### From: "Cromwell, Ted T." <ted.cromwell@nreca.coop> To: Melanie King/RTP/USEPA/US@EPA Cc: "Cronmiller, Rae E." <rae.cronmiller@nreca.coop>

Date: 09/20/2012 07:28 AM Subject: NRECA RICE suggestions

Hi Melanie, NRECA’s recommendations are attached. The first couple of paragraphs/bullets were taken directly from the Executive Summary in our August 9, 2012 comments. The rest of the package includes the additional details and supporting information that were discussed in our recent meeting.

Please let either Rae or me know if you have questions/clarifications on what we’ve submitted.

Thank you for this opportunity to further explain these issues.

Ted

T. Ted Cromwell Senior Principal, Environmental Policy National Rural Electric Cooperative Association (703) 907-5706 (office) (703) 795-0719 (mobile)

Confidentiality Notice: This e-mail message, including any attachments, is for the sole use of the intended recipient(s) and may contain confidential and privileged information. Any unauthorized review, copy, use, disclosure, or distribution is prohibited. If you are not the intended recipient, please contact the sender by reply e-mail and destroy all copies of the original message. (See attached file: RICE demand response final.pdf)NRECA appreciates EPA efforts to improve the RICE MACT requirements, particularly for the activities

that would be considered allowable for emergency RICE units. Putting context on these proposed changes, EPA clearly indicates that emergency RICE units could be utilized for a range of operations within, and up to, the annual 100 hour limit without causing adverse health or environmental impacts. NRECA agrees with EPA’s assessment and our comments on the proposal include recommendations that can further improve the proposal without increasing use of emergency RICE units beyