieved. Several commenters said that it would also be important for the EPA to recognize the relationship between the baseline year and current reductions al ready achieved for the purpose of setting the performance level. Commenters said that for example , if the EPA were to select 2005 as a baseline year, it should recognize that 2011 emissi ons nationwide are already 11 percent below 2005 emissions, and the average power sector emissi ons rate in 2011 is 11 percent below the
emission rate in 2005.

Several commenters said that the EPA's approach of applying a uniform heat rate percent efficiency improvement, without considering heat ra tes at individual facilities, penalizes utilities that are using best practices and/or had upgraded e quipment to increase boiler efficiency prior to 2012, while rewarding units that had done little to improve plant-level efficiencies before 2012.
Commenters said that in order for states to receive credit for early action, in establishing the final goals for a state, the EPA must identify which exis ting individual units in the state no longer have cost-effective options available to achieve, f or instance, the 6 percent HRI from BB1, and increase the state's CO2 target accordingly.

Commenters indicated that states should have the di scretion to adjust the 2012 baseline to give credit for early action. Commenters indicated that a special consideration that states should be able to address is where certain utilities - partic ularly small utilities - have recently implemented capital projects resulting in HRI soon before the i ssuance of the proposed rule. Commenters contended that where small utilities have already s pent considerable capital on increasing EGU423

efficiencies, states should be given the latitude i n the SIP process to adjust the 2012 baseline. Commenters said that States are best pos itioned to evaluate the Propose Rule and the objectives it sets, and look at circumstances that are unique in a particular state. Commenters stated the Proposed Rule should authorize state SIP s to provide flexibility in setting the efficiency baselines up to three years for early ac tors. Commenters indicated that failure to grant states this flexibility would prevent applicable ut ilities from being credited for HRI already achieved in recent years, while at the same time pr ecluding the utilities from achieving any additional HRI, and said this inequity would be par ticularly troubling where the EGU with an HRI through a turbine upgrade is the small utility' s only jurisdictional EGU.

Several commenters also indicated that as proposed, the rule does not account for carbon
emissions reductions made from 2005-2012. Commente rs indicated that any single year snapshot will have abnormalities that may not refle ct the long-term energy mix and forecast, and requested that the EPA give serious consideration t o adjusting the benchmark emissions date, whether to an earlier year or a multi-year average, to accurately reflect Georgia emissions accounting for emissions reduction made before 2012 . Commenters said that in 2005, approximately 64 percent of Georgia's generation wa s from coal, and today that number is under 33 percent. Commenters said that similarly, natura l gas-fired generation in Georgia has grown ten-fold since 2005, from 7 percent to 35 percent, and other portfolio changes have included securing new renewable resources such as solar, win d and biomass, and certifying the first new nuclear units in 30 years. Commenters indicated tha t the proposed rule does not give appropriate credit for these efforts, and suggested that becaus e of this they may have been better off if they had waited until after 2012 to make decisions regar ding utility investments in cleaner technologies.

Several commenters emphasized that states that have already taken significant steps to decrease CO2 emissions should get credit for these actions. Several commenters said their states have already taken a number of steps to build high effic iency coal-fired units, increase renewable energy, and/or increase energy efficiency, and the EPA should allow such states to bank credits for what they accomplish before the first complianc e date. Commenters said the EPA should establish baseline references for each state by yea r and allow quantities of energy efficiency achieved in excess of reference levels prior to 202 0 to be carried forward for application in the compliance period. Commenters said that the draft CPP requires greater reductions from states that have already reduced emissions, and this is no t consistent with the structure of the CAA. Commenters said that in a more traditional ap proach to Section 111 standards, the EPA
would base standards on the emission rate achievabl e through the use of a particular control technology, and if a unit already had installed tha t control technology, it would be deemed compliant. Commenters said in the proposed Section 111(d) guidelines, however, reductions already achieved through state and utility investme nts in clean energy are not deemed compliant, but are, instead, met with standards that require f urther reductions in order to be achieved.

Commenters said that using 2012 data to set each st ate's target was troubling because by that point several coal-fired power plants had shut down or invested significant capital to improve efficiency. Commenters said that Pennsylvania's Al ternative Energy Portfolio standards was passed in 2004, and suggested that the EPA should m ove the baseline back to 2005 to capture the significant emissions reductions made since then. Commenters also suggested that the EPA move the baseline back to 2005, rather than the 201 0 mentioned in the NODA.424

Commenters said that the claim that CO2 emissions w ill be reduced by 30 percent from 2005 emissions levels is misleading as 2012 is being use d as the baseline year for calculations. Commenters said this stated goal is m isleading, because the EPA proposed statespecific targets using 2012 as the baseline year; 2 005 data was not considered when establishing the proposed emission targets. Commenters said that consequently, states that have already achieved significant CO2 reductions would need to r equire further CO2 emissions reductions that may not be achievable in practice. Commenters said that CO2 emissions in Pennsylvania were reduced by approximately 15 percent between 20 05 and 2012; the final goal set by the EPA for Pennsylvania requires the Commonwealth to reduc e CO2 emissions from 2012 by approximately 31 percent by 2030, which represents a 41 percent reduction from 2005 levels. Commenters noted that while the proposal allows EGU retirements to be credited towards meeting a state target, establishment of a more str ingent target that incorporates those reductions makes the early retirements of fossil fuel-fired EG Us not creditable from a practical standpoint. The only credits for retirements afforded in the pr oposed plan are those that occur after 2012. Therefore, commenters recommended that EPA consider a five-year averaging approach for establishing baseline for emission targets.

Commenters submitted the Proposed GHG Rule's failur e to consider previous reductions makes the rule overly burdensome and arbitrary, especiall y compared to the minimal reductions in other states that have not already spent billions of doll ars creating a cleaner fleet of electric utilities.

Commenters stated with respect to energy efficiency measures, since the 1990s, Southern Minnesota Municipal Power Agency (SMMPA) has develo ped an extensive energy efficiency program that has been able to achieve up to a 2.08% reduction in retail electricity sales in recent years. The commenters said the Proposed Rule's chos en baseline of 2012 simply ignores these efforts. The commenters said this punishes SMMPA fo r its prior, volitional efforts, as SMMPA has essentially exhausted the easy and inexpensive efficiency measures (e.g., light bulb changes) and is now left with the daunting task of having to squeeze additional efficiencies out of an already highly energy-efficient system. The comment ers said at bottom, the Proposed Rule's use of a 2012 baseline unfairly penalizes SMMPA and all other utilities that have already made significant efforts to reduce carbon emissions from their footprint. The commenters said EPA should adjust the baseline to give utilities credit for early action.

Commenters stated Vectren has already achieved sign ificant reductions in GHG emissions from its electric generation system. The commenters said since 2005 Vectren has reduced its GHG emissions approximately 23 percent through the reti rement of a coal-fired unit, investments in turbine efficiency, the purchase and development of renewables and the implementation of energy efficiency programs. The commenters said Vec tren has already reached the Administration's previously stated goal of reducing GHGs 17 percent from 2005 levels by 2020, yet EPA's approach to setting state-specific emissi on rate goals does not recognize emission reductions achieved by individual utilities before 2012. The commenters said many companies such as Vectren have already completed the most cos t effective of these early reductions, particularly in the areas of heat rate improvements and energy efficiency (i.e. the low-hanging fruit), and the additional incremental emission red uctions required to meet new emissions goals based upon a 2012 baseline will be more costly to c onsumers and are a future disincentive to425

take early action to reduce emissions. The commente rs said EPA should allow the use of an alternative baseline to recognize early actions tak en by states and individual utilities.

Commenters stated EPA claims that "states with curr ently existing programs and policies, and states that put in place new programs and policies early, will be better positioned to achieve the goals," however, EPA's building block approach, com bined with its single 2012 baseline year, does not give appropriate credit for states and uti lities that have acted proactively to manage CO2 emissions prior to 2012. The commenters said si nce 2012 generation provides the starting point for EPA's goal calculation, only actions take n after 2012 will provide a compliance benefit to a state because pre-2012 actions are inherently assumed in the calculation of the goal. The commenters added EPA somewhat inconsistently claims in the preamble to its proposal that only actions taken after June 18, 2014 will count toward s compliance. Commenters stated as an earlyactor state that has endeavored to reduce its carbo n footprint for many years, New Mexico is penalized by EPA's failure to allow credit for acti ons prior to 2012 (or 2014). The commenters said New Mexico has had success in encouraging the development of renewable energy and demand-side energy efficiency improvements in the y ears prior to EPA's proposal (in MWh).

Commenters stated Idaho has long been ahead of EPA' s curve to utilize non-CO2 sources of electricity production; unfortunately, much of the wind generation was put into operation prior to your proposed 2012 base year. The commenters said b ecause 2012 is arbitrarily established,
there will be no credit for the efforts that occurr ed prior to 2012; as such, there will be no credit allowed for the work to maximize the good efforts t o utilize wind power and other renewable generation installed prior to 2012. The commenters said much of Idaho's electrical power is generated using renewable hydro resources, thus red ucing the need for coal-or even gas-fired generation. The commenters said the proposed rule d oes not recognize hydro generation as a renewable, non-CO2 producing source of electricity.

Commenters stated EPA's 2012 baseline, and thus EPA 's program, does not adequately credit the reductions that Iowa has already achieved at a sign ificant investment or cost. The commenters said Iowa's cooperatives have a variety of existing policies and programs that have had the effect of reducing carbon emissions. The commenters said s ome of these programs have been in place for many years and have resulted in significant ene rgy savings and reductions in the carbon intensity of Iowa's generation fleet. The commenter s said the EPA should recognize the value of these programs and allow Iowa's cooperatives to inc lude them as part of the best system of
emission reductions. The commenters said Iowa's ele ctric cooperatives, and more generally, Iowa's utilities have had a long history of impleme nting energy efficiency and load management programs, with early versions starting in the 1980s . The commenters said programs over time have required increased investments and energy savi ngs and have become subject to more stringent review. The commenters said Iowa electric and gas utilities offer a number of energy efficiency programs, products, services, and traini ng to residential, industrial, and commercial

customers.

Commenters were concerned that the CPP fails to rec ognize that in economic fairness the ratepayers of the TVA area should receive the benef it a credit toward carbon emission reduction requirements for the voluntary strides TVA made wit h its voluntary, progressive energy efficiency programs by 2005 and thereafter rather t han EPA using a 2012 baseline against which
carbon emission reductions are measured.426

Commenters stated EPA's proposed rule does not allo w TVA to receive any credit for early
actions before 2012. The commenters said because TV A upon its own initiative reduced its carbon emissions by than thirty percent (30 percent ) between 2005 and 2013, then the proposed rule consequently requires an excessive and burdens ome over-investment by TVA to reach EPA's newly proposed required goals even if reachin g those goals was reasonably possible. The commenters said that financially penalizes the rate payers of the TVA region served by TVPPA
member LPCs.

Commenters stated EPA's cumulative percentage for P A EE reductions in 2017 is 1.02%. The
commenters said PA's estimated value for 2017 under PA Act 129 is 5.93%.The commenters said this higher value for PA Act 129 considers the reductions attributable to Phases I and II (all prior to the 2012 baseline date) and an assumed ann ual average incremental reduction value of 0.74% explained previously. The commenters asserted that the EPA should allow PA to be
credited with EE reduction benefits back to a 2012 baseline date. The commenters said the cumulative percentages for EPA and PA Act 129 in 20 30 are 12.07% and 15.49% respectively. The commenters estimated EE reductions through 2030 amounts to 19,327 GWh when starting from baseline year of 2012 projecting forward throu gh 2030 using an incremental annual factor of .74%. The commenters said this compares to EPA's calculated EE reductions of 19,329 GWh through 2030 utilizing an incremental factor of 1.5 %; thus, the commenter-calculated target and the EPA estimates for 2030 are nearly identical. Th e commenters said if EPA were not to credit
PA with PA Act 129 EE reductions back to the 2012 b aseline then PA's cumulative EE reductions (2017 through 2030) would be 10.3% and P A's associated cumulative GWh reductions would be approximately 14,927, a shortfa ll of 4,402 GWh. The commenters said on this point, the commenters recommended the EPA allo w PA to take credit under BB4 for EE benefits achieved since the baseline year of 2012.

Commenters stated the baseline year and reduction t argets for Colorado, as for other states, are arbitrary and punish Colorado for early action. The commenters said Colorado's enactment of mandates for increased use of renewable energy and conversion of power plants from coal to natural gas prior to 2012 have not improved the sta te's position with respect to meeting EPA deadlines for compliance. The commenters said in fa ct, other states which have not yet taken such drastic measures will actually be required to cut carbon emissions by much lower percentages; thus, Colorado is already at a competi tive disadvantage to some other energy producing states. The commenters said these combine d factors mean that EPA has set an artificially low baseline for further CO2 emission reductions, with no justification for selecting a year with higher amounts of gas generation and lowe r amounts of coal generation. The commenters said this arbitrary selection puts Color ado utilities and their customers at risk.

Commenters stated as a state, Wisconsin should be w ell-positioned to comply with a rule that limits carbon dioxide (CO2) emissions; EPA's Clean Power Plan purports to reduce overall CO2 emissions nationwide by 30 percent from 2005 levels . The commenters said since 2005,
Wisconsin utilities have taken actions that reduced CO2 emissions by over 15 percent on a mass basis for the 2005 to 2012 period. The commenters s aid the EPA's goal-setting methodology and use of a 2012 baseline for the purpose of setting s tate goals generally fails to recognize emissionreducing actions taken by states prior to 2012. The commenters said by assigning state-by-state emission reduction requirements using a baseline ye ar of 2012, the proposed rule often requires deeper cuts by states that have taken early action than by states that have not. The commenters427

said Wisconsin, for example, would be expected to r educe its CO2 emission rate by more than 34 percent by 2030; other states, including many who h ave done less to reduce CO2 emissions to date, are given less stringent reduction targets.

Commenters stated on or around October 30 EPA issue d a Notice of data availability (NODA) related to the proposed Carbon Pollution 111(d) Rul e. The commenters said among other things, the agency solicited comments "on whether state-spe cific circumstances exist that could justify using different data years for individual states, a s opposed to using the same data year, or combination of years, consistently across states." The commenters asserted those circumstances do exist. The commenters said using 2012 as the bas eline year unfairly penalizes RGGI participants, who have already shown leadership in reducing GHG emissions. The commenters said the wording in the NODA implies EPA is not ame nable to allowing the group of states participating in RGGI together to take any credit f or the significant, early reductions the program has achieved; that would be wrong. The commenters s aid EPA risks reinforcing the impression that companies and states would be better off next time waiting until EPA forces action, rather than taking the initiative to address environmental concerns. The commenters said at least states should be allowed to choose a baseline period that recognizes their policies and actions taken to
date to rein in GHG emissions.

Commenters stated the Proposed Rule penalizes state s like Colorado that were early adopters of emission reduction and renewable energy statutes by using 2012 baseline data to establish standards of performance. The commenters said the 2 012 baseline disregards the considerable investment made by utilities prior to 2012 and plac es a higher standard of compliance on states that are industry leaders in renewable energy inves tment. The commenters said electric service in Colorado is provided through investor-owned utiliti es (IOUs), municipal utilities, and cooperative electric associations. The commenters s aid all of these utilities serving over 40,000 customers must meet a renewable energy standard. Th e commenters said in 2004, Colorado citizens passed Amendment 37, which adopted a renew able energy standard for IOUs. The commenters said in 2007, the Colorado General Assem bly passed a renewable energy standard for municipal utilities and cooperative electric as sociations. The commenters said in 2013, the Colorado General Assembly increased the renewable s tandard for both distribution and wholesale cooperative electric associations. The co mmenters said in 2010, the Colorado General Assembly passed the Colorado Clean Air, Clean Jobs Act (CACJA) to reduce emissions from older coal-fired power plants through retrofit tech nologies, retirement, and construction of new natural gas units.

Commenters stated Colorado utilities are industry l eaders in renewable energy investment; in 2012, about 17 percent of Xcel Energy's companywide power supply came from wind, solar, hydro, and biomass resources, 266 MW (AC) of which was solar power, including about 129 MW (AC) of customer-sited solar. The commenters add ed Xcel Energy retired the Cherokee
Unit 1 107 MW coal unit in 2011. The commenters sai d by 2012, Tri-State Generation and Transmission Association, Inc. generated or purchas ed 184,045 MWh of energy from renewable sources. The commenters said by 2012, Black Hills/C olorado Electric Utility Company, LP d/b/a Black Hills Energy had invested in 158,494 MWh of e nergy from renewable sources. The commenters said prior to 2012, Colorado utilities h ad already invested millions of dollars in reducing emissions; the Proposed Rule disregards th is considerable investment.428

Commenters stated in using 2012 baseline data to es tablish standards of performance for states, the Proposed Rule penalizes states like Colorado th at were early adopters of emission reduction and renewable energy statutes. The commenters said credit for coal plant retirements, construction of renewable and natural gas generatio n, heat rate improvements, and other advancements in emission reduction that occurred pr ior to 2012 cannot be included in Colorado's plan. The commenters said the Proposed Rule does no t provide credit for customer-sited retail distributed generation facilities, which are interc onnected to the electric grid through state law provisions or the Public Utility Regulatory Policie s Act of 1978 (PURPA). The commenters said these omissions place a greater burden on Colorado than on other states that did not take early
action to address source emissions.

Commenters stated despite references to a greenhous e gas (GHG) reduction timeframe of 2005 to 2030, the rule sets goals based on 2012 data; th is eliminates acknowledgement of key GHG reduction projects occurring during the 2005-2012 t ime period. The commenters said Madison Gas and Electric Company (MGE) voluntarily converte d the Blount Generating Station ("Blount") from coal to natural gas and retired 90 MW of the 190-MW capacity prior to 2012; plans for the transition started in 2006. The comme nters said natural gas became the primary fuel at Blount in March 2010, and as of December 31, 201 1, the ability to burn coal was discontinued entirely. The commenters said at that time, MGE ant icipated possible future GHG regulation and worked with the Wisconsin Department of Natural Res ources (WDNR) to specifically acknowledge this voluntary early action. The commen ters said MGE requested credit to the extent possible in future regulation and formalized that as part of the Environmental Cooperative Agreement-a contract between the WDNR and MGE to ac knowledge superior environmental performance. The commenters said the period between 2005 and 2012 is also important as it was a period in which significant renewable energy proj ects were added to MGE's generation fleet. The commenters said MGE's renewable energy producti on increased from approximately 60
GWh in 2005 to over 400 GWh in 2012.

Commenters stated the proposed rule fails to provid e credit for CO2 emission reduction activities undertaken by states prior to 2012; in many cases, states are penalized for taking such early action. The commenters said for example, EPA's curr ent approach results in more stringent goals
for states in which coal units have been converted to natural gas-fired units or replaced with a natural gas combined cycle (NGCC) unit prior to 201 2. The commenters asserted that these CO2 emission reduction actions should be given credit a nd considered in EPA's baseline and goal setting computation. The commenters said EPA should finalize a rule that rewards good faith actions taken by utility companies as a preferred e nvironmental policy approach to continue to encourage proactive efforts in the future. The comm enters recommended EPA provide a methodology allowing states to request adjustment t o the baseline and/or obtain credit towards compliance with the EPA's goals for CO2-reducing ea rly actions such as retirements, fuelswitching and repowering, renewable energy, and cus tomer energy efficiency that occurred in or after 2005 and prior to 2012.

Commenters stated the Administration has repeatedly stated that a primary environmental objective is to "by 2030, reduce nationwide carbon dioxide (CO2) emissions, from the power sector by approximately 30 percent from 2005 levels ", yet when the proposed CPP was released,
each state's emission reduction level was calculate d by applying the BSER to 2012 levels. The commenters said using 2012 levels penalizes states that took early action to reduce carbon429

emissions by not providing compliance credit for ca rbon reduction from 2005 to 2012, thus making their targets more severe and limiting the s tate's flexibility to meet their target.

Commenters stated is concerned that Pennsylvania, a nd other states that have taken aggressive measures to improve air quality, will not receive c redit for being early adopters of these programs. The commenters said in the Proposed Rule, the EPA states that it will rely on 2012 carbon intensity data to set state emission reducti on targets; if this is the case, emissionsreducing policies adopted prior to that point, such as Pennsylvania's:

1. Mandatory statewide utility Energy Efficiency and C onservation Program that reduces total annual consumption of electricity; and

2. Alternative Energy Portfolio Standard, that spurred significant investment in renewable energy, will not count towards the reductions requi red by the Proposed Rule.

The commenters said additional emissions reductions from nuclear uprate projects, coal plant retirements, and increased gas-fired generation fro m Marcellus Shale production in Pennsylvania prior to 2012 have the potential to go unnoticed if the EPA relies on 2012 carbon intensity data.

Commenters stated the target-setting methodology is unfair because it fails to give credit for reductions of CO2 that were implemented before 2012 . The commenters said by ignoring effects from CO2 reduction by states and utilities achieved before the baseline year, EPA erred when it performed its analysis of what is reasonably achiev able in establishing BSER. The commenters said ignoring these early actions creates a higher cost of compliance and fewer alternative choices for states choosing to reduce carbon emissi ons prior to the implementation of the rule.

Commenters stated EPA rolled out the Clean Power Pl an by stating that the goal is to reduce carbon dioxide emissions to 30 percent below the 20 05 level; there is no mention in any information that states emissions are currently 13 percent below these levels. The commenters said this is an important fact, that was left out, EPA should mention there has been expensive measures taken to deal with the problem.

Comment 26: Ratepayers in early action states would bear a hig her cost then other states

Response 26: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Several commenters expressed concern that ratepaye rs in early action states might bear a proportionally greater burden in reducing carbon po llution than ratepayers in states that have
done much less. Commenters contended that the rule will severely impact the states relative competitiveness; in some cases at least doubling th e disadvantage the state now has regarding
electric rates. Commenters added that it makes litt le sense to require a state to deeply worsen its economic position relative to its neighbors because it pollutes less, especially when other states are not required to reduce their carbon intensity t o the same absolute level. Commenters stated430

that projects that are part of the billion dollar r eductions they recently completed are amortized over the remaining life of the coal plant beyond 20 30. The commenters added that if the proposed limits are finalized, their customers will be paying twice for the same reductions many other companies deferred until now. Another comment ers added that because previous investments in energy efficiency and renewables are not credited, some states will need to make further investments to meet EPA's targets, which ma y result in consumers paying for utility investments that will not be used. Commenters quest ioned whether EPA had considered the conditions specific to each state, specifically Min nesota, and the utility markets.

Comment 27: 2012 not a representative year; multi-year average that starts earlier would be more representative and would not penalize early ac tion

Response 27: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated that the EPA's use of 2012 as a b ase year for the state goals is misrepresentative because 2012 was an abnormal year due to the unusually low prices of natural gas, and indicated this skews the EPA's assumptions about the feasibility and impacts of redispatching under BB2. Commenters said that furthe rmore, using 2012 penalizes states that have already made significant efforts to develop RE and EE. Commenters also indicated another concern regarding the use of 2012 as a baseline yea r - it is not representative of coal-fired EGU dispatch. Commenters said that dispatch of EGUs in a competitive least-cost electric market tends to reflect costs of fuels; natural gas prices were unusually low in 2012 - resulting in greater dispatch of natural gas-fired units and less dispat ch of coal-fired EGUs. Commenters noted that dispatch of coal-fired EGUs over the last two summe rs has increased as natural gas prices have increased since 2012, and said that historic dispat ch trends bear out the relationship between fuel costs and dispatch.

Commenters also indicated that 2012 was not a repre sentative year due to higher than usual gas utilization and lower than usual coal utilization, and also due to unusually mild weather. Commenters said that according to the Edi son Electric Institute (EEI), mild weather in 2012 contributed to a 1.3 percent reduction in elec tric demand compared to 2011, while residential and commercial natural gas consumption fell by 12.3 percent and 8.5 percent, respectively. Commenters noted that EEI also points to anomalous investment patterns in 2012- with the highest level of new capacity additions si nce 2004, the highest level of retirements to date, and historic highs in wind and natural gas-fi red generation announcements.

Commenters said a multi-year baseline should be use d due to the natural yearly variations in supply, weather, interruptions, etc. Commenters sa id a multi-year baseline period also would be consistent with how the EPA expects sates to demons trate compliance under the proposed rule, and the commenters urged the expansion of the basel ine period of the timeframe of 2005 through
2012.431

Commenters said the proposed regulation may have th e effect of disadvantaging states (like NY) for taking early action to reduce power plant emiss ions, while seemingly benefitting many other states that have delayed action. Commenters said t hat as currently proposed, the rule requires little of many states that have yet to take action and that typically have more "low hanging fruit" opportunities to reduce emissions, and more states like New York that would have to work even
harder to realize even more emission reductions fro m their electricity sectors. Commenters suggested that potential ways to resolve this would be for EPA to use an earlier baseline, such as 205, that recognized early action taken by states, or to consider a mechanism whereby appropriate credit is given to reflect emission red uctions already achieved.

Several commenters said that while using a multi-ye ar baseline would partially address the concern with unusually low natural gas prices in 20 12, it does not address the issue of penalizing states that have made early emissions reduction eff orts. Several commenters therefore recommended a more representative and earlier basel ine year (i.e., 2005) or a multi-year baseline average be used that takes into account the early e fforts made by states. Commenters recommended that the EPA use a multi-year baseline rather than a single-year baseline, and indicated that a historic baseline is preferable to a projected year or a combination of historic and projected. Commenters indicated that the EPA has p roposed to include rolling three-year performance periods for compliance purposes, appare ntly in an effort to address the year to year variability in power system operations and associat ed emissions, but said that the EPA makes no mention of power sector variability with respect to its proposal to use 2012 as the single baseline year. Commenters said that a multi-year baseline w ill produce a more representative baseline than a single year.

Commenters said that states that took early action should be given credit for their
efforts. Commenters indicated that between 2005 an d 2012 Florida utilities increased annual electrical generation while decreasing CO2 emission s (on both a lb/MWh and tons per year basis), and stated that these emissions reductions should have been taken into account in calculating Florida's interim and final goals.

Commenters also requested that the EPA utilize a mu lti-year average to set the targets - an approach it has used in all past regulatory actions establishing set state emission budgets, such as the NOx SIP call, the Clean Air Interstate Rule (CA IR) and the Cross-State Air Pollution Rule (CSAPR). Commenters said the EPA has acknowledged c oncerns with the use of a single-year baseline in the NODA and is requesting comment on u sing 2010 and 2011 data in addition to
2012. While Commenters indicated that this would be an improvement, they requested the best (optimal MWh) three out of five years from 2008 thr ough 2012 be used to establish the
emissions baseline. Commenters indicated considerat ion of a multi-year baseline would smooth out economic, commodity, or weather anomalies arisi ng from use of a single year by providing a more realistic average or representative baseline f rom which to develop state goals and emission targets.

Comment 28: 2005 or range of years between 2005-2012 should be used as baseline432

Response 28: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Several commenters stated that the President's Cli mate Action Plan issued in June 2013, speaks
of a 17% reduction in carbon emissions from 2005 to 2020, yet in spite of these directives, the
EPA has chosen to use 2012 as the baseline for emis sions in the Clean Air Plan proposal. Commenters said this baseline year does not reflect any of the prior reductions that have been implemented to reduce carbon emissions, and said th at the EPA could consider a range of years
such as 2009 to 2012 or 2010 to 2012. Commenters ad ded that a more appropriate baseline may even be 2005 since this is the beginning year menti oned in the Climate Action Plan.

Commenters said that reductions in CO2 emissions th at occurred from 2005 to 2011 are discounted and completely ignored by selecting a 20 12 baseline year. Commenters indicated that they have already reduced CO2 emissions by 33. 4% from 2005 to 2013. Commenters stated that this is a significant reduction that is not ac counted for with the use of a 2012 baseline data
for the Clean Power Plan. Commenters asked "If the directive for carbon emission reductions from President Obama began with the year 2005, why is a 2012 baseline used as the starting point", and said that it appears that the EPA was s elective in choosing this particular year for the state goal calculations.

Commenters said that the EPA's Notice of Data Avail ability (NODA) indicates that EPA may be considering a range of dates for the baseline or an other single year besides 2012. Commenters suggested using a range of years between 2005-2012 instead of one single year if a 2005 baseline cannot be used. Commenters said a range of years is more reflective of a facility's actual operation and would avoid the handicap of picking a year in which the facility experienced significant downtime due to an extended outage. Co mmenters said 2012 was not a representative year, and said that a multi-year bas eline would be appropriate, and said at a minimum they recommend using a 3-year period such a s 2010-2012, or earlier, should be
used. Commenters said that credit for emissions re ductions made since 2005 should be given, and indicated using a baseline including the year 2 005 would accomplish this.

Several commenters suggested the EPA should start c alculating emissions targets using 2005 data, not 2012 data. Commenters said that although the goal of the Clean Power Plan is to reduce emissions 30 percent below 2005 levels, when it came time to formulate each state's emissions target, the EPA used average 2012 emissio ns rates from fossil-fired electrical generating units - this makes little sense. Comment ers said if 2005 emission rates constitute the benchmark against which emissions reductions will b e measured, then it is logical (and fair) to calculate state emissions targets beginning in 2005 , not 2012. Commenters said that by jumping ahead to 2012, the EPA does not give credit for ear ly emissions reductions. Commenters said that total U.S. CO2 emissions fell by almost 9 perc ent between 2005 and 2013; the vast majority of these cuts, however, will not be counted by the EPA, and states will not receive any credit for them. Commenters said if the EPA begins its calcula tions in 2005 rather than 2012, the emissions targets for many states would be much low er and more manageable, and several coalfired plants might be able to survive.433

Commenters stated according to EPA's Trends in Gree nhouse Emissions Table 2-1, emissions have been reduced by approximately 12% in fossil fu el usage and 16% in that used to generate electricity between 2005 and 2012. The commenters s aid at the very least, EPA should recognize this effect and establish its targets on decreases since 2005.

Commenters stated in the past, performance standard s have been technology-based and tied to achieving the NAAQS for a particular pollutant; how ever, for CO2 there is no NAAQS or readily-available control technology on which to ba se emission guidelines. The commenters said EPA must distinctively define BSER for the multitud e of existing EGUs. The commenters said
the level of control should be considered from a 20 05 base year. The commenters said the year 2005 is the appropriate base year for a number of r easons: it is the base year in the President's Climate Action Plan, it is representative of energy demand prior to the 2008-2009 recession, and 2005 has a robust emissions inventory because state s were required to submit a full emissions inventory pursuant to the Air Emissions Reporting R equirements rule.

In comments submitted prior to the proposal in Apri l 2014, and resubmitted following proposal, commenters offered the following as part of their t o the question, "How should EPA set the performance standard for state plans," in EPA's "Co nsiderations in the Design of a Program to Reduce Carbon Pollution from Existing Power Plants. " Commenters supported the use of 2005 as the base year for level of control. The commente rs noted that year 2005 is a national emissions inventory (NEI) year for which states were required to submit full emissions inventories pursuant to the Air Emissions Reporting Requirements Rule. T he commenters stated that year 2005 is also the best representation of the electric generation market, energy supply and demand, before the
onset of the economic recession in 2008.

Comment 29: 2005 should be used as baseline; any reductions ma de after proposal date should
be counted

Response 29: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters said that 2012 was remarkable in that n atural gas prices were so low that fuel switching from coal to natural gas was at its maxim um in years prior and since. Commenters said that in choosing 2012 as baseline year, the EP A is therefore setting the baseline at an extremely aggressive level. Commenters said that g enerators should not be penalized for having taken early action to reduce GHG emissions. Comment ers stated that any such action taken after
2005 should be credited into the baseline. In addit ion, Commenters said that all reductions taken
and GHG emissions reductions achieved after the Jun e 18, 2014 proposal date, including end-use energy efficiency enhancements, generation retireme nts, new capital investments in existing or new generation to include nuclear, natural gas and renewable, should be counted against future GHG reduction targets.

Commenters said that the use of a single year for t he baseline is inappropriate, and even if a single year were to be used, 2012 is not representa tive and does not provide credit for action434

taken prior to any federal or state mandate. Commen ters strongly suggested that the emission targets contained in the rule more closely mimic th e EPA press releases which call for a 30%
reduction in emissions over 2005 levels. Commenters said a 30% reduction over 2005 levels, as announced and described by EPA during the press rel ease, is a very aggressive goal that allows utilities to get credit for early actions taken sin ce 2005. Commenters said a 30% goal can also be implemented with less impact to utility customers, and without unduly compromising reliability. Commenters said that instead, the proposed rule cal ls for Florida to achieve a 38% reduction
over 2012 levels.

Commenters said they agree with the EPA's statement s that the use of actual, historical data as a baseline is more appropriate than using a projected year data set (which would be deterministically defined based on model inputs and assumptions). Commenters said this is not appropriate for defining "adequately demonstrated". Commenters said however, the EPA is not correct in stating that there would be "little vari ation in results of a multi-year baseline period, o r even another more representative year compared to 2 012". Commenters examined the increased
use of NGCC and decreased use of coal and oil elect ricity generation in Florida since 2005, and
the associated decrease in emissions. Commenters s aid that using a baseline of 2005, Florida's state goal calculation would result in a goal no lo wer than 1,163 lb/MWh.

Commenters said that if the EPA retains its beyond -the-unit approach to setting state goals, the EPA should use 2005 as the baseline year for comput ing state goals, rather than 2012, for several reasons. Commenters said the year 2005 was a key ye ar for U.S. and international climate and energy policy because the Kyoto Protocol entered in to force in that year. Commenters said the 2005 Energy Policy Act (which included major change s to federal energy policy) was also enacted into law the same year. Commenters said 200 5 are also relevant because the EPA's own climate change goals are based on reductions from t hat year. Commenters said in addition, although some states were already implementing RE a nd climate policies prior to 2005, most leading states have made significant progress in re ducing emissions in the nearly 10 years since
2005. Commenters said were the EPA to base state em ission goals on a 2005 baseline instead of the proposed 2012 baseline, it would avoid penalizi ng these states for their early investments in emission reductions, while ensuring that all states implement emission reductions from RE and EE that are roughly equivalent.

Comment 30: The EPA should retain the proposed RE goal setting approach; 2004 baseline should be used for Wyoming RE, 2012 baseline should not be used for SD

Response 30: See section VI of the final rule preamble of the C PP for the EPA’s response to this

comment regarding the baseline year. See section VII of the final rule preamble for discussion of state goals.

The following are summaries of the specific public comments under this comment:

Commenters said that the EPA has requested comment on whether the approach to calculating
state emission limits should be modified to includ e a floor based on reported 2012 generation (because a handful of states have calculated RE goa ls less than their reported RE generation in435

2012). Commenters said such a floor would punish e arly renewable energy adopting states by requiring them to meet more stringent goals than th eir similarly situated regional neighbors. Commenters said because the generation information provided is inappropriate since these levels represent in-state generation reported on Energy Information Administration Form 923, and may not represent creditable RE for the ge nerating state because the Proposed Rule contemplates in certain instances that the RE will be credited outside the state of generation. Commenters said that due to these reasons, the EPA should retain the proposed renewable energy goal setting approach and not establish a fl oor based on 2012 generation.

Commenters suggested that 2004, rather than 2012, s hould be used for renewable energy in Wyoming. Commenters said that Wyoming is an energy exporting state and therefore it is
reasonable to look at the RPS start dates for the s tates in the region that depend on Wyoming's energy. Commenters said the Wyoming Department of E nvironmental Quality (WDEQ) has
evaluated the RPS start dates for the various state s in the region and when each of the RPS programs began, as these initiatives fueled the nee d for RE in that state. Commenters said the EPA incorrectly established a baseline year of 2012 for RE, which shows an inflated outlook of RE in Wyoming.

Commenters said the interest in and growth of RE in Wyoming began in 2004 as the result of RPS requirements from other states, and said the RE in Wyoming in 2012 is a result of RE development from 2004-2012. Commenters said as such , WDEQ determined 2004 to be the accurate and most appropriate baseline year of Wyom ing's RE before outside influences began impacting the state's resources.

Commenters said the year 2012 is a particularly uns uitable baseline for South Dakota due to the extremely limited operations at Deer Creek Station during 2012. Commenters said using 2012
for South Dakota's baseline would distort the EPA's assumptions about the State and about the capacity of Deer Creek to ramp up generation to dis place coal-fired generation. Commenters said in its October 30, 2014 NODA, the EPA requests comm ent on whether a different year or the average of a combination of years should be used to calculate the state fossil fuel emission rates used in state goal computations. Commenters does no t have a strong preference between using a single year versus an average of years, except that the assessment should in no way rely on data from 2012

.

Comment 31: The EPA should use projected data whenever units d idn't operate normally (like PSGC), and the EPA should adjust Illinois' state go al accordingly

Response 31: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment for discussion of the subcategory-specific emission performance rates and baseline year. See section VII of the final rule preamble fo r discussion of state goals.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA's choice to use 2012 data f rom which to determine initial fleet CO2 emissions and build its BSER calculation is misguid ed. Commenters said that the EPA assumed that one year, 2012, is representative of CO2 emiss ion rates for the entire industry, but too many436

variables are lost in such an assumption. Commenter s said the EPA recognizes stakeholders' concerns with this approach in the recently-issued NODA and requests comment on alternatives to the 2012 data year - the EPA proposes using eith er a different single year or a combination of

years.

Commenters said that as applied to Prairie State Ge nerating Company (PSGC), the national assumption is particularly flawed. Commenters said that PSGC had not begun normal operations in 2012 and the data reported is not representative of PSGC's normal and intended operation. Commenters said in normal steady state operations, PSGC will operate its base-loaded units at an intended 90% capacity factor, yet the 2012 data tha t is currently used represents barely a 23% capacity factor. Commenters said PSGC submits that the EPA should be willing to estimate emissions and generation using projected data for a newly operating unit whose operations were not representative of steady state conditions. Comm enters said the EPA does just that in the CPP
when EPA accommodates "under construction" NGCC uni ts by using estimates. Commenters said the EPA should adjust state baselines for any other EGU that came online or began normal operations after 2012, and the EPA should adjust st ate goals accordingly.

Commenters said projected data is easily estimated from more recent information submitted to both EPA's Acid Rain Program and the Department of Energy's Energy Information Agency. Commenters said that using data that are not repres entative of future actual operations of a plant that is in the initial stages of operation distorts the state goal calculations, particularly if a rat ebased emission goal is converted to a mass-based em ission goal. Commenters said using the newly added technical support documents provided fo r converting a rate-based goal to a massbased goal, Illinois' state goal would be almost 15 % less than it should be by using actual 2012 data for PSGC rather than projected data reflecting expected normal operations. Commenters said as such, PSGC believes that the EPA should use estimated data which projects CO2 emissions and electric generating data at the expec ted 90% capacity factor, and adjust Illinois' state goal accordingly.

Comment 32: States should be able to choose their baseline; 20 10-2012 should be default baseline with option to pick different period in la st 5 years if can demonstrate not representative; a 3-year or 5-year average should be used as baseli ne; 2012 should be used as baseline, or alternate if can demonstrate not representative; 20 12 should be default baseline, but states can request alternate year or years

Response 32: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment

States Should Choose Own Baseline. Commenters said that they believe that state-specific circumstances exist in Oregon (and other states) to justify using different data years in different states for purposes of establishing baseline fossil emissions, as the NODA contemplates. Commenters said that choosing any si ngle year as a baseline unnecessarily creates437

the risk that events unique to that year and state will introduce bias, and a multi-year baseline would be more representative.

Commenters stated that the EPA should leave it up t o states to determine their appropriate baseline based on the measures used to develop the goals. Commenters said that the EPA "recognizes that states that have already shifted t oward lower carbon-intensity generation or ramped up demand-side EE programs are better positi oned to meet state-specific goals" and that existing state measures taken after the date of pro posal would be recognized in a way that "may be generally compatible with the forward-looking me thodology that the EPA used to propose state emission performance goals."

Commenters stated that these statements are a clear reflection of the flawed logic throughout the proposed rule. Commenters said firstly, those state s, such as Ohio, that already have taken measures to shift to lower intensity fuels, maintai n a robust generation mix, and improve end-use efficiencies, received more stringent state emissio n goals than states that have done nothing with respect to early adoption. Commenters said secondly , they recognize that the EPA did use a "forward-looking methodology" in setting state goal s, but said that unfortunately, such a methodology is contrary to the intent of Section 11 1, in which the BSERs is based on adequately demonstrated, commercially available technologies, not optimistic projections of what might be possible in each state.

Commenters said to avoid what is viewed by Ohio EPA as a penalization of states that have adopted beneficial measures prior to this proposal, the EPA should allow the states to determine
when reductions should be credited to its emission performance goals. Commenters urged U.S. EPA to consider, in the name of flexibility and to avoid penalizing forward-looking state actions, the ability for states to recognize and credit prio r emission reduction measures based on reasonable and defensible analyses of prior actions . Commenters stated that the EPA's action on excluding some CO2 reductions prior to 2020 is arbi trary, and without technical foundation.

Baseline should be 2010-2012 as default, can reques t alternate. Commenters stated that the EPA should use a 2010-2012 three-year average baseline as a default and allow states to select a different baseline period if the three-year average is not representative. Commenters said that the final rule should not rely on a single data yea r for calculating state emission goals because state emission levels can fluctuate significantly f rom year to year due to weather, fuel prices, the economy, and outages at both fossil and non-fossil generators. Commenters indicated that the EPA's proposed baseline year, 2012, was not represe ntative of emission levels in many states,
and indicated that the final rule should use data f rom multiple years when establishing baseline
emission levels for states. Commenters said that a 2010-2012 three-year average - one of the options discussed in the October 2014 NODA - would be an improvement over the EPA's current single-year proposal. Commenters added that moreove r, in some cases, even a three-year average could be unrepresentative of a state's actual emiss ion profile. Commenters said therefore, the
EPA should allow states to select a different basel ine year or period within the previous five years if the state can demonstrate that the 2010-20 12 baseline is not representative of affected EGUs' typical emission performance.

3-Year or 5-Year baseline. Commenters said that a s ingle year will almost never be truly representative of a state's electric generating ope rations, and said if the EPA is going to establish438

a representative baseline, states should be given t he opportunity to choose representative baselines established from averaging various years, including three to five year averages.

2012 Baseline as default, states can request altern ate. Commenters supported the EPA's original proposal to use 2012 as the default baseline year, with the caveat that the modifications to the quantification of the RE and EE components of the s tate goals are necessary to avoid penalizing early actors. Commenters added, however, that the EPA should also allow a state to select an alternative baseline year if the state can show tha t 2012 emissions are unrepresentative and that basing state goals on the 2012 baseline year would be unfair or inequitable.

2012 as default baseline, states can request altern ate year or years. Commenters strongly supported the EPA's proposed use of 2012 a s the baseline year. Commenters said it is the most recent year of available data, and is most representative of California's existing EGUs due to the closure of SONGS in early 2012. Commente rs said that the California Utilities also recognize that a 2012 baseline year may not be repr esentative of other states' electricity portfolios, and therefore urged the EPA to set 2012 as the default baseline year, and provide states with the ability to either request an altern ative baseline year or use a multi-year average (e.g., 2010-2012).

Commenters suggested allowing states to identify a "baseline" year or even average several years, rather than using one data set.

Commenters stated choosing a single year, 2012, for the compliance baseline is not representative of typical operation; for example, 2 012 was an outage year for OMU, meaning that heat input and emissions were not representati ve of a more typical or average operating year.
The commenters said the rule should allow states to establish a baseline that the state believes equitably represents its circumstances; for example , EPA could allow a state to choose any three years within the most recent ten year period for wh ich emissions data is available and then average those three years to establish its baseline for the its' compliance plan.

Commenters stated the year EPA selected as the base line for calculating emission reduction goals - 2012 - was not a representative year for el ectric generation in Louisiana because of a mild winter and historically low natural gas prices that led many utilities to switch to gas and reduce solid fuel generation. The commenters said for Clec o, the petroleum coke and coal-fired fluidized bed unit, Madison 3, experienced a very l ow capacity factor in 2012 because it was just beginning commercial operation and completing the s hakedown phase of its initial startup. The commenters said in its goal calculation for Louisia na, EPA identified solid fuel generation as having a nameplate capacity of 4,727 MW in 2012, wh ich provided 24 million MWh to the grid, resulting in a weighted capacity factor of 58.5 per cent; however, if Madison 3 had been in full operation, the capacity factor of Louisiana solid f uel generation would have been 64.4% in year 2012 using nameplate capacity, resulting in a highe r goal calculation for Louisiana. The commenters said because a single year is often a po or representation of a state's generation mix, the commenters supported EPA's discussion in its No tice of Data Availability regarding the use of an average of several years as the baseline for the goal calculation. The commenters also supported allowing states to choose their own basel ines, rather than arbitrarily requiring all states to follow a single baseline that will inevitably be unrepresentative for at least some states.439

Commenters stated U.S. EPA acknowledges stakeholder concerns regarding the use of the 2012 base year or the use of a single year for goal comp utation; further, stakeholders identified anomalies with generation in their state or at thei r companies for 2012. The commenters said therefore, U.S. EPA has provided eGRID data for 201 0 and 2011 and is requesting comment on whether a different single data year or average of a combination of years should be used. The commenters said U.S. EPA is also seeking comment on whether a state-specific year or set of years is warranted. The commenters have several con cerns regarding the 2012 base year for goal computation; the commenters did not believe, given the scope of this proposal, there is a onesize-fits-all base year that would be appropriate f or all states. The commenters asserted U.S. EPA's simplified approach to determining an appropr iate base year that applies to all building blocks raises issues. The commenters said a proposa l of this magnitude warrants significant analysis by individual states to determine the appr opriate base line for each individual building block given their individual state characteristics for generation, changes in diversity of the fleet, RPS programs, EE programs, etc. The commenters said if U.S. EPA moves forward with this proposal, in the spirit of "flexibility," U.S. EPA must find a more workable method to engage states in determining appropriate baselines to miti gate the impracticality of this proposal.

Commenters stated given the diverse operating condi tions and resource portfolios of the western states, using 2012 as the baseline year for the CPP has varying impacts on EPA's goal setting process; in effect, the baseline date can determine "winners and losers" depending on the circumstances present in a utility's system in 2012 - some of which are entirely beyond their
control.

Commenters stated a single year baseline date may o r may not reflect "normal operating conditions" for the state and its utility systems; atypical CO2 emissions due to anomalies related to climatic or weather conditions (e.g., affecting hydro power availability that can have significant effects on regions like the Pacific Nor thwest), or operational challenges unique to the state (e.g., generation is offline for anticipated or unanticipated repairs; or units were run on an alternate fuel in that year due to temporary shifts in fuel and transportation costs). The commenters said sometimes these circumstances may h ave unique and dramatic effects on a
state's CO2 emissions. The commenters recommended t hat EPA allow states greater flexibility by:

1. Allowing state to demonstrate that an alternative b aseline year is more representative of its annual emissions; or

2. Allowing states to establish a baseline based on an average of years within a range of

years.

The commenters said EPA and states recognize these kinds of approaches in the context of other CAA programs in order to address similar concerns.

Comment 33: No credit is given for early reductions; interim g oal is not necessary

Response 33: See sections VI and VIII of the final rule preambl e of the CPP for the EPA’s response to this comment regarding the baseline yea r and state plans, respectively.440

The following are summaries of the specific public comments under this comment

Commenters said that the regulation as proposed doe s not give credit for early reductions, and therefore, if 2012 remains the year from which calc ulations for CO2 reductions are made, the
reduction calculation should be credited from 2005. Commenters said that if the EPA does not use 2005 for the base year, then 2012 forward shoul d be used rather than starting in 2020.

Commenters added that there is no language in the C AA Section 111(d) to suggest an interim goal is appropriate or required. Commenters said th at in prior Section 111(d) regulations, the EPA did not propose interim scheduled reductions. C ommenters said that the calculation for
reductions should be no later than 2012.

Commenters stated that the EPA penalizes the early action Tampa Electric Company (TEC) and others have already taken with respect to coal plan t efficiency improvements. Commenters said that TEC and many other utilities have already comp leted the relevant efficiency improvement projects outlined by the EPA. Commenters indicated that since 1980, the FPSC has incentivized heat rate improvements utilizing a program called G eneration Performance Incentive Factor (GPIF) Program for investor-owned utilities. Commen ters explained that targets are set annually through a formal hearing procedure, and investor-ow ned utilities either gain rewards or suffer penalties based on the prior year's performance com pared to the previously set annual targets.

Commenters said that the EPA's goal-setting exercis e for Florida simply assumes a reduction from efficiency improvements is plausible, without due consideration of whether or not the potential measures have already been completed. Com menters said that as proposed, the EPA would arbitrarily reward those who delayed maintena nce on power plants until after 2012 and penalize others who have already completed such pro jects. Commenters indicated that States should be afforded the flexibility to work with the EPA to adjust the target goal if the appropriate efficiency projects that the EPA assumes are feasib le have already been completed or would not achieve the reduction that EPA predicts. Commenters stated that the opportunities for efficiency improvements are limited, and the resulting very lo w coal-fired unit capacity factors that would result from fuel switching render reductions from B uilding Block 1 insignificant.

Comment 34: CPP gives proper recognition to existing state pol icies, programs and early actions to reduce CO2 emissions. CPP rate-based go al guidelines should be retained

Response 34: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment

Commenters said that in prior comments concerning the appropriate method for deriving CO2 reduction goals as part of an overall CO2 reduction plan, Iowa stakeholders urged the EPA to give the state credit for its existing policies, pr ograms, and early actions to reduce CO2 emissions, and indicated that through the proposed CPP, the EPA has given appropriate recognition to existing state policies, programs an d early actions to reduce CO2 emissions.441

Commenters said Iowa DOJ finds the EPA's calculatio n of Iowa's goals to be fair and wellfounded.

Commenters urged the EPA to retain the CPP rate-bas ed goal guidelines that give Iowa appropriate credit for these early-action initiativ es that reduce CO2 emissions. Commenters said Iowa consumers have paid for these early action ini tiatives, often at a significant premium as compared to a business as usual or more traditional system planning approach, with the expectation that they would benefit from such inves tments under potential future CO2 regulations.

Comment 35: Final performance level should be 3-year average; interim goal should be eliminated and glide path should be used

Response 35: See sections VI and VIII.B. of the final rule prea mble of the CPP for the EPA’s response to this comment regarding the baseline yea r and state plans, respectively.

The following are summaries of the specific public comments under this comment:

Commenters agreed that a three-year average for dem onstration of achievement and maintenance is an improved amount of time. Commenters did not a gree with an established interim goal, and instead said that there should be a glide path with the states reporting progress to the EPA. Commenters stated that there is no statutory basis for requiring an interim goal.

Commenters also agreed with the proposal of a final actual plan performance check using a three-year rolling average, the first year of such a check being 2016. Commenters said that by allowing credit for EE in 2012 and beyond, the stat e could make a show of progress for RE and EE with the state plan submittal.

Comment 36: Baseline based on a single year of data is especia lly unrepresentative for states with hydropower, the EPA should either use a 10-yea r average OR other multiyear average for hydro-dependent states or allow states to determine their own baseline

Response 36: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters said that choosing any single year as a baseline unnecessarily creates the risk that events unique to that year and state (e.g., low or high water, extended plant outages, and atypically cold winters or hot summers) will introd uce bias in a manner that makes the baseline less representative of average conditions. Commente rs said that calendar year 2012 data implies that Oregon's electricity sector has a lower emissi on rate than it actually does because hydropower made up an unusually large percentage of the state's power generation that year. Commenters said that in 2012 in Oregon, the unusual ly large water supply and historically low442

natural gas prices resulted in Oregon's only coal-f ired power plant operating at an unusually low capacity factor of approximately 50 percent. Comme nters stated that a baseline representative of average conditions would be more consistent with ut ility planning practices and other EPA rulemakings and ease state compliance reporting and tracking. Commenters suggested two ways to make the baseline representative of average cond itions and more consistent with utility planning processes and other EPA rulemakings: i) us e a ten-year average to set the baseline or ii) allow states to determine their own baseline throug h established ratemaking or utility planning proceedings.

Use of 10-year (or multi-year) average for baseline . Commenters said that by using a ten-year average for baseline, the EPA would capture the var iability in water years, which would mitigate the likelihood that single-year anomalies, like hig h hydropower production, would lead to inaccurate emission profiles. Commenters said that the variability in water years is significant, but a ten-year average can produce a result that is representative of an average water year. Commenters said that using a ten-year average would create a final goal of 415 in Oregon and an interim goal of 450, representing more than a 10% c hange from the proposed goals.

Commenters said that while less representative of a n average water year, multi-year averages based off fewer years will also produce a result th at is closer to average. Commenters said that in an effort to more closely represent average conditi ons, states often use multi-year averages in ratemaking settings to moderate single year fluctua tions. Commenters said that in addition to hydro conditions, multi-year averages can smooth ou t unusual impacts from extended plant outages or other short term irregular market distor tions, and indicated that the EPA itself uses a multi-year average in other EPA rulings (such as NS R).

Allow States to determine their own baseline. Comme nters said that another possible way to make the baseline representative of average conditi ons would be to allow states to determine their own baseline through established ratemaking o r utility planning proceedings. Commenters said that under this approach, the EPA would replac e the baseline with guidelines that would require states to propose a baseline representative of average conditions, which the EPA would have to approve. Commenters stated that through the ir extensive experience in utility planning, rate-making, and other regulatory proceedings, stat es are well-positioned to estimate the appropriate average conditions to use in establishi ng a baseline. Commenters said that for example, common practice in the Pacific Northwest i s to use an "average water year" in utility planning due to the continuous and unpredictable na ture of water availability. Commenters noted that in this context, an average water year does no t represent averaging fossil dispatch occurring over several years, but models fossil dispatch as i f a historic (e.g., 30- or 60-year) average amount of hydropower is placed on the electric syst em.

Other. Commenters stated using the 2012 generating year as a baseline is not representative - multi year baseline is needed: EPA established stat e emission rate goals by first determining each state's emission rate baseline, based on electric g eneration in 2012. The commenters said setting a representative baseline for the State is importan t both from the standpoint of calculating the state's emissions goal and for the calculation of c ompliance on an annual basis. The commenters said because 2012 was an exceptionally high water y ear, a higher than normal amount of electricity was generated by hydro resources. The c ommenters said this abnormally high hydro generation displaced some thermal generation. The c ommenters said to ensure a more443

representative baseline period, suggest that EPA al low each state to establish a benchmark based on an average of some period of years; for a predom inantly hydropower state, that period should span at least 5 years. The commenters said as an ex ample, Tacoma Power uses a 15-year sample of historical data to produce a baseline hydrologic generation curve; entities, such as the No1ihwest River Forecast Center, might serve as a g ood source of information in devising a representative baseline for Washington State; in ad dition, some mechanism should be in place to normalize the year-to-year variations in weather an d water availability.

Commenters stated EPA's arbitrary use of a 2012 bas eline to determine a goal that is supposed to
be a 30% carbon reduction from 2005 to 2030 does no t take into account any anomalies from intermittent renewables, market changes, energy dem and, supply changes, etc.; specific to Washington State, 2012 was a very high hydropower y ear and natural gas prices were low; this led to a significantly lower thermal dispatch than normal-base load coal was only dispatched at approximately 32% capacity factor and Washington St ate CCCT plant dispatch was even lower (less than 21%), resulting in an abnormally low lev el of carbon emissions. The commenters said in Washington State the 2012 total CO2 emissions eq ualed 6.9 million tons, while average emissions from 2008 to 2012 equaled 11.8 million to ns per year, meaning 2012 represents only 58% of the preceding 5 year average.

Commenters stated in response to EPA's NODA, a thre e year average as proposed by EPA does not adequately address hydro variability because bo th 2011 and 2012 were unusually high hydro
seasons. The commenters said states should be allow ed to either normalize according to industry standard practices or pick a year in the recent pas t that had close to normal hydro, such as 2008 in the Pacific Northwest. The commenters requested that EPA allow states flexibility to normalize baselines for factors such as hydro condi tions, which could include using a multi-year baseline for developing state goals or using a sing le year within the last few years that is within
2% of normal conditions. The commenters said includ ing multiple years will better represent the variability in weather and energy markets that can affect regional generation and dispatch. The commenters said a range from 2005 to 2012, or at a minimum a range 2008 to 2012, would more adequately represent these fluctuations. The commen ters said alternatively, 2008 exhibited hydro conditions at 99% of normal, which would be a reaso ned basis for selecting thermal operations in that year as the basis for estimating dispatch of a ffected generating units, rather than an arbitrary
selection 2012. The commenters said the EPA should ensure states have the flexibility to make reasonable normalizing adjustments to address hydro variability.

Commenters stated as proposed, the proposed rule se lects a reference year in which states like Idaho experienced higher than- normal stream flows. The commenters said for states like Idaho that are heavily reliant on hydropower generation, that has the inevitable result of skewing our emissions levels as the state was less dependent on its out-of-state thermal power production due to greater use of lower-emissions hydropower. The c ommenters said the region's year-to-year variability in stream flows and hydropower generati on require a more accurate baseline as the foundation for its compliance targets. The commente rs said EPA should instead use an average of multiple years - at least five - to better accou nt for the variability in steam flows and, as a result, clean power generation. The commenters said this would better normalize and more accurately depict electricity generation conditions and minimize climate anomalies such as temperature and precipitation that may affect a sta te's reduction target.444

Commenters stated the proposed rule uses a 2012 bas eline. The commenters said using a single year is particularly problematic in the Pacific Nor thwest due to the fluctuation of electric power emissions from year to year. The commenters said wa ter supply is variable and due to the region's reliance on hydropower, using a single yea r is arbitrary and can prove problematic if the year chosen is exemplifies extreme conditions. The commenters said indeed, 2012 was one of the biggest hydropower years recently, and additionally , the Boardman Coal plant had been down for maintenance during significant portions of 2012 . The commenters said using such a below average thermal generation in the baseline year eff ectively leads to more stringent targets in the
Pacific Northwest. The commenters recommend the rul e should use a five-year average for setting a baseline and annual targets to account fo r the challenges of yearly water supply and hydropower variations.

Commenters stated energy production from the hydrop ower system in the Pacific Northwest differs significantly from year to year, due in lar ge part to variations in precipitation. The commenters said in 2012, the Northwest experienced a high water year and consequently, higher than average generation from the 31 dams of the Fed eral Columbia River Power System. The commenters said EPA proposed using 2012 as the base line year for calculating emissions goals, but an above-average water year is inherently flawe d for purposes of determining average outputs from thermal resources in the Northwest. Th e commenters said this is the case because high hydropower production is typically correlated with below average thermal production. The commenters said higher production of hydropower red uces the need to generate power from thermal resources. The commenters said therefore, u sing only 2012 as a baseline for purposes of
the rule at hand results in a baseline choice that is not representative of a longer term average of
emissions in the Pacific Northwest.

Commenters stated the final rule should allow for y ear-to-year hydro variation. The commenters said as a hydro-dependent region, the Pacific North west would be exposed to discriminatory treatment under EPA's proposal for its use of this non-carbon emitting resource. The commenters said the Pacific Northwest hydroelectricity varies from year to year; flow and generation over the past 23 years have varied significantly due to weat her conditions. The commenters said because most Pacific Northwest states depend significantly on hydroelectric generation, and have relatively little thermal generation, they will be required to rely largely on building blocks three Renewable Energy ("RE") and four Energy Efficiency ("EE") of the proposed rule to meet their emission-rate goals.

Commenters stated the ability of the Pacific Northw est to maintain system reliability and compliance with the requirements of EPA's proposal by depending solely on building blocks three and four is extremely problematic. The commen ters said energy efficiency, especially that achieved under a cost-effectiveness standard, and i ntermittent renewable energy generation are not sufficient to economically or operationally com pensate for CO2 emission in low and even average water years. The commenters demonstrated th e importance of setting the baseline year to a level representative of expected average conditio ns; out of 80 years, Washington State would likely never meet EPA's 2030 target, whether calcul ated on a mass-basis of emission-rate basis. The commenters illustrated how much year-to-year va riability exists in the historical record; this variability will continue in the future. The commen ters said total estimated CO2 emissions in a year of high hydroelectricity generation are approx imately 3.5 million tons. The commenters said in a low hydroelectricity generation year, emission s rise to as high as 11 million tons. The445

commenters said understanding this natural variabil ity is critical in setting expectations for what emissions reductions are possible.

Comment 37: A 3-year, 5-year, or 10-year baseline should be us ed for hydro-dependent states

Response 37: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated that hydropower generation in Was hington and other Pacific Northwest states is highly correlated with mountain snowpack which in turn correlates with winter temperature and precipitation. Commenters said, for instance, Washington's hydropower generation recently ranged from a low of 54.7 milli on MWh in 2001 to a high of 91.8 million MWh in 2011. Commenters indicated generation in hyd ro-dependent states is also highly dependent upon weather cycles, such as an El Nino, and climate change may cause further variability in hydropower generation

Commenters recommended defining hydro-dependence as those states with hydroelectric generation consisting of more than 50 percent of to tal instate generation. Commenters recommended that for these hydro-dependent states, if EPA has not already decided to use a fiveyear baseline as the standard approach, that a five -year baseline be used for this subset of states that are reliant on hydropower for the majority of their in-state generation. Commenters noted that differentiating the baseline periods of states based on shared characteristics (such as hydropower dependency) is a concept that the EPA sp ecifically asked for comment on in the NODA. Commenters stated that the approach proposed is consistent with that concept.

Several commenters said that for states dependent o n fluctuating hydrologic cycles, the baseline period for deriving baseline data (generation, emis sions, capacity factors, et al) should be 10 years. Commenters said at a minimum, a 5-year aver age should be used. Commenters said at a minimum the EPA should consider an average of no le ss than three years, which better represents a "typical" profile. Commenters indicate d that for Montana and other states of the Pacific Northwest, the amount of thermal generation online is highly dependent on the hydrologic cycle, and even a three-year baseline wo uld not serve to normalize the performance
of the fleet in those states. Commenters recommend ed that hydro conditions be normalized through the use of a 10-year period or through anot her method that identified an average water year for the region and the consequent run times of local thermal generation. Commenters also indicated that the use of any single year for basel ine will also lead to unrepresentative estimates of non-hydro dependent states' emissions, levels of energy efficiency performance, renewable energy generation, etc., and suggested a multi-year baseline would be more representative.

Comment 38: 2012 was a very good hydro year, and not typical. Good hydro years translate into decreased fossil fuel generation446

Response 38: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA is mistaken in assuming that by excluding existing hydroelectric generation from consideration in the rule that vari ability in annual electricity generation from existing hydro facilities will not create problemat ic levels of variability in the electricity generation from fossil-fuel fired power plants from one year to the next; this is especially the case in regions of the country where hydroelectric generation represents a significant percentage of total electricity generation. The commenters sai d for Montana, a good hydro year can generate as much as twice the electricity from dams located in the state as during a bad hydro year. The commenters said in good hydro years, fossil fuel-fi red power plants, which are primarily coal plants in Montana, operate less while they operate significantly more in bad hydro years.

Commenters said key to the potential validity of EP A's proposed rule, 2012 was a good hydro year for the Pacific Northwest, which in turn signi ficantly depressed electricity generation from affected coal and natural gas facilities across the broader region, including in Montana. The commenters said EPA's implicit assumption in settin g each state's emission rate goal is that hydro generation in future years will reflect gener ation in 2012. The commenters said this assumption is overly optimistic for Montana and the greater Pacific Northwest; future years' electricity generation and carbon emissions for Mon tana's affected EGUs are likely to be significantly higher than they were in 2012, in par t because Montana's hydroelectric generation in 2012 was more than 1,300 GWh more than the state 's 2003-2012 10-year average; the 1,300 GWh of above average hydro generation in 2012 is eq ual to almost 5 percent of the state's total generation in 2012.

Commenters stated the year 2012 was one of the two highest hydroelectric generation years this century for the Columbia River basin. The commenter s said as noted by the U.S. Energy Information Administration (EIA) in June of this ye ar, "Hydroelectric power plants located on the river and its tributaries account for 29 gigawa tts (GW) of hydroelectric generating capacity and contributed 44% of the total hydroelectric gene ration in the nation in 2012." The commenters said the 2012 hydroelectric generation r ate in Washington State was 19% higher than the average generation rates from 2001 through 2013 based upon the EIA data; the hydroelectric generation rate in Washington State v aries substantially from year to year, as does the portion of power generated by hydroelectric gen eration. The commenters said the EIA noted, "Hydroelectric supply can have implications for the dispatch of other generators (such as wind turbines, thermal generators, and the Columbia nucl ear station) in the Pacific Northwest, where four states (Washington, Oregon, Idaho, and Montana ) host 35% of U.S. hydroelectric capacity." The commenters said the very high hydroelectric gen eration in 2011 and 2012 resulted in much lower generation rates from TCG during those years than are considered normal operation. The commenters said the variability of hydroelectric ge neration cannot be accounted for in setting State goals for Columbia River Basin States utilizi ng data from any single year, especially 2012. The commenters said a long-term average must be use d to set the goals and to determine State performance against the goals. The commenters said an average of at least ten years is needed to achieve reasonably stable hydroelectric generation rates; at a minimum, a 10-year average baseline period is needed to set goals for States i n the Pacific Northwest. The commenters said447

analysis of a larger set of annual data than the 13 years available on the EIA website may lead EPA to choose an even longer baseline and complianc e averaging period than ten years. The commenters requested that EPA use, at minimum, a te n-year baseline for hydroelectricity production to set goals and compliance requirements for States in the Pacific Northwest; this change will more appropriately reflect the variabil ity that hydroelectric power production has on
a state wide emission factor.

Commenters stated hydropower generation in the Paci fic Northwest varies considerably from year to year, which can impact the level of thermal generation, and thus emissions, in the region. The commenters said the Proposal uses 2012 as the " baseline year" to calculate state emission goals, and the EPA specifically solicits comment on the use of this single year as the baseline in its October 27, 2014 Notice of Data Availability. T he commenters said there is an inherent amount of variability in FCRPS generation from year to year depending on precipitation level and timing, reservoir conditions, and other variabl es. The commenters said the level of hydropower generation, along with other factors, ca n impact the level of thermal generation in the region in any given year. The commenters said i n the Pacific Northwest, 2012 was a high water year resulting in greater than normal hydropo wer generation.

Commenters said states with large amounts of hydrop ower may experience yearly variations in thermal generation. The commenters said the Pacific Northwest has often experienced cases where a strong hydro production year contributed to conditions for a low thermal (natural gas and coal) production year; 2012 is an example of su ch a year. The commenters said the use of 2012 as the baseline year, where hydro production w as above average and thermal production was below average, could lead to more ambitious emi ssion reduction goals than the use of a different year; similarly, the use of a below avera ge hydro production and above average thermal production year as a baseline year could lead to le ss ambitious carbon reduction goals.

Commenters asserted that climate change may increas e the variability on the FCRPS in the future; recent studies, including the latest inform ation from the Intergovernmental Panel on Climate Change (IPCC), agree that Columbia Basin we ather will likely continue to warm. The commenters said this warming will cause more precip itation to fall as rain in the winter rather than snow, resulting in increased river flows in wi nter and early spring, reduced flows in summer and new challenges for future river operations and planning.

Commenters stated the Pacific Northwest benefits fr om a large base of emissions-free hydroelectricity generation. The commenters said th ermal plants constitute a smaller percentage of overall output (approx.18%) relative to other re gions of the country and certain states have very few such plants subject to regulation under th e EPA proposal. The commenters said for example, Idaho has only two thermal plants that wou ld be impacted by the EPA proposal. The commenters said both plants operated at a low level in 2012, relative to the expected long term average, because the region experienced an above-av erage water year. The commenters said the implications of the 2012 baseline are magnified in Avista's Idaho service territory because the state has only two natural gas-fired plants falling under proposed 111(d) regulation. The commenters said one of the two, the 318-MW Langley Gulch plant owned by Idaho Power, came online late in calendar year 2012 and operated at a 15% annual average capacity factor. The
commenters said this level is well below the level operated at similar plants. The commenters said having almost identical operating characterist ics and integrated similarly in the marketplace,448

the plant operated in 2012 with a capacity factor o f one-third that of Rathdrum Power, the only other Idaho regulated plant.

Commenters stated 2012 was an above-average hydro y ear, causing baseline CO2 emissions in Washington and the Pacific Northwest to be artifici ally low. The commenters said 2012 carbon emissions in Washington State were 5.5 million tons lower than the 10-year average due to above-average hydroelectricity generation. The comm enters said this figure is significant, given the 2012 actual CO2 emissions of approximately 7 mi llion tons for the state, and EPA's goal to reduce those emissions to approximately 2.5 million tons by 2030.

