UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

AIR AND RADIATION 

MEMORANDUM 

Subject: 

From: 

To: 

Summary of Stakeholder Meetings 

Carissa Cyran 

Dockets EPA-HQ-OAR-2013-0602, EPA-HQ-OAR-2013-0603, and EPA-HQOAR-2013-0495 

This memorandum summarizes meetings with stakeholders during the week of May 25, 20 15. 

On May 26. Administrator Gina McCm1hy, Acting Assistant Administrator Janet McCabe and 

Associate Assistant Administrator for Climate and Senior Counsel for Air and Radiation Joseph 

Goffman met with Christophe Crane and other representatives of Exelon, and Marv Fertel of the 

Nuclear Energy Institute. Sign-in sheet and presentation are attached. 

On May 28, Acting Assistant Administrator Janet McCabe and Associate Assistant 

Administrator for Climate and Senior Counsel for Air and Radiation Joseph Goffman spoke with 

Phil Smith of the United Mine Workers Association. 

On May 29, Associate Assistant Administrator for Climate and Senior Counsel for Air and 

Radiation Joseph Goffman met with Tom Lorenzen. 

Internet Address (URL) · http 1/wwwepa gov 

Recycled/Recyclable • Pnnted wtth Vegetable Otl Based Inks on 100% Postconsumer. Process Chlorone Free Recycled Paper 
Date: May 26, 20 15 

Meeting: Meeting with Exelon and Nuclear Energy Institute Representatives 

Rule(s) Discussed: CPP 

Written Material: Yes 

Name Title and Organization 

Christopher Crane President and CEO, Exelon 

Marv Fertel Prcsiqcnt and CEO of the Nuclear Energy Institute 

Joseph Dominguez Executi ve Vice President, Govenunental and Regulatory AJTairs and 

Public Policy, Exelon 

Kathleen Barron Senior Vice President. Federal Regulatory Affairs & Wholesale Market 

Policy. Execlon 

Kathleen Robertson, Senior Environmental & Fuels Policy Manager, Federal Regulatory 

Affairs. Execlon 

Janet McCabe EPA 

Joe Goffman EPA 

Administrator Gina McCar1hy EPA 
lll(d) -Summary of Concerns and Solutions 

Issue 1: Ensuring that the rate-based methodology reduces emissions 

Concern: 

The proposed rule contains a compliance loophole that could result in higher than status quo carbon 

emissions if existing zero-carbon resources are retired and repla ced with fossil fuel-fired units. This 

loophole compromises the effectiveness of the rule and exposes EPA and the United States to legal and 

political arguments that the rule will be ineffectual. 

Solutions (in order of effectiveness): 

1. Include the entire generation fleet in the development of the target emission rate 

2. Mass-based check for states that elect rate-based compliance 

3. Subtract prematurely retired MWs of zero-emission generation from the state's emissions rate 

(so-called denominator-deduct); effectively requires replacement with other zero-carbon MWh 

4. Provide compliance incentives for states to preserve units that have been uprated and produce 

incremental electricity during a license extension period that begins post-2012 

Issue 2: Providing adequate incentives for states to adopt mass-based compliance systems 

Concern: 

The proposed rule did not create sufficient incentives to use regional approaches that co-optimize 

reliability and GHG reductions. 

Solutions: 

The Reliability Dispatch Safe Harbor (ROSH) program that has been endorsed by states, EEl, 

environm ental organizations, and grid operators will co-optimize reliability and environmental 

reductions beginning on or before 2020. 

In addition to ROSH, EPA could incentivize states to choose mass-based compliance, which also sends 

the correct market signals, such as: 

• Provide a default/presumptive mass number for each state and express it alongside and equal 

to the rate target 

• Conduct streamlined review of state plan submittals that include participation in a multi-state 

mass-based program 

• Preparation of a model rule or a national tracking system/platform that would allow for the 

creation and trading of C02 emission allowances to further alleviate states' administrative 

burdens 

• Introduce detailed administrative requirements, accounting rules, and 'burdens of proof in 

instances where a state builds a plan based on a rate-based approach and wants to trade 

emissions-reduction credits from a state with a mass-based approach, and vice versa, to 

prevent emissions leakage 

• Allow states that choose a mass-based approach to adjust the mass-based cap in some known 

way to address load growth 
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Nuclear Generation is Integral to a Low-Carbon Pres

Future 

• Nuclear generation provides 63 percent of U.S. zero-carbon electricity, with unp

and reliability. 

• However, many units are at risk now. Four of our Illinois units did not clear the l

which means that their costs of continued operation are higher than the capaci

and our Clinton unit is in MISO and thus does not receive a forward capacity pa

- As a result, these units (which represent 43% of the state's nuclear generatio

capacity commitment for the 17/18 planning year. 

- Ch ief among the factors causing this is the absence of market mechanisms to 

carbon-free nature of nuclear power. 

- We do not expect the factors driving these economics to change in the near-te

rulemaking. 

- We originally were on a schedule to make decisions about whether or not to r

challenged units by the end of 2014, but at the request of policymakers, have 

that decision until this year to accommodate the legislative calendar. 

• However, the exclusion of nuclear from the 111(d) rule has reduced the Leg

of urgency and we do not expect legislative action without a strong final rule

postpone indefinitely if we continue to lose money on these units. 

• If these units retire, they cannot be mothballed and later brought back online. T

represent nearly 40 million metric tons of avoided C02 emissions annually. 

- Over their license lives, these units would avoid nearly 400 million metric tons 

- The entire nuclear fleet in Illinois represents avoided emissions of 65 million m

C02 per year, or more than half the state's projected mass-based limit. 

• In addition, the NY and NJ units already scheduled to close presently avoid over 

tons annuallv. 

1 
Nuclear Economics Retirements

2 

• More than 4,000 MW of nuclear generation has recently retired: 

Plant Megawatt (MW) Location Owner 

Crystal River 3 860 Florida Duke Energy Florida, Inc

Kewaunee 556 Wisconsin Dominion Resources, In

San Onofre {SONGS) 2,200 California Southern California Edis

Vermont Yankee 605 Vermont Entergy Corporation 

• Recent client reports from Moody's and Fitch have identified over 10,000 MW 

nuclear generation is at risk of retirement: 

Plant Megawatt (MW) Location Operator 

Byron 2,336 Illinois Exelon Generation C

Clinton 1,065 Illinois Exelon Generation CGinna 583 New York Exelon Generation C

Oyster Creek * 637 New jersey Exelon Generation C

Quad Cities 1,871 Illinois Exelon Generation C

Three Mile Island 852 Pennsylvania Exelon Generation C

Fitzpatrick 838 New York Entergy Corporation 

Pilgrim 688 Massachusetts Entergy Corporation 

Indian Point 2,069 New York Entergy Corporation 

Davis-Besse 900 Ohio FirstEnergy Corpora

*Exelon has previously announced that Oyster Creek will retire in 2019 
Costs of Reducing or Avoiding C02 Emissions from E

Power Generation 

100 ~ 80 

0 

u 

"i ~ 0 ~ 50 

c 

0 ~ 1b 

0 

u 40 

20 

0 

8 ~ .§i~ ~0 ..... ~ ~ ~ 17 ~ ~ ~ ~ ~ ~(Jr ~<e .:tli;- §~ ~ Source: EPA 

3 

24 ~~ 40 21 . -·········· .x ... ...... -- -·X 10 40 30 33 - >< " ·· ... --- ~ $' "' 4J -5"~ ~ ~~ li; ~ ~ 4 ~- .I ~ / ~­ ~ ~ ;§ ~~ Q; ::.§' ~~ ~ ~t? <if ~~ (Jd -.& "' ;§ .41 r# w ~ ~ $ 14! ~ so· d ~ ~ ~qj 

.:' 

~ ~ "' cJ'i$> •'!-.q- V:J~ 
Nuclear Retirement Impacts C02 Emissions 

4 

• OPSI asked PJM to analyze a number of compliance scenarios, including a high nuc

scenario. C02 emissions would be much higher under CPP compliance with 50% n

retirements. As carbon prices grow to $30 and more, new CCGTs (111b) and existi

carbon cost) are dispatched ahead of existing coal and CCGT. 

500 48 5 

450 

400 

397 

350 

300 

250 

2020 

PJ M Forecast of CPP 

C02 Emissions (n1n1 Tons) 

475 

462 

2025 2029 

- No Nuc Retire - 50''/ Nuc Retire - Cap 

Source: PJM Economic Analysis of EPA Clean Power Plan Proposal 3/2015, OPSI Cases 2a, 2b.4 

111

Emis

} 111

Em is
Nuclear Retirement Impacts CPP Complia

• PJM forecasts that CPP compliance costs would be significantly higher with 50% nu

retirements. The carbon price and total cost will be roughly triple the cost of CPP co

current nuclear units operate: 

PJ M Forecast of CPP 

Carbon Price ($/ton) 

45 

40 

35 

30 28 

25 I I 

20 

1 I 

15 13 

I I 

10 

5 I s I I 

39 

I I 

I I 

I I 

I I 

- I 

Ill 

14 

12 

10 

8 

6 

4 

2 

PJM Forecast 

Con1pliance Co

1

5 

2020 2025 2029 2020 :?025 

• No Nuc Retire • so·;, Nuc Retire • Nc1 Nur RPtirP • 50'

Source: PJM Economic Analysis of EPA Clean Po1\er Plan Proposal 3/2015. OPSI Cases 2a. 2b.4 

5 
Nuclear Economics 

6 

• In the preamble, EPA states that "nuclear units may be experiencing up to a $6/MWH sho

their operating costs with electricity sales." This can be corroborated by an analysis nucle

and historic/forward electricity prices. 

• A relatively modest carbon price (equivalent to roughly $6/MWH) would preserve many ex

nuclear capacity that are currently unprofitable and at risk of premature retirement 

2016 Forecast 

$70 

$60 

......... Contingency* 

co $50 c 

E ~ $40 

.......... 

..c 

3: $30 ~ ........... 

tl7 

Price adder assurnmg 

$10/mtC02 Federal 

-eartJorrPnce-

~ 

.---. 

$43'---' 

---- !'--; 

$20 201 

$10 

$- ,-------------r----' 

Large Large Small 

Dual Nuc Single Nuc S1ngle Nuc 

Source: UBS, ·us Electric Utilities and IPPs". Jan 2013 

Source: Credit Suisse. "Nuclear ... The Middle Age Dilemma·. Feb 2013 

*Contingency does not include return on investment 

MISO Upstate NY Western Eastern 

P JM P JM 

AII·Hours Energy Forwards for 2016 delivery as of 9

MISO basis IS assumed (90% of NiHub). NY capactty 
Reliability Dispatch Safe Harbor Overview 

• Proposal addresses many legitimate concerns with compliance during the inte

including sending a price signal to maintain existing nuclear and hydropower (

if EPA bases BSER only on incremental RE). 

• Numerous commenters recommended the option during and after the comme

including EEl, EDF, Exelon, Calpine, and Third Way. 

• Many more expressed concern with pace and timing of interim requirements 

solutions. 

• Such a safe harbor would eliminate states' compliance risk (including that w

other states' choices), effectively cap consumer costs, and provide a market

to preserve existing and invest in new zero-carbon resources. 

• Translates the requirements of the Clean Power Plan (CPP/111(d)) to the lang

cost dispatch. 

• Would function as an Alternative Compliance Payment (ACP) for fossil units n

reliability. 

• Co-optimizes reliability and GHG reduction - neither is at the expense of the o

• The safe harbor option would be voluntary- a state that opts into the program 

deemed compliant. 

• In this way, similar to final 316(b) rule compliance options for impingement m

7 
Reliability Dispatch Safe Harbor Mechanics 

• Under this option, EPA would develop a single, predetermined cost-per-ton of C

wou ld apply it to each unit based upon its emissions, resulting in a unit-specifi

that would be included in the unit's market bid (for units in RTOs). 

• If that unit was dispatched, the RTO (or similar entity) would retain the C02 cos

load-serving entities. (Generators would receive the remaining portion of their 

• LSEs could then refund those carbon fees to their customers, thereby reducing 

impacts, or alternatively, otherwise use the funds to reduce customer costs (e

transmission charges or other payments). 

• Majority of credible regional studies show a carbon adder of between $15 and 

achieves overall interim goals. 

8 

• This comports with the cost-effectiveness assessment included in the propos

• This is an opportunity for tile Agency to agree that cost-effective reductions a

the interim period. 

• Th is is dependent on all states implementing something equivalent, not all s

implementing ROSH. 
Reliability Dispatch Merchant R

• An RTO re-dispatch with carbon will reduce emissions by increasing gas generation 

generation during certain hours of the year: 

Without RTO Re-Dispatch (C02 emissions during hour= 1,050 tons) 

Generators 

Nuclear 1000 MW 

Coal1000 MW 

Gas 1000 MW 

1) Generators bid fuel: 

Nuclear $7 /MWH 

Coal $32/MWH 

Gas $35/MWH 

4) Generators that run 

receive LMP: 

Nuclear $32/MWH 

Coal $32/MWH 

2) RTO determines 

LM P = $32/MWH and 

gas does not run 

3) Customers pay LMP = 

$32/MWH 

With RTO Re-Dispatch at a C02 price= $15/ton (C02 emissions during hour= 440 tons) 

Generators 

Nuclear 1000 MW 

Coal1000 MW 

Gas 1000 MW 

1) Generators bid fuei+C02: 

Nuclear $7 /MWH 

Coal $47.8/MWH* 

Gas $41.6/MWH* 

4) Generators that run 

receive LMP less 

generator C02 adder: 

Nuclear $41.6/MWH 

Gas $35/MWH 

RTO 

2) RTO determines 

C02 adders 

(Coal $15.8/MWH*, 

Gas $6.6/MWH*) and 

LMP = $41.6/MWH 

and coal does not run 

3) Customers pay LMP 

less C02 credit = 

$38.3/MWH 

($41.6 LMP less C02 

credit of $3.3/MWH 

based on average C02 

adder for all generators 

that run) 

9 *Coal adder based on 1.05 tonsjMWH (10 HRx210 lbs/MMBtu) and gas based on 0.44 tons/MWH (7.5HRx1171b
Reliability Dispatch Regulated Non-RT

• There-dispatch can be accomplished by regulated utilities that are not in RTOs, but t

will be slightly different and the price impact is likely to be lower: 

Without RTO Re-Dispatch (C02 emissions during hour= 1,050 tons) 

Utility Generation 

Nuclear 1000 MW 

Coal1000 MW 

Gas 1000 MW 

1) Determine generation 

fuel cost: 

Nuclear $7 /MWH 

Coal $32/MWH 

Gas $35/MWH _ 

Utility Dispatch 

2) Utility determines 

least cost dispatch 

4) Generation that runs and gas does not run 

receives fuel costs: 

Nuclear $7 /MWH 

Coal $32/MWH 

3) Customers pay 

$19.5/MWH fuel cost+ 

all fixed costs and return 

on ratebase 

With RTO Re-Dispatch at a C02 price = $15/ton (C02 emissions during hour= 440 tons) 

Utility Generation 

Nuclear 1000 MW 

Coal1000 MW 

Gas 1000 MW 

1) Determine generation fuel 

cost with C02 adder: 

Nuclear $7 / MWH 

Coal $47.8/MWH* 

Gas $41.6/MWH* 

Utility Dispatch 

2) Util1ty determines 

least cost dispatch 

with C02 adders 

- (Coal $15.8/MWH*, 

4) Generation that runs Gas $6.6/MWH*) and 

receives fuel costs: coal does not run 

Nuclear $7 /MWH 

Gas $35/MWH 

3) Customers pay 

$21/MWH fuel cost+ all 

fixed costs and return on 

rate base 

1

0 *Coal adder based on 1.05 tons/MWH (10 HRx210 lbs/MMBtu) and gas based on 0.44 tons/MWH (7.5HRx1171b
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Compliance with System Rate 

12 

• If 100% of existing nuclear generation is included in the initial goal-setting algorithm an

formula, the baseline rate (1000 lbs/MWh) will properly reflect the carbon benefits of c

of the existing nuclear. 

• Compliance demonstrations could then utilize 100% of existing nuclear generation. 

225 

200 

175 

150 

125 

100 

75 

50 

25 

Compliance Example with System Rate 

Existing 

Nuclear 

I 100 

Generation 

(Million MWH) 

200 ~ 100 mm tons * 2000 lbs = 1.000 lbs/ MWh 

200 TWh ton 

\ 

100 

100 

C02 Emissions 

(Million Tons) 
Compliance Example - EPA Proposed Rule 

• Only 6% of existing nuclear generation is included in the goal-setting algorithm 

compliance formula, so conti nued operation of nuclear has little impact on the 

• Consider an example with 100 TWh of Coal and 100 TWh of nuclear in a state: 

13 

Compliance Example Including Nuclear 

225 

200 

175 

Excluded 

150 94% of Nuc 

125 

100 

6%*Nuc 

75 

50 Coal 

25 

- ------------· 200 

94 

Generation 

(Million MVvl-1) 

106 

I 

1 00 mm tons * 2.000 lbs = 1887 lbs/MW

106 TWh ton 

100 

C02 Emissions 

(Million Tons) 
Compliance as Proposed with Nuclear Retirement -

Exclude New NGCC 

14 

• States can choose whether or not new NGCC is counted in the existing unit ru

If the nuclear units retire and the state excludes new CC generation (or if rep

is generated by out-of-state gas units) overall emissions can increase by roug

the rate result is unchanged. 

• Only 6% of the nuclear is included in the rate calculation, so only 6% of the re

must be replaced by new clean generation in order to keep the rate result lev

225 

200 

175 

150 

125 

75 

50 

25 

Compliance Example 

200 

1

-------- ~ 100 mm tons* 2.000 lbs = 1,8871bs/MW

I 

I 

Excluded 1 

NewNGcc : 

or Imports 1 

Coal 

94 

Generation 

(Million MWH) 

' 106TWh ton 

~ 

! I \ 

: 139 ~--------~ 

1 106 1 39 1 

I I I 

100L - - 1 

-I 

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(Million Tons) 
Compliance as Proposed with Nuclear Retirement -

Include New NGCC 

15 

• If the nuclear units retire and the state includes new NGCC generation in its 

C02 emissions can increase by 40% and the rate result actually decreases. 

• Adding NGCC generation to the mix can lower the average rate in the state (a

the proposal). 

Compliance Example w/ New NGCC 

225 

200 

175 

150 Included 

125 New NGCC 

100 

75 

50 Coal 

25 

-

Generation 

(Million M\fv11) 

200 

141 mm tons * 2,000 lbs = 1,410 lbs/MW

200 TWh ton "" 

\ ""' 

141 

C02 Emissions 

(Million Tons) 
Compliance with Nuclear Retirement -

Denominator Adjustment 

16 

• If a pre-maturely retiring nuclear unit is fully replaced with new zero-emission gen

rate result is equivalent to continued operation of the nuclear units, and overall e

increase. 

Proposed Compliance 

225 

200 

New 

20

~ 100 mm tons 175 * 2000 lbs = 1887 lbs/MW

150 

RE/ EE - 125 I ' 100 100 75 

50 I 100 I I I 100 

25 Coal 

(25) 

(50) 94% of 

(75) Retired 

(100) 

(125) {94) Generation C02 Emissions (Million MWH) tMillion Tons) 

'