Comment 39: Use of 2012 as base year is arbitrary

Response 39: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters disagreed with the whole concept of usin g a baseline year for establishing BSER in the proposed rule, and said that any legal emission standard should be based on what is technically and economically achievable in any give n state. Commenters said it is arbitrary to establish standards for states by superimposing "wh at other states have been able to achieve" in each of the four building blocks, and it is equally arbitrary to establish standards based upon an average of "what other states have been able to ach ieve". Commenters contended that each state has a unique generation and dispatch profile, deman d profile, weather profile, customer profile, and economic profile, as well as unique customer gr owth, reliability considerations, and renewable energy resources.

Commenters indicated that the EPA's choice of 2012 as the base year is arbitrary, that 2012 in particular was highly unusual and therefore unrepre sentative, stated that no single year or several years combined is representative of current conditi ons, and said that the EPA's selection of 2012 as the base year creates large and disparate impact s for wholly arbitrary reasons.

Commenters stated that the EPA's selection of 2012 as the base year is particularly arbitrary, because it was a highly unusual year in the energy sector. Commenters said that because natural gas prices were historically low in 2012, natural g as generation was historically high and has
since abated somewhat. Commenters said that becaus e of the relatively large amount of natural gas generation relative to coal in 2012, electricit y sector CO2 emissions in that year, as well as coal generation CO2 emissions, were also significan tly lower than they had been previously, and
have since increased. Commenters added that the fa ct that 2012 was a high water year in the Pacific Northwest also made it an atypical year. C ommenters said that these factors combined mean that the EPA has set an artificially low basel ine for further CO2 emissions reductions, and said the EPA has provided no justification for dete rmining that the year with high amounts of gas generation, low amounts of coal generation, and the low energy sector CO2 emissions is a representative year for projecting future performan ce - there is none.449

Commenters said that given the dynamic nature of th e electricity system and the national economy, no one year, or even several years combine d, is representative of "current" conditions for the purpose of establishing a baseline that wil l then be used to measure future performance over the long-term. Commenters said that for instan ce, selecting 2006 as the baseline would be arbitrary because it would exclude the recession, b ut selecting 2007 or 2008 as the baseline would be arbitrary because it would be dominated by the effects of the recession. Commenters indicated that even selecting the average of 2006-2 012 as a baseline would be arbitrary because it cannot be said that those years are representati ve of the past or expected future conditions. Commenters said that the EPA's NODA recognizes that selecting the single year of 2012 as the base year is arbitrary and seeks comment on whether another year of an average of multiple years should be selected, but added that any year o r combination of years that the EPA selects will be arbitrary and will produce winners and lose rs based on nothing more than the base year.

Commenters stated that the EPA's selection of 2012 as the base year creates large and disparate impacts for wholly arbitrary reasons. Commenters sa id that for instance, the amount of natural gas combined cycle generation produced within a sta te in 2012 has a significant impact on the state's ultimate emission rate "goal" because the 2 012 capacity factor for existing natural gas
units within a state determines how far the state m ust go to achieve EPA's 70% capacity factor assumption. Commenters said that natural gas combin ed cycle units in Virginia, for example, operated at a 60% capacity factor in 2012, and that as a result, increasing the dispatch of those units to 70% does not displace as much coal-fired g eneration as a state with lower 2012 capacity factors, such as Nebraska, where existing combined cycle units operated only at a 10% capacity
factor in 2012. Commenters said that because of the differences in the 2012 baseline underlying the EPA's goal calculations, the EPA's calculation of Virginia's goal assumes Virginia need only increase natural gas generation by one-quarter of i ts 2012 levels, whereas the EPA's calculation of Nebraska's goal assumes that state must increase its natural gas generation six-fold.
Commenters said that if the EPA had selected a diff erent year in which Virginia and Nebraska operated their combined cycle units at different le vels, their goals would be different.

Commenters added that even non-emitting generation resources and energy demand in 2012 can have a significant impact on a state's interim and final goals. Commenters said that for instance, states with relatively high renewable generation in 2012 compared to their neighbors may not have as far to go to achieve the regional targets e stablished by the EPA, whereas states with relatively low renewable generation in 2012 may hav e to ramp up generation from those resources much more quickly and extensively. Commen ters said that likewise, states that achieved significant energy savings through existin g demand side management programs in 2012 may be better positioned to reach the EPA's one-siz e-fits-all energy savings rate goal in the future. Commenters said yet if EPA had selected a d ifferent baseline year in which these same states produced lower amounts of renewable electric ity or energy efficiency, these states' goals
would be different.

Commenters added that selecting 2012 as the base ye ar also produces anomalies due to plant outages, etc. Commenters said that due to a fire t hat kept the largest coal fired unit in Minnesota (Sherburne County Unit 3) offline for the entire year, the EPA's decision to use 2012 as the single baseline year in its analysis resulte d in an unrealistically low baseline of coal-fired generation in Minnesota, which presumably will make compliance with the even lower targets450

set by the EPA that much more difficult. Commenters indicated that other anomalies likely exist
in other states.

Commenters found the use of 2012 as the sole source of baseline data problematic in the overall operation of the building blocks. The commenters sa id EPA's suggestion that renewables and energy efficiency might displace fossil fuel-fired generation is not realistic. The commenters were also concerned that the four building blocks p roposed by EPA do not work together as a concerted system and are, in fact, sometimes in ten sion with one another.

Commenters stated selection of 2012 as the base yea r is arbitrary. The commenters said given the dynamism of the electricity system and the national economy, no one year, or even several years combined, is representative of "current" conditions for the purpose of establishing a baseline that will then be used to measure future performance ove r the long-term.

Commenters stated for instance, selecting 2006 as t he baseline would be arbitrary because it would exclude the recession, but selecting 2007 or 2008 as the baseline would be arbitrary because it would be dominated by the effects of the recession. The commenters said even selecting the average of 2010, 2011, and 2012 as a baseline would be arbitrary because EPA has not demonstrated that those years are representativ e of the past or expected future conditions in
North Dakota.

Commenters stated to ensure a more representative b aseline period and provide some partial credit for early actions, EPA should set the baseli ne levels for computing the state goals based on a recent multi-year period prior to 2012. The comme nters said following the approach used in other Clean Air Act regulatory programs, EPA should allow Montana to select a more representative baseline -and one that receives cred it for all "early action efforts."

Comment 40: 2012 baseline values are not representative

Response 40: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated to the extent that EPA determines that Idaho must meet a specific emission rate under the proposed rule, EPA must use baseline operating values and emission rates that appropriately characterize state generation and CO2 emissions levels in order to set rational, achievable, and non-arbitrary state performance goa ls. The commenters said EPA's 2012 baseline emission rate for Idaho is not representat ive; specifically, EPA failed to appropriately characterize generation levels for Idaho Power's La ngley Gulch NGCC plant. The commenters said EPA's understatement of Langley Gulch's operat ions and Idaho's baseline emissions results in an artificially low and arbitrary performance go al for Idaho that is not reasonably achievable.

Comment 41: 2012 Not Representative for Baseline - state speci fic comments451

Response 41: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Idaho

Commenters stated in its goal-setting analysis, EPA identifies two "existing" NGCC plants that were in operation in Idaho as of the end of 2012 - Idaho Power's Langley Gulch plant and the Rathdrum LLC plant. The commenters said EPA used th e operating data from 2012 for those plants in determining baseline emissions and settin g the Idaho state performance goals; however, EPA failed to take into account that Langley Gulch, a newly constructed $400 million unit, was not commissioned until June 29, 2012; thus, the 201 2 operating data for Langley Gulch used by EPA in its baseline include only a partial year of operation and significantly understates the anticipated future capacity factors. The commenters said specifically, EPA took the capacity factor of approximately 37% for the six months the plant operated in 2012 and annualized it to derive an overall 2012 capacity factor of only 15.2 %. The commenters said not only does EPA's calculation fail to adjust for the six months of no n-operation prior to the plant's commissioning, but it also fails to recognize that the period afte r commissioning a new unit includes periods that do not represent normal operation conditions.

Commenters stated by comparison, the plant operated in 2013 at an annual capacity factor of approximately 46% and projections for future use ar e much higher; EPA's reliance on the partial year data resulted in an underestimate of overall I daho NGCC generation in the 2012 baseline and an inaccurate baseline capacity factor for both NGCC units of only 30%.

Commenters stated EPA's underestimate of NGCC gener ation in the 2012 baseline substantially impacts Idaho's and Idaho Power's ability to achiev e future compliance while meeting customer demand. The commenters said through EPA's goal-sett ing process, the underestimated NGCC baseline component translates directly into a lower state performance goal for Idaho. The commenters said the real-world compliance effect is to severely constrain the future (post-2020) use of Idaho's existing NGCC resources, including t he brand new Langley Gulch plant. The commenters said given the disparity between the int erim (244 lbs/MWh) and final (228 lbs/MWh) goals for Idaho, which are based on an ina ccurate 2012 baseline rate (339 lbs/MWh), and the emission rate for Langley Gulch (approximat ely 850 lbs/MWh), compliance can only be achieved, if at all, when existing NGCCs are limite d to very low capacity factors associated with extreme peaking operation. The commenters said the limitations necessary to achieve compliance would thus severely impact Idaho utiliti es ability to meet load and maintain reserve requirements. The commenters said EPA's overly stri ngent performance goals could force Idaho Power to virtually idle the brand new $400 million Langley Gulch plant while building new NGCC capacity and/or using peaking units with subst antially higher costs and carbon intensity that would be outside the scope of Section 111(d). The commenters said this outcome would have substantial impacts on customers, both in term s of the diminished utilization of Langley Gulch and the additional costs of building or obtai ning comparable replacement generation. The commenters said in addition, any new NGCC capacity built would be subject to a higher emissions limit under the proposed Section 111(b) s tandards and could ultimately produce452

greater total carbon emissions. The commenters said this result demonstrates the arbitrary and capricious nature of EPA's state performance goals for Idaho in the proposed rule.

Iowa, Minnesota and South Dakota

Commenters stated to calculate the state goals, EPA started with the combined 2012 CO2
emission rate for each state's covered fossil fuel- fired power plants. The commenters said using a single year as the starting point to calculate the rate-based goals for each compliance period fails
to take into account data anomalies that can occur in any given year, and did in fact occur in 2012. For example, the commenters have identified d ata anomalies in three states in which MRES serves members: Iowa, Minnesota and South Dako ta, as well as an anomaly in the operation of LRS.

Commenters stated in Iowa, the City of Pella Munici pal Power Plant is identified as an affected unit, but was retired in 2013 and did not emit any tons of CO2 in 2012.

Commenters stated in Minnesota, Sherburne County Ge nerating Station (Sherco) Unit 3 was offline for all of 2012 due to an unplanned outage, making the starting point of Minnesota's goal calculation atypical. The commenters said this shou ld be corrected, as Minnesota will continue to rely on this generating unit (approximately 900 MW) for the duration of the planning period, and likely beyond; further, Hutchinson Plant #2 is erro neously categorized as an affected unit, even though it does not meet the criteria because its av erage annual operation has been below 219,000
MWh threshold. The commenters said the Hutchinson u nit should be removed from the list of affected units, and the goal recalculated for Minne sota. The commenters said a significant forced outage at Laramie River Station in 2012 makes the s election of that single year unrepresentative of generation at LRS. The commenters said the opera ting hours for 2012 for Unit 1 were less than 60% of normal because of a long forced outage caused by a fire; the 2012 data for LRS is not representative of normal source operations for LRS Unit 1.

Commenters stated in South Dakota, Deer Creek Stati on, the only NGCC plant in South Dakota, was modeled by EPA as operating at 1% capacity fact or during 2012; however, Deer Creek
should have been considered "under construction" du ring 2012 because it did not go into commercial operation until late in 2012 and had onl y 190 total run hours for the year. The commenters said while firing of the unit may have b egun in April, it was not commercially operated for the bulk of the year. The commenters s aid the 1% capacity factor is clearly unrepresentative, and South Dakota was the only sta te that had a less than 10% NGCC capacity factor applied in EPA's building block 2 calculatio n.

Comment 42: Tribal and Territorial Supplemental - 2012 not rep resentative; earlier baseline should be used (e.g. 2005) to allow credit for earl y reductions. Emissions reductions that will occur due to compliance with other rules should be recognized by the EPA; Navajo Nation is not
like a state

Response 42: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.453

The following are summaries of the specific public comments under this comment:

Responding to the Tribal and Territorial supplement al proposal, several commenters said they support using alternatives to the 2012 base year be cause 2012 was an unusually low year for coal generation. Several commenters said that according to the Proposed Rule, "Nationwide, by 2030,
this rule would achieve CO2 emission reductions fro m the power sector of approximately 30 percent from CO2 emission levels in 2005." Several commenters said that in fact, throughout the Proposed Rule comparisons are made to 2005 emission s, and therefore the EPA should look as far back as 2005 for an appropriate representative baseline year. Several commenters indicated they understand the EPA's desire to have consistenc y between jurisdictions in establishing base years, and suggested using the highest base year ge nerating level at least looking back to 2005 would be reasonable in establishing the base year f or fossil generation. Commenters said that using averages for the base generation is not an ap propriate approach since it does not account for changes that were beyond the EGU owner's contro l. Commenters urged the EPA to consult with the Navajo Nation prior to issuing a final rul e in order to determine which year between 2005 and 2012 is the most representative of operati ons at NGS and FCPP.

Several commenters said that EPA should use a histo ric baseline rather than the year 2012. Several commenters said that high gas usage in 2012 due to the presence of unusually low gas prices, combined with continuing depressed econ omic conditions, resulted in a lower dispatch rate for NGS and FCPP in 2012. Several com menters said it is therefore encouraging that EPA is open to looking to other years to serve as a baseline in calculating
emissions. Commenters said that the baseline rate should be set based on historic emissions that are representative of historic CO2 emissions at FCP P and NGS. Commenters recommended that
the EPA allow a look-back to 2005 in order to estab lish a more representative baseline year. Commenters said the use of a baseline year b ack to 2005 is justified because it is the baseline year that the EPA is using for assessing t he total carbon reductions, and 2005 has also been used as a baseline year with international act ions. Several commenters stressed that the
emissions rate that will be established for the Nav ajo Nation must be sufficiently high to be able to accommodate the options available to NOS under E PA's Best Available Retrofit Technology determination under the Regional Haze Rule. Approva l of Air Quality Implementation Plans; Navajo Nation; Regional Haze Requirements for Navaj o Generating Station, EPA-R09-OAR2013-009. Commenters indicated these options are id entified in Appendix B of the Technical Work Group (TWG) agreement as "Alternative A" and " Alternative B."

Commenters stated that carbon emissions will decrea se at the two power plants (FCPP and NGS) as a result of previous rules promulgated by the EP A, and the effect this will have on the Navajo Nation's coal-based economy should be recognized by the EPA. Commenters said that the Navajo Nation's economy is severely underdeveloped, and the Navajo people are currently experiencing an unemployment rate of a staggering 5 2%. Commenters said that many of the Navajo people live in extreme poverty, with 32% lac king electricity, 31 % lacking complete plumbing, 38% lacking water services, 28% lacking k itchen facilities, and 60% lacking a telephone. Commenters emphasized the Navajo people cannot absorb the detrimental economic
effects that will come with unit shutdowns and decr eased coal production at the two power plants
located on their lands. Commenters added that the N avajo Nation government has also seen a significant decrease in its revenue, which weakens its sovereignty and forces it to become more dependent upon the federal government to provide es sential services to the Navajo people.454

Commenters stated that the power plants and the Nav ajo Nation have already taken measures that have yielded substantial reductions in CO2 emi ssions, and said some credit should be given to the Navajo Nation for those efforts. Commenters said that the Parties have already begun discussing possible allocations of CO2 credits, and indicated there is general agreement between
the Parties that the owners of NGS and FCPP need su fficient credits to assure the ongoing operation of these power plants, along with the con cept that the Navajo Nation would receive
some sort of economic benefit if credits were used off tribal lands. Commenters said the Parties are also exploring opportunities for the Navajo Nat ion to retain excess credits that can be used for the benefit of the Navajo Nation. Commenters sa id that building flexibility into the Navajo Nation's emissions rate (i.e., giving the Navajo Na tion a more favorable emissions rate) gives the Navajo Nation the opportunity to develop a carbon t rading program and participate in a multijurisdictional program, and also gives the Navajo N ation an effective tool to assist it in determining its own economic future and lessens the need for reliance on the federal government
for assistance.

Several commenters added that the EPA must also rea lize that the Navajo Nation is not like a state - among other things, states have diverse eco nomies, while the Navajo Nation's economy is severely underdeveloped. Several commenters said t hat States have the ability to absorb occurrences like EGU shutdowns and job losses, but the Navajo Nation does not. Several commenters added that the Navajo people are facing economic hardships that are much more severe overall than those in the states, with many Navajos living in extreme poverty.

Commenters stated EPA's use of 2012 emissions data in applying Building Block One to Bonanza fails to recognize that 2012 was not a typi cal year. The commenters said the goal calculation for the Uintah-Ouray Reservation is bas ed on a single data point from a single operating unit - the 2012 emissions at Bonanza unit 1. The commenters said EPA 's Technical Support Document utilized the 2012 Bonanza emission s rate of 2145 lbs./MWh and reduced it by 6% and 4%, respectively to obtain the 2,016 and 2,059 lbs./MWh alternative building block one goals for the reservation. The commenters said unlike goal computation for multi-source jurisdictions, where variation in operating levels from one unit to another tend to offset and diminish when averaged over multiple units within a jurisdiction, the selection of a single year's data for a single unit does not produce representat ive results for future operations.

Commenters stated using 2012 for calculating possib le HRI for Bonanza Unit 1 is particularly inappropriate and unrepresentative because 2012 was the third best year within a ten year operating period in terms of carbon dioxide emissio ns/per electric output. The commenters said
there is no reason to assume that the unit could me et that rate in future years, much less achieve the additional reduced emissions EPA expects from b uilding block one. The commenters said the use of 2012 year "single point" data as a baseline for Bonanza Unit 1 carbon dioxide emission rate presents an unrepresentative characterization of the unit's normal operations. Specifically:

1) 2012 was a major planned outage which involved a major turbine generator overhaul. The commenters said as part of the 2012 major outage, t he generator turbine at Bonanza underwent a major overhaul for the first time in years. The com menters said as part of the 2012 overhaul, seals were replaced, reducing leakage from years of wear, and the unit experienced temporary marked improvement in carbon dioxide emission rate which, as the data indicates, did not455

continue in following years due to normal wear-in o f equipment and plant systems, as is typical following such an extensive overhaul outage

2) Unit heat rate, and therefore carbon dioxide emi ssion rates, immediately following the 2012 major unit outage were significantly better than av erage unit heat rate over multiple years. The commenters said the Bonanza Unit heat rate typicall y exhibits marked improvement in the months immediately following major maintenance outa ges. The commenters said such outages do not occur each year; and the 2012 outage was esp ecially rigorous in that it involved a protracted overhaul of the turbine generator - an o ccurrence which occurs only once or twice in a decade. The commenters said as part of such an over haul (especially involving turbine overhaul), many plant systems are attended to, with significan t replacements taking place to address wear issues over the years' interval between such outage s. The commenters said naturally occurring degradation through wear of seals and other parts o nce again commences following such outages thus giving the year in which such an outage occurs an unusually low (better) heat rate than is representative of the unit's actual performance and capability when measured over multiple

years.

Comment 43: T&T Supplemental – The EPA should use a historic b aseline rather than the year
2012

Response 43: See section VI of the final rule preamble of the C PP for the EPA’s response to this

comment.

The following are summaries of the specific public comments under this comment:

Commenters stated, the Navajo Nation should be give n a more flexible emissions rate than what is currently stated in the Proposed Supplemental Ru le. The commenters asserted that the rate
should be set based on historic emissions that are representative of historic CO2 emissions at FCPP and NGS; accordingly, instead of using 2012 as the baseline year, EPA should allow a longer look look-back period for purposes of establ ishing a more representative year.

Commenters stated the power plants and the Navajo N ation have already taken measures that have yielded substantial reductions in CO2 emission s. The commenters said some credit should be given to the Navajo Nation for those efforts. Th e commenters said building flexibility into the Navajo Nation's emissions rate (i.e., giving the Na vajo Nation a more favorable emissions rate) gives the Navajo Nation the opportunity to develop a carbon trading program and participate in a multi-jurisdictional program; it also gives the Nav ajo Nation an effective tool to assist it in determining its own economic future and lessens the need for reliance on the federal government
for assistance.

Comment 44: Due to variability in coal constituency and other factors, a single year baseline is inappropriate for Bonanza Unit 1 on Uintah-Ouray Re servation. Instead a 5-year average (2008 - 2012) should be used as baseline456

Response 44: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters said the Bonanza Unit 1 on the Unitah-Ou ray Reservation relied on one single source of coal for all of its primary fuel requirem ents in 2012 and most other years. Commenters said that source, a dedicated Mine located 35 miles away from the Unit, has no coal sorting or blending facilities, is not located within practica l distance of any coal delivery or coal market facilities, and must mine the coal ahead of its one long-wall mining system as that coal
exists. Commenters said as a result, the fuel variability a t Bonanza Unit 1 differs greatly from one year to the next and for portions of the year a s the Mine retreats through various pockets of
differentiated coal reserves. Commenters said the e ffect on carbon emission rates can be dramatic both because of the nature and speed with which coal delivered into the Unit can change, but also because of challenges in operating the Unit systems at optimal configuration to address sudden changes and swings in coal constitue ncy. Commenters said 2012 did not reflect representative carbon emission rates over the exten ded period of operations at Bonanza Unit 1

Commenters said the Supplemental Proposal uses a hi storical baseline emissions rate of 2,145 lb/MWh for the Bonanza unit - as the only generatin g source within the Uintah-Ouray (UTE) Reservation. Commenters said based on the foregoing historical figures, and given the factors cited above for not relying on one single operating year data, Deseret urges that the appropriate representative baseline carbon dioxide emission rat e should be adjusted for Bonanza Unit to use the 5 year average period (2008-2012) which increas es the baseline emission rate to 2,173
lb/MWh.

Commenters stated operations of Bonanza during 2012 do not reflect normal or representative operations of the Unit for purposes of setting stan dards intended to be attained over long periods. The commenters said the Interim Goal compliance per iod under the Supplemental Proposal encompasses the years 2020 -2029, a multi-year peri od during which operations at Bonanza are anticipated to vary depending on a number of factor s. The commenters said factors that existed during 2012 which render that year unsatisfactory a s a representative year to use for converting
to a mass based standard include:

2012 was a year of an unusually extended outage pla nned for repair, replacement and inspection of the turbine generator at Bonanza. The commenters said 2012 was a major maintenance outage year for Bonanza Unit 1. The commenters said such p lanned maintenance outages are not scheduled every calendar year at Bonanza Unit 1. Th e commenters said the unit is designed and intended to run for many consecutive months (more t han one calendar year) between major planned outages; moreover, to preserve a warranty f rom its equipment manufacturer, Deseret committed to a very lengthy planned maintenance out age to occur on or before the close of the year 2012 in order to facilitate an internal inspec tion of the generator turbine assembly - an event that was not scheduled for some 12 years going into 2012, and would not be expected to be repeated for another 6 to 10 years thereafter.

Deseret adjusted the dispatch order of its generati ng resources in 2012. The commenters said although Deseret owns and operates one generating f acility, Bonanza Unit 1, it also has a457

minority interest in the Hunter 2 unit operated by PacifiCorp. The commenters said in managing its load and resources, Deseret has in limited circ umstances re-designated the order of dispatch
between the Bonanza unit and its entitlement to out put from Hunter 2 to reflect specific, isolated
events or circumstances. The commenters said these "re-dispatch" decisions are a-typical, infrequent, and usually extend for a few months' ti me. The commenters said during 2012 Deseret re-ordered the dispatch of its generating resources such that, for the entire year 2012, Bonanza was dispatched down, therefore generating less, and the Hunter 2 unit dispatched to a higher output level than during typical operating conditio ns. The commenters said the re-dispatch
decision in 2012 reversed the usual order in which these two generating resources are dispatched. The commenters said the cause for the 2012 re-dispa tch decision revolved around challenges that Deseret anticipated in potential short-term disrupt ion in coal deliveries to Bonanza. The commenters said in order to preserve and stockpile fuel stock at Bonanza against the risk of short term supply disruption, Deseret took the unusual st ep of re-ordering the dispatch points between its resources; this results in skewing the 2012 ope rating level and results.

Commenters said operating data for Bonanza Unit 1 d emonstrate that the Equivalent Availability Factor for the unit was 88.18% during 2012; this co mpares with EAF for 2011 (the preceding year) of 93.51%, and 2013 (the subsequent year) of 94.44%; likewise, Net Capacity Factor in 2012 was only 76.91%, which is much lower than the 87.59% the following year and 82.40% the previous year; 2012 was clearly not representative.

Commenters stated EPA has recognized and invited in put from affected jurisdictions which would be unusually and unfairly disadvantaged by ch oosing 2012 as a baseline period due to unique circumstances. The commenters said the Uinta h-Ouray Reservation is just such a jurisdiction.

Commenters stated unlike standards set for multi-so urce jurisdictions, the Uintah-Ouray emission source is one single unit - Bonanza Unit 1 ; it is therefore not like states which aggregate and therefore "average" among several or multiple emitting units events or occurrences that are not annual or more frequent in nature - in most situations, the frequency and/or duration of planned outages, for one example , would tend to "average out" among multiple units, precisely because most operators av oid scheduling prolonged outages simultaneously with outages scheduled for multiple units under that operator's control. The
commenters said Deseret and the Bonanza Unit 1 has no such offsetting opportunity; it is therefore inappropriate to base the historic emissi on rate baseline on any single year.

Commenters urged a multiple year period as a baseli ne determination. The commenters said overall, operating levels at Bonanza Unit 1 were th e very lowest during 2012 of any of the 10 years beginning 2004 through 2013; 2012 operating l evels and emissions results do not fairly represent a valid baseline from which to derive a b aseline for computing goals under the Supplemental Proposal.

Comment 45: Territories. The EPA should allow Puerto Rico to u se 2014 as the baseline period for AESPR, as the current calendar year is more rep resentative of CO2 emissions from AESPR's458

Facility. Alternatively PR should calculate baseli ne using any two consecutive years out of last 5

years

Response 45: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters said in its proposal, the EPA has used 2 012 as the "baseline" year from which
reductions in CO2 emissions would be measured in Pu erto Rico, the same baseline year EPA has proposed for facilities in the rest of the United S tates. Commenters again urged the EPA to reconsider its one-size-fits-all approach because t here are "specific circumstances" which justify using a "different data year for" Puerto Rico "as o pposed to using the same data year, or combination of years," as the EPA has proposed acro ss the 50 states. (79 Fed. Reg. 64,543, 64,553 (Oct. 30, 2014) (seeking comment on use of 2 012 as a single baseline year in EPA's proposal for the 50 states)). Commenters said rathe r, if the EPA proceeds with this approach to determine the BSER when setting a CO2 emissions goa l for Puerto Rico, the EPA should allow
Puerto Rico to establish a baseline for each of its sources that is representative of expected operations for each source. Commenters said for AES Puerto Rico, that representative baseline is the current calendar year, 2014.

Commenters said in general, establishing a baseline that is representative of current facility operations simply reflects common sense. Commenters said a single historic year may be an anomaly that is not representative of current or hi storic operations. Commenters said there may have been an extended outage due to a major mainten ance - or an unusually high forced outage rate - or simply a downturn in dispatched generatio n for any of a number of reasons. Commenters said is arbitrary for the agency to set a baseline - and derive reductions from that baseline - without first considering the specific c ircumstances in a state or territory or at a particular facility within the state or territory. Commenters said otherwise, a source could be
forced to make additional reductions from an alread y atypical, reduced operating level.

Commenters said to provide for a representative bas eline year is especially critical here, because using a 2012 baseline would require AESPR to dramat ically reduce its operations by more than 25% below 2014 operating levels in 2020. Commenters said yet, 2012 would not be representative of either AESPR's current or histori c operations - or the operating level expected going forward.

Commenters said on the contrary, calendar year 2014 has been the culmination of sustained efforts by AESPR management to maintain their units more effectively in order to reduce the equivalent forced outage rate (EFOR) at its facilit y and achieve the equivalent availability factor (EAF) of 90% expected under the PPA. The commenters said the data in this regard are ver y clear: In 2012 the equivalent forced outage rate (E FOR) for the AESPR plant was 9.43%. Commenters said by contrast, the EFOR for AESPR in 2014 was 1.69%, in line with the expectation for properly maintained CFB units. Comm enters said similarly, in 2012 the EAF was
82.15% - while the EAF in 2014 to date has been 91. 17%. Commenters said with the increased availability and reliability, AESPR has produced su bstantially more electricity for PREPA in 2014 than in 2012 - the net capacity factor (NCF) f or AESPR in 2012 was only 80.94%, but has459

been 91.68% during 2014. Commenters said moreover, PREPA has forecast that it expects to continue to purchase electricity from AESPR in the range of the 2014 production levels in coming years.

Commenters said in the alternative, the EPA should allow Puerto Rico to establish a baseline for BSER by averaging any two consecutive years of oper ations in the past five years as representative of normal operations. Commenters sai d setting a baseline based on a two-year average would follow the same approach the EPA itse lf has used when setting a baseline under the New Source Review requirements of the federal C lean Air Act. 57 Fed. Reg. 32,314, 32,325 (July 21, 1992) (discussing presumption that any tw o years in the five years preceding a physical change would be considered representative of normal operations for the source); see 40 C.F.R. section 52.21(b)(48)(i) (regulation establishing th e presumption of two years as the baseline).

Comment 46: As is proposed rule won't accomplish reductions ne eded. For meaningful comparison the Proposed Rule's reduction targets sh ould be articulated and evaluated in comparison to emissions in 1990, the internationall y-accepted year, not 2005.

Response 46: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Several commenters said the emissions reductions th at would be achieved by the Proposed Rule
will not achieve the emissions reductions needed to avoid the worst of climate change. Several commenters said that to be able to make meaningful comparisons, the proposed goals should be compared to a baseline of 1990, the internationally -accepted baseline year, not 2005.

Commenters said the EPA expresses the Proposed Rule 's targets as a 30% decrease in existing plant emissions by 2030 as compared with baseline e mission levels in 2005. Commenters said because emissions in 2005 were, however, higher tha n those in 2012 (the last year for which EPA has published comprehensive inventory data), th e Proposed Rule will, by 2030, result in only about a 17% reduction from 2012 power sector e mission levels. Commenters said the Proposed Rule also omits any comparison with emissi on levels in1990, the internationally agreed-upon emission baseline year. Commenters said given the proper 1990 baseline, this proposal amounts to a reduction of less than 4 perc ent.

Commenters said a group of leading climate scientis ts has calculated that developed countries like the United States must reduce their greenhouse gas emissions by 35-65% below 1990 levels by 2030 in order to preserve a likely chance of lim iting global temperature rise to 2 degrees Celsius this century. Commenters said when measured against 1990 emission s, the Proposed Rule reduces power sector emissions by only 7.7% by 2030. Commenters said on an economywide basis, moreover, current United States climate policy, including the Proposed Rule, will result in emissions 5% above 1990 levels by 2030. C ommenters said the Proposed Rule thus clearly fails to accomplish reductions urgently req uired from the nation's largest source of greenhouse gas emissions. Commenters said moreover, because the Proposed Rule seeks only to create a carbon intensity standard rather than an e missions cap, it is far from certain whether460

even the 30% target of emissions reductions from 20 05 levels will in fact be reached. Commenters said in light of these grim fa cts, there is simply no justification for the Proposed Rule's low targets and slow implementation schedule.

Commenters stated the proposed Clean Power Plan imp roperly calls for reductions in CO2 from 2005 levels; the problem is that CO2 levels in 2005 were the highest ever. The commenters said in fact, current levels are 15% less than in 2005. The commenters said the proposed rule should at least use current levels, or more appropriately, 1990 levels.

Commenters stated using 2005 emission levels as a b aseline is a mistake for multiple reasons; first, the 2005 baseline will take credit for reduc tions that have already occurred as emissions have declined since their height in 200; second, th e international community has agreed to use 1990 as the appropriate baseline and we should foll ow suit. The commenters said scientists base their required reduction amounts on 1990 levels so it only makes sense to use these levels as the
baseline for reductions.

Commenters said the base year should be changed fro m 2005 to 1990, because having 2005 as a
baseline takes credit for reductions that have alre ady occurred.

Commenters stated progress in reducing greenhouse g ases should be based on emissions in 1990, the Kyoto Protocol baseline, not emissions in 2012. The commenters said the international community has used 1990 as a baseline ever since th e Kyoto Protocol.

Comment 47: The EPA should use 2012 as base year for all calcu lations

Response 47: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters said that there is considerable confusio n of what the goals are, and recommended that 2012 should be used as the base year for all c alculations.

Commenters stated that the 30 percent reduction goa l is from a 2005 base year. Commenters said the emission rate was 2,434 million metric tons in 2005, and, in the most optimistic case, will be reduced to 1,701 million tons by 2030. Commenters a dded that by 2012, EGU's had already reduced emissions to 2,023 metric tons, or 17% by s witching from coal to natural gas for lower cost, and by closing older, smaller coal fired EGU' s that were not worth upgrading to meet other EPA air pollution reduction standards.

Commenters stated that the actual state specific go als are calculated from a 2012 base year compared to a base case of future emissions. Commen ters said the base case assumes no carbon reduction goal is set and calculates CO2 emissions will grow to 2,256 metric tons by 2030. So, Commenters said, compared to the base case, CO2 emi ssions will only fall 25% (from 2,256 tons461

to 1701 tons), according to the EPA. Commenters sai d therefore, the EPA should drop the reference to 30% reduction by 2030 from 2005, and u se a 25% reduction by 2030 from 2012 to
end this confusion.

Comment 48: 2012 should be used for baseline

Response 48: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA has offered states the opport unity to request an alternative base year in calculating the goal; however, for Oklahoma, data f or the years 2010 and 2011 do not appear to provide any significant advantage over the year 201 2. Therefore, the commenters requested that the year 2012 be retained as the base year for the state.

Commenters supported the EPA's proposal to use 2012 as the base year for compliance
calculations. The commenters said while others have argued that use of an earlier base year is more appropriate, the commenters asserted that they are requesting a change because of a misunderstanding of rate-based targets. The comment ers said if properly implemented, a revised base year would have no outcome on the overall plan . The commenters said under the proposed rate-based methodology, compliance depends on the a verage emission rate of the entire fossilfuel generation sector; consequently, all historic changes that have resulted in lower carbon intensity from that sector are already considered i n the estimation of what reduction level is achievable and will contribute to meeting the goal. The commenters said while an earlier base year would not impact the fossil fuel sector, it co uld increase the amount of credit available from energy efficiency and renewable energy sources with out increasing the associated costs. The commenters said such a change would necessarily req uire EPA to revise its analysis to determine the Best System of Emissions Reductions under 7411( a)(1); this would result in a corresponding need for a more stringent standard of performance. The commenters did not investigate the impacts of changing the base year on the conversion from rate-based to mass-based targets. If EPA were to alter the baseline, the commenters expe cted the alteration would include any necessary changes to methodology to ensure mass-bas ed goals remain as close as possible to the final rate-based goals.

Commenters stated according to EPA, the application of EPA's building block methodology to Minnesota's existing energy mix results in a need t o reduce its carbon emissions rate (CO2 lbs/MegaWatt hour ("MWh")) from a 2012 emissions ra te of 1,470 lbs/MWh to a 2030
emissions rate of 873 lbs/MWh. The commenters said using EPA's figures would place Minnesota among those states with the largest emiss ions reduction goals. The commenters said despite a seemingly stringent target, the analysis of Minnesota's current emissions rate and its projected emissions rate under a business-as-usual scenario discussed below demonstrates that Minnesota is well positioned to meet the Clean Powe r Plan's goal. The commenters said this analysis shows that, despite what EPA will likely h ear from other Minnesota stakeholders about462

"fixing" the perceived disparity between Minnesota and other states, there is no need to fix any disparity by weakening Minnesota's target.

Commenters calculated how close Minnesota would get to reaching its Clean Power Plan target by merely complying with existing state laws; Minne sota's robust RES and solar energy standard already require an increasing percentage of renewab le energy from its utilities through 2025. The commenters said Minnesota also has an annual energy -savings goal equivalent to 1.5% of the average of the three prior year's weather-normalize d gross annual retail sales. The commenters said assuming that the utilities comply with Minnes ota's mandatory RES and EPA's energy efficiency savings methodology, Minnesota's 2030 em issions rate would be 940 lbs/MWh. The commenters said this means Minnesota would only nee d a 7% reduction in emissions to achieve Clean Power Plan compliance after achieving the sta te's RES, energy efficiency goals, and solar energy standard.

Comment 49: 2012 should be used as base year; regulation shoul d be strengthened

Response 49: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Several commenters supported the use of 2012 as the base year for the Clean Power Plan building block methodology. Commenters stated that emissions of CO2 were lower in 2012 than in any year after 2005, and indicated that use of a ny other calendar year or average of multiple years for the baseline would weaken the national st ringency of the Clean Power Plan proposal, all else remaining equal. Commenters confirmed the EPA's conclusion that there was not a significant difference in the state emission target s with a 2012 baseline versus a baseline of 2010-2012, and indicated they are indifferent as to whether a 2012 single year baseline or a 3- year average 2010-2012 baseline is used in the dete rmination of the state emission targets.

Commenters expressed support for the Clean Power Pl an overall, but indicated that the draft proposal for a 30% reduction from 2005 power plant emissions levels is incommensurate with the pace of pollution reductions that scientists ha ve found necessary to avoid catastrophic climate change. Commenters said that this is due partly to the choice of a 2005 baseline, representing America's peak pollution. Commenters said that som e utilities are already moving away from coal to natural gas, and the EPA's proposed rule wo uld curtail industry behavior only slightly from a baseline, "no-action" scenarios assuming low natural gas prices, and is not adequate to the
Clean Air Act.

Commenters encouraged the EPA to hold to the 2012 b aseline, not only because that's when data is available that EPA started gathering on emission s from power plants but because ultimately the bar is too low at that 30 percent. The commente rs said by the time we go forward, the process is proceeding and we've been a dozen years down thi s road of knowing we're going to have to limit emissions on coal fired power plants, and the private sector has a couple years to get used to the idea that that's going to happen. The commen ters said they have 20 years, 2020 to 2029 to implement it. The commenters said that they can acc omplish this with little effect; and by the463

time we get to 2020, by the time we get to 2029 we will know very clearly that the bar has been
set too low.

Comment 50: The EPA should reevaluate baseline to strengthen t argets; early reductions result
in underestimate what's achievable

Response 50: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated EPA must set stronger and faster pollution reduction targets; the Clean Power Plan's goals for states underestimate our cap acity to expand clean energy and energy efficiency. The commenters said these goals are, in many cases, lower than pre-existing targets of state renewable portfolios and efficiency standa rds, or equal to what states have already achieved, and only minimally higher than U.S. Energ y Information Administration (EIA) projections under a "business as usual" scenario (U CS 2014, C2ES 2014).

Commenters stated they cannot wait until 2030 to ma ke sure states are meeting the goals in the Clean Energy Plan; the EPA must re-evaluate the bas eline it used to set the plan's state pollution reduction goals. The commenters said the current ba seline fails to account for progress that is already occurring and therefore significantly under estimates what is readily achievable. The commenters said the plan gives states 15 years to a chieve reductions, even in cases where states are already halfway or most of the way there; state s can and are already doing better.

Commenters stated the plan needs binding milestones to keep us on track for achieving the pollution reductions that are critical by 2030. The commenters said the EPA must have a stronger oversight role to ensure that every state does its fair share to reduce carbon pollution. The commenters said past experience tells us that pollu ters exert outsized influence in many state capitals, and they routinely use that influence to try to evade accountability for their pollution. The commenters said they should not be allowed to p ush the cost of dealing with their pollution onto the public nor operate as though they are abov e the law. The commenters said even the best environmental standards can become largely meaningl ess if the public and EPA are not able to monitor compliance and enforce those standards.

Commenters stated EPA should guard against the poss ibility that changes in baseline years or credit for early action will simply defer the burde n of adjustment to no ultimate purpose. The commenters recommended that any adjustments to base line year or credit for early action should not increase the actual national-average carbon dio xide intensity of power generation in the later years of the period covered by the rule, beginning in 2025. The commenters said since the endangerment is ultimately a function of cumulative carbon dioxide emissions rather than annual emissions, the commenters recommended that any adju stment to baseline years or credit for early
action should be tailored such that the cumulative carbon dioxide emissions from 2016 through 2024 are no larger than would have been allowed abs ent the adjustments in baseline years or consideration of credit for early action. In order to provide maximum flexibility to states while meeting this objective, the commenters recommended that the enforceable standard for the464

period prior to 2025 be formulated as a limit for e ach state on the average carbon dioxide emissions intensity during the entire period from 2 016 through 2024, leaving it to the state implementation plans to determine each state's spec ific glide path. The commenters said if the reference glide path used by EPA to determine this allowance is adopted, then credit for early action will automatically accrue to states under th is formulation.

Commenters stated the real concern about the Clean Power Plan is that it doesn't do enough; rather than spurring immediate and significant acti on that is achievable and needed, the plan focuses too much, in our opinion, on endorsing adva nces that are already occurring. The
commenters said EPA must reevaluate the baseline it uses to set the state pollution reduction goals; as such, baseline fails to account for progr ess that is already occurring, and thereby leads to results that underestimate what is readily achie vable. The commenters said for example, EPA proposal assumes nearly 49 gigawatts of coal plant retirements throughout the country by 2020, but nearly 68 gigawatts of coal plants have already retired or announced their intent to do so. The commenters said in Pennsylvania, the 2020 coal plan emissions baseline EPA uses includes 11 coal plants that have already retired or announced their intent to retire in the next few years. The
commenters said if those emissions are removed from the 11 plants from the 2012 baseline, that baseline is already below the level of carbon pollu tion EPA assumed Pennsylvania could achieve through the redispatching of coal plants. The comme nters said EPA's carbon proposal would have little further direct impact on generation of electricity from the most carbon intensive form of power, which is coal.

Comment 51: 2012 is generally an appropriate base year, but fo r units whose operation in 2012 was anomalous, states should select an alternative baseline; due to unplanned outage in 2012 of largest coal-fired plant in Minnesota (Sherco 3), t he targets developed by the EPA are fatally
flawed and must be revised

Response 51: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year and treatment o f the Sherco facility.

The following are summaries of the specific public comments under this comment:

2012 generally appropriate baseline but alternate s hould be allowed for anomalous
units. Commenters indicated that the NODA solicits input regarding whether a different single data year or average of a combination of years shou ld be used to calculate a baseline for use in state goal calculations. Commenters asserted that 2 012 is generally an appropriate base year, and should remain the presumptive base year for most un its in most states. However, commenters stated that for units whose operation in 2012 was a nomalous, states should select an appropriate three-year average for use in baseline calculations . Commenters said that providing the opportunity for states to select years would better ensure the use of data more reflective of the unique circumstances of these particular units. Com menters stated that requiring such data to be in the form of a three-year average would lessen th e likelihood that a state could simply select the highest-emitting year for a particular unit. Co mmenters noted that this approach could address, for Minnesota the concern with Sherco Unit 3 identified in their September 16, 2014 letter, and may address concerns for other units wh ose 2012 operation was also anomalous.465

Commenters suggested that the EPA should issue an a dditional NODA or supplementary proposal providing this option, and allowing states the opportunity to submit appropriate threeyear average baseline information for anomalous uni ts. Commenters said that the final goals would incorporate data for these anomalous units.

2012 Baseline Erroneously and Significantly Underes timates Current Coal-Fired Generation and
Emission levels in MN. Commenters said the fact tha t the Proposed Rule's baseline assumptions do not include annual emissions from Sherco 3 highl ights why reliance on a baseline year of 2012, or any single year, for that matter, is not a ppropriate for determining historical emission levels. Commenters said indeed, using a single year as a baseline disregards the variability of electric power resulting from anomalous weather yea rs, unanticipated outages, fluctuations in fuel prices, and other factors.

Commenters said that as an alternative to the 2012 baseline, SMMPA supports the Minnesota Pollution Control Agency's initial proposal to use an average of generation data from 2009 to 2011. Commenters said that any baseline period that includes 2012 will significantly understate coal-fired generation and emissions in Minnesota. Commenters said they agree that using data from multiple years is a rational approach to deter mining historical emissions rates, as it would yield generation data that more accurately takes in to account the many factors that cause generation dispatch to fluctuate year to year. Comm enters emphasized that the EPA should recalculate the baseline using an average of genera tion and emissions levels during a single, representative year or over the course of multiple years (not including 2012) so that its starting assumptions for the Proposed Rule more accurately r eflect historical emissions levels. Commenters said if a single alternative baseline ye ar is to be used, a year such as 2009 or 2010, during which Sherco 3 was online for the entire yea r, would be appropriate. Commenters said at the very least, the EPA must recalculate Minnesota' s emission reduction targets to account for Sherco 3's generation capacity and emissions levels

.

Comment 52: 2012 baseline and nuclear uprates

Response 52: The final goals do not have nuclear assumed in the rates, please see section V.A and V.E. of the final rule preamble of the CPP for more information about nuclear generation and Building Block 3, respectively.

The following are summaries of the specific public comments under this comment:

Commenters asked whether the EPA has considered whe ther its use of nuclear uprates completed in 2012 or post-2012 in calculating the at-risk nuc lear generation goal is consistent with its use of
a 2012 baseline. Commenters further asked would th e EPA consider using a different baseline date that allows recently completed nuclear uprates to be excluded from the goal-setting calculation but be included in the compliance calcu lation.

Comment 53: Compliance period must be clarified; two EE-relate d issues must be clarified466

Response 53: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the compliance period. See sectio n V.A of the final rule preamble for discussion of demand-side energy efficiency. See se ction VIII of the final rule preamble for discussion of state plans.

The following are summaries of the specific public comments under this comment:

Commenters said that the EPA needs to clarify the c ompliance period in order to ensure there is no disincentive to make investments in clean energy and energy efficiency before the start of the interim compliance period in 2020. Commenters said the EPA should allow credit for new carbon reduction actions (i.e., from increasing exi sting policies, new policies and/or adding new qualifying facilities) taken after a final state pl an is submitted to EPA, and before the beginning of the plan performance period (2020), to count tow ard achievement of the state's emissions goals. Commenters indicated this would help ensure that states have an incentive to engage in carbon reduction measures prior to that period and get a jump on being better positioned to achieve their final compliance goals.

Commenters stated that there are two areas related to energy efficiency that also need a more clear explanation. Commenters said first, the EPA a ssumed in its drafting of the plan that energy efficiency measures are sustained on an average of ten years. Commenters encouraged the EPA to permit credit for the full term of the contract or for a longer period of time if so decided by a state. Commenters said that secondly, under the pr oposed rule actions taken after the rule's proposal (June 2, 2014) would be creditable in 2020 . Commenters indicated this could be interpreted to allow credit for buildings that have been built under outdated building codes and standards; to remedy this they suggest the EPA coul d use a baseline building code standard using such standards that are in place in 2014.

Commenters stated concurs that "EPA needs to clarif y the compliance period in order to ensure
there is no disincentive to make investments in cle an energy and energy efficiency before the start of the interim compliance period in 2020. Sta tes should be given flexibility with respect to meeting targets over a multi-year period, but the c ompliance schedule should ensure emission reductions are secured as soon as possible and that state plans include provisions to correct
shortfalls."

Comment 54: Snapshot data from 2012 does not adequately demons trate that states can achieve incremental EE savings of 1.5 percent.

Response 54: See section V.A of the final rule preamble for dis cussion of demand-side energy efficiency. See section VI of the final rule preamb le of discussion of subcategory-specific emission performance rates. See section VII of the final rule preamble for discussion of state goals. See section VIII of the final rule preamble for discussion of state plans.

The following are summaries of the specific public comments under this comment:

Commenters stated looking at reported 2012 incremen tal EE savings snapshot data, EPA found that three states, Arizona, Maine and Vermont, had achieved an annual incremental retail sales467

savings rate of 1.5 percent. The commenters said EP A then concludes that this level of reduction is the "best practices" level and an annual increme ntal savings that all states can achieve. The commenters said EPA's reliance on this 2012 snapsho t data is misplaced for two reasons: first, EPA takes the 2012 reported data out of context by not discussing how or how long it took the three "best practices" states to achieve this savin gs rate; second, if this data were to demonstrate anything, it is that the savings rate that arguably could be achieved by all states is closer to 0.5 percent, not 1.5 percent, as this is the median sav ings level achieved in 2012.

Comment 55: Under BB3, when setting the solar portion of RE ta rget a baseline year of 2013 or
later should be used

Response 55: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters did not support using a baseline year be low 2012, and strongly suggests the use of a baseline year of 2013 or higher in setting the sola r portion of the renewable state target under building block 3. Commenters noted that the solar i ndustry has grown dramatically in recent years and the amount of solar capacity online in th e U.S. has doubled since the end of 2012. Commenters said that therefore, the use of a lower baseline year would not accurately represent the current or future potential contributions from solar to a low carbon energy supply.

Commenters said that if the EPA decides to use an a verage of multiple years of generation to set the baseline, it will be critical for the EPA to ad just the calculation to reflect the generating flee t as it exists today (i.e. end of September 2014). Co mmenters suggested that to do this, the EPA can look at the generation mix relative to the exis ting online generation capacity of each technology in each averaged year. Commenters said t hat put another way, the EPA could look at the average capacity factor of each technology in e ach year and then apply that to generation fleet as it exists today. Commenters said that to c larify further, the EPA could estimate baseline solar generation by either multiplying the historic al average capacity factor for solar in each state by the current existing capacity in each state, or by modeling the expected performance of current existing capacity in each state. Commenters said that modeling for wind and solar is a sensible approach as wind and solar are at the top of merit order dispatch, and thus their modeled performance is very likely to reflect their average lifetime performance.

Commenters stressed that correctly assessing the ba seline and solar energy's contribution to the baseline for the Clean Power Plan is critical, as t he generation fleet has changed in meaningful ways since 2012 and especially since 2010. Commente rs said that using a simple average of absolute generation levels of each technology would grossly underrepresent solar generation as it exists today because there is a significantly large r amount of solar capacity online today.468

Comment 56: Not accounting for current and projected RE market expansion between 2012 and 2017 distorts the methods proposed by the EPA, and ultimately undermines the true potential of solar and other renewable technologies.

Response 56: See section V.E. of the final rule preamble of the CPP for the EPA’s response to this comment and more information about Building Bl ock 3 and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule su pporting the final CPP.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA's Proposed and Alternative Approaches use 2012 as the base year for setting renewable penetration levels for when the r ule goes into effect - 2017. Commenters said the combination of continued performance improvemen ts and price declines, coupled with an expiring federal Production Tax Credit (PTC), and a n approaching roll-back sunset date for the federal Investment Tax Credit (ITC) have fueled maj or capacity additions, making reference to
2012 levels obsolete. Commenters said that not acco unting for current and projected market expansion between 2012 and 2017 distorts the method s proposed by the EPA, and ultimately undermines the true potential of solar and other re newable technologies.

Commenters said for example, EIA projects that wind power capacity will increase by 8.8% in 2014, and 16.2% in 2015. Commenters said solar capa city at a national level increased by nearly
three times between mid-2012 and mid-2014.Commenter s said the southeast has contributed to these gains, doubling its solar capacity between 20 12 and 2013.

Commenters said distributed generation (Residential and Non-Residential) capacity is a major component of solar development, accounting for abou t 40% of all solar photovoltaic (PV) capacity installed (over 1,600 MW-ac) in 2013 and n early half the cumulative solar PV capacity
installed to date in the U.S. Commenters said both the benchmark rate approach and IPM model approach fail to capture existing and potential dis tributed generation, which is a major omission from the solar technology sector. Commenters said i n addition to being a power source that does not have emissions, distributed generation has othe r unique "value" benefits for customers and the grid that should not be overlooked.

Comment 57: Renewable generation floor should not be set equal to amount of the state's actual 2012 renewable energy generation for states that ex ceed regional average

Response 57: See section V.E. of the final rule preamble of the CPP for the EPA’s response to this comment and more information about Building Bl ock 3 and the CO 2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule su pporting the final CPP.

The following are summaries of the specific public comments under this comment:

Commenters said the EPA seeks comment on whether th e final rules should set a renewable generation floor equal to the amount of the state's actual 2012 renewable energy generation for states such as Iowa that exceed the regional averag e. Commenters opposed this alternative baseline because it would penalize and fail to give appropriate credit to Iowa utilities and469

ratepayer s for the significant costs of associated with their early actions to implement renewable

energy.

Comment 58: Summarizes comments regarding applying credits fro m shutting down coal/oil EGU's and/or switching to NGCC.

Response 58: See sections VI and VII of the final rule preamble of the CPP for discussion of the subcategory-specific emission performance rates and state goals, respectively. See section VIII for discussion of state plans.

The following are summaries of the specific public comments under this comment:

Retirements from 2012 should be credited. Several c ommenters contended that shutdowns or retirements of existing EGUs as of the date of stat e plan submission should be included in target
rates for each state. Commenters stated that nation ally, at least 330 coal-fired EGUs have retired
or converted to biomass since 2010. Commenters adde d that the proposed state targets do not reflect any of the approximately 60 GW of projected coal-fired power plant retirements projected to occur from 2012 through 2016. The commenters sta ted that EPA's BSER must accurately reflect expected control options which includes aff ected source retirements since 2012.
Commenters contended that emission reductions resul ting from coal plant retirements occurring after 2012, but prior to 2020 should count for purp oses of calculating whether states have met their CO2 emission reduction goals from 2020 throug h 2030. The commenters stated that such coal plant retirements may occur prior to 2020 (the first year in which the EPA proposed an interim CO2 emission reduction goal) does not mean that those real CO2 emission reductions should be considered irrelevant for purposes of ass essing whether a state has met its CO, emission reduction goals.

Disparity in goals depending on NGCC capacity. Comm enters raised concerns about the disparity in state goals between those states with little or no NGCC generating capacity and those with significant amounts of NGCC capacity. Commente rs contended that EPAs 70 percent natural gas re-dispatch assumption in building bloc k 2 disadvantages states that have taken steps prior to 2012 to replace aging coal-fired facilitie s with NGCC facilities. Commenters contended that EPA should exempt from the Block 2 redispatch calculation of all NGCC capacity constructed since 2005 to replace retired coal-fire d capacity. The commenters stated this exemption should apply to both existing NGCC capaci ty and NGCC capacity currently under
construction. Other commenters stated that because EPA does not account for coal-fired megawatts that already have been displaced by RE an d NGCC, both a lower baseline emission rate and high levels of RE in the baseline year cau se a state's ultimate performance goal to be more stringent.

Re-dispatch goals have more significant affect for States with significant RE. Commenters explained that EPA created a 2012 baseline emission rate for each state that reflects the level of generation from all in-state affected fossil-based units. As a result, the commenters stated that the
2012 baseline emission rate for states that had ret ired coal-based units and built new NGCC units already reflects these reductions, resulting in a m ore stringent goal. The commenters stated that470

the goal calculation approach relies on the amount of electricity produced by renewable sources in 2012, meaning that the more renewable energy pro duced in 2012, the more stringent a state's goal emission rate. The commenters added that state s that already had, as of 2012, increased use of wind, solar and other variable renewable resourc es often had built new NGCC units to balance their systems. The commenters concluded that NGCCs in states with significant amounts of renewable generation had a lower capacity factor an d, thus, the re-dispatch goals envisioned under Building Block 2 have a more significant effe ct on their emission reduction goals.

Various methods of crediting early action. Commente rs added that EPA could adjust the interim and final goals upward in early acting states by ex empting from Building Block 2 NGCCs that replaced coal and eliminating the NGCC capacity fac tor penalty in leading RE states. The
commenters recommended that that EPA consider the i mpact of high levels of wind penetration and recalculate the baseline NGCC capacity factors for each state in order to eliminate the NGCC capacity factor penalty. The commenters stated that EPA should adjust the baseline NGCC generation to account for what NGCCs in each s tate would have generated were it not for high levels of RE penetration. The commenters concl uded that this would provide credit to states that have both been RE leaders and built high-effic iency NGCCs. Commenters suggested that EPA apply a "floor" and "ceiling" to the amount of coal plant output displaced by NGCCs to help decrease the disparity of the impact Building Block 2 has on different states and it could provide states, like Oregon, that acted early to re tire coal plants with some relief from the impact of Building Block 2. Commenters supported crediting coal-heavy states, live West Virginia, for
actual emission reductions that occurred between 20 05 and 2012 as a result of displacing coal with natural gas. The commenters claimed that these states have already seen an implementation of Building Block 2 as a result of market condition s. The commenters added that these states would get no credit because they did not have subst antial in-state natural gas generation, but did
reduce mass emissions. The commenters concluded tha t because EPA is claiming the rule will result in a 30 percent reduction in CO2 emissions s ince 2005, emission reduction due to displacement of coal units with natural gas units s hould be credited against the states goal. One commenters recommended providing states with credit for prior CO2 reductions as an option towards meeting reasonable national targets for red ucing CO2 emissions. Commenters added the EPA should work with states to adjust the goals rel ating to building block 2 to a level that recognizes early actions, and acknowledges the impo rtance of fuel diversity.

Forced early retirement and reliability. Commenters added that the proposal threatens the nation's electricity supply by forcing coal plants to remain idle or shut down before replacement power is in place, and would not allow owners to re coup investments on pollution control technologies already outfitted on newer units and o btain the remaining useful life of the coalfired EGU's.

Transferring credit to affected EGUs. Commenters su pported owners or operators of nonemitting units or efficiency programs be allowed to use the credit for meeting its compliance obligations under the section 111(d) program or tra nsfer the credit to affected EGUs for their compliance use under the program. The commenters st ated that in the case of existing affected fossil-fuel fired EGUs that retire prorate to the s tart of the interim goal period, a state would assume the unit's generation was replaced by existi ng NGCC generation located with the state.
The commenters added that the credit could be based on the reduction in emissions caused by the change in generation location.471

Credit for coal to NGCC switch in 2005. Commenters contended that they repowered coal units to natural gas combined cycle in 2005 and realized substantial CO2 emission reductions. The
commenters added that reductions resulted from an a greement with EPA's ongoing New Source Review enforcement program. The commenters objected to EPA's proposal not giving credit for these reductions which were a result of agreement w ith EPA. The commenters added that the reductions were included in a voluntary, but legall y binding greenhouse gas trading program
from 2003-2010.

Credit for retirements since 2005 and those schedul ed to occur by 2015. Commenters said states
must be allowed to take into account the substantia l CO2 emissions reductions that have occurred since 2005 (i.e., the shutdown of nine (9) coal-fired units in West Virginia), and those which are scheduled to occur by 2015 (i.e., the shu tdown of an additional nine (9) coal-fired units in West Virginia).

Comment 59: The EPA should check eGRID data for more appropria te baseline.

Response 59: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated the NODA also attempts to address EPA's use of a single year (2012) as the baseline from which state goals are calculated. The commenters said EPA's use of 2012 penalizes states like Texas that are already implem enting the measures in the building blocks. The commenters said extending the baseline to cover 2010 or 2011 or some other combination is
not sufficient. The commenters said EPA must releas e and analyze eGRID data for a significantly longer period of time in order to ass ess what an appropriate baseline might be. The commenters said for a state like Texas, such a base line would likely extend further back than 2010. The commenters said without additional analys is of these data, and without EPA making data from prior years available, it is difficult to predict whether any of these options presents an improvement on EPA's proposal. The commenters said EPA's barebones "notice" and the limited amount of time it has provided for comment simply d o not allow for adequate analysis; if EPA wishes to alter its proposal to use a different bas eline, it must issue a new proposal and allow for full public comment on that proposal.

Comment 60: General comments about using 2005 as the baseline

Response 60: See section VI of the final rule preamble of the C PP for the EPA’s response to this comment regarding the baseline year.

The following are summaries of the specific public comments under this comment:

Commenters stated in terms of timeframe the base ye ar of 2005 is problematic. The commenters said many utilities, since 2005, have closed coal f ire power plants, largely due to the472

obsolescence and inefficiency of some of these plan ts, and other market changes. The commenters said in that respect they would be recei ving, under the regulations, automatic credit for those plants that have already been closed due to these market and engineering forces.

Commenters stated the proposal to cut carbon pollut ion is based on 2005 levels. The commenters said 2005 was close to the peak year of U.S. carbon pollution, so EPA's baseline is already skewed toward the highest level of carbon. The EPA Fact Sheet states that the proposal will maintain an affordable, reliable energy system, whi le cutting pollution and protecting our health now and for future generations, but in reality this is just not true. The commenters said a healthy,
sustainable future cannot afford the amount of carb on the plan allows for; it's not possible.

Commenters were concerned that EPA is using a stand ard that's a few years old instead of using 2012 or '13 as the base; it weakens the net result of what the rule does.

Commenters stated the EPA's targets for reducing ca rbon dioxide pollution by 2030 are too low and do not do enough to reduce our risk from climat e change. The commenters said under the proposed rule, overall US greenhouse gas emissions will still be higher in 2030 than they were in 1990; that's well below the level recommended by th e Intergovernmental Panel on Climate Change, which says developed nations must hit targe ts 20 - 40% below 1990 levels in order to
avoid extreme climate scenarios.

Commenters stated the EPA says that the rule will c ause the US power sector to reduce overall carbon pollution in 2030 by 30% from 2005 levels. T he commenters said using that year as a baseline reflects a more lenient approach than many analysts expected. The commenters said the US burned a lot of coal in 2005 due to disruptions to the natural gas infrastructure caused by
hurricanes Katrina and Rita in the Gulf of Mexico. The commenters said the 2005 baseline also allows the US to claim credit for pollution reducti ons that happened when our economy shrank during the great recession. The commenters added, t he EPA rule allows states to count carbon dioxide reductions from coal plant retirements that were already in the works before the rule was established; for example, by the time the rules tak e effect next year, Kentucky will have achieved 11 percentage points of our 18 percent reduction ta rget without doing anything more than
business as usual.

Commenters stated the proposed rule, if fully imple mented, is projected to result in a 30% reduction in carbon dioxide emissions from power pl ants below 2005 levels by 2030. The commenters said according to calculations by the Ce nter for Biological Diversity, this corresponds to only a 7.7% reduction from 1990 - th e base year accepted by the United Nations Framework Convention on Climate Change. The comment ers said by using a misleading base year of 2005, the high point of economic activity p re-recession, the rule takes dubious credit for carbon dioxide reductions that occurred largely bec ause of economic decline. The commenters said as long as the U.S. continues to rely mostly o n fossil fuels, these are not reductions that can be sustained with future economic activity and popu lation growth; furthermore, as discussed in the next section, much of that reduction is anticip ated to come from greater reliance on natural gas, resulting in a surge of methane emissions that is likely to undermine climate benefits.

Commenters stated according to EPA's description of the proposed rule, "[n]ationwide, the Clean Power Plan will help cut carbon pollution from the power sector by 30 percent from 2005473

levels." The commenters said while EPA can take som e credit for some of the falling emissions in recent years, it certainly isn't due to the new carbon rule because it didn't even exist yet; it is misleading to refer to a 2005 base year to judge wh at this rule will accomplish. The commenters said the most recent year included in the newest EP A greenhouse gas inventory is 2012; between 2005 and 2012, emissions in the power sector fell o ver 15%; emissions fell 10% economywide.
The commenters said if 2012 emissions are used as t he basis, the best case scenario is this rule achieves not quite a 15.88% cut from power CO2 by 2 030; at best, referring to data provided in the RIA, the proposed rule achieves less than a 5.9 6% decrease in economy-wide CO2 between
2012 and 2030.

Commenters stated that they strongly urge U.S. EPA to consider how states can take credit for early adoption and shutdown measures taken after 20 05, the year U.S. EPA is using as a baseline
for 30% in CO2 emission reductions.

Comment 61: Should the EPA credit early action taken by states to reduce carbon emissions; if so, how.

Response 61: See section V of the final rule preamble for discu ssion of the final BSER
determination. See sections VI and VII of the final rule preamble of the CPP for discussion of the subcategory-specific emission performance rates and state goals, respectively. See section VIII of the final rule preamble for discussion of state plans.

The following are summaries of the specific public comments under this comment:

Commenters said the clean energy programs developed in Minnesota, Colorado, and the other states we operate in should serve as models for car bon abatement strategies across the nation. The commenters said in fact, these programs are exa ctly the kinds of initiatives that the proposed Clean Power Plan is designed to encourage. The comm enters said they have already resulted in dramatic reductions in greenhouse gas emissions wit hin our system. The commenters said Xcel Energy has already reduced its carbon dioxide emiss ions by 19 percent from 2005 levels and will achieve a reduction of at least 31 percent by 2020, 10 years earlier than the administration's 2030 target.

Commenters said although we are proud that our clea n energy leadership has achieved so much while maintaining reasonably priced power, these in itiatives have not been free - our customers are funding billions of dollars of investments to m ake them a reality.

Commenters said unfortunately, the Clean Power Plan virtually ignores these investments - it would provide very little credit to existing state clean energy programs. The commenters said the proposal would give an easier compliance path to st ates that resisted clean energy in the past, and even worse, the Clean Power Plan actually punishes states that are clean energy leaders.

Commenters said for example, building blocks 1 and 4 of the proposed rule discount the fact that the cheapest coal plant and customer efficiency pro jects and programs have already been completed in leading states. The commenters said Bu ilding block 2 requires greater emissions reductions in states such as Minnesota that, prior to 2012, replaced aging coal plants with natural474

gas combined cycle units. The commenters said Block 2 also punishes states that balance their intermittent renewable energy with natural gas plan ts. The commenters said finally, block 3 requires greater emissions reductions in states and regions that have moved forward with renewables under progressive renewable standards. T he commenters said in other words, the proposed rule takes clean energy leadership for gra nted and would establish more aggressive targets in states that committed early to clean ene rgy leadership.

Commenters said over the last decade, our states co mmitted to clean energy on the promise that leadership would give them a head start under feder al climate policy. The commenters said there is still time to make this promise a reality. The c ommenters said we believe that a few simple changes to the Clean Power Plan will credit early e missions reductions without significantly altering the structure or environmental benefits of the rule. The commenters said Xcel Energy
will continue to work with EPA to ensure that the n ation's climate policy recognizes the value of clean energy leadership.

Commenters said state and private sector leadership in addressing pollution is something that should be recognized and supported. The commenters said of course, under the Clean Power Plan, states and companies that have already transi tioned toward lower-carbon and zero-carbon energy and energy efficiency are closer to the full deployment of the best system of emissions
reduction than others - and EPA should consider cla rifying that states that go beyond their targets
under the Clean Power Plan would receive credit for those actions under future updating of the carbon pollution standards for power plants.

Commenters said the proposed Clean Power Plan curre ntly states: "Emission impacts of existing programs, requirements, and measures that occur dur ing a plan performance period may be recognized in meeting or projecting CO2 [carbon dio xide] emission performance by affected EGUs according to section 60.5740(a)(3) and (4), as long as they meet the following requirements: Actions taken pursuant to an existing state program, requirement, or measure, such as compliance with a regulatory obligation or initi ation of an action related to a program or measure, must occur after June 18, 2014."

Commenters said credit for early action should be p rovided for in the final EPA regulation.

Commenters said the agency should also be aware tha t only counting emissions reductions from 2020 to 2029 creates a perverse incentive for state s and utilities to defer implementation of programs that reduce energy waste, and thus prevent pollution of many kinds, until 2017 or later. The commenters said in Michigan, for example, Publi c Act 295 of 2008 set requirements for increased renewable energy and for programs that in centivized energy waste reduction - and implementation continued despite the deep economic crisis and rising energy costs in the state during the intervening years. The commenters said i f the federal Clean Power Plan disallows counting of such measures toward the state's goal - or worse, would disallow credit for pollution reductions achieved by such measures until 2017 or later - EPA is actually creating an incentive to repeal Michigan's (and other states') laws that currently reduce all pollutants. The commenters said moreover, it is clear that many states do not have mandatory energy efficiency requirements in place, and as drafted, the rule would further di scourage their adoption prior to 2020. The commenters said this will likely result in more CO2 (as well as increases in other pollutants, including mercury, acid rain precursors, and partic ulate matter) being emitted into the475

atmosphere than might occur under a final rule that encouraged early investment in pollution prevention.

Commenters said the EPA states that concerns over t he "acceptable" lifetime of various measures led to the decision to propose not crediting earlie r reductions. The commenters said although it can be argued that some waste reduction measures ha ve a shelf life, these should not be difficult to establish, as "payback" figures are abundant in available information and other parts of the federal government have expertise setting depreciat ion schedules that assume reasonable lives of a variety of assets. The commenters said additional ly, the "shelf life" of measures such as added insulation and replacement windows is so long that there should be no concern. The commenters said in most cases, the emissions reductions will n ot be "lost," but continue to provide quantifiable pollution reductions for years to come

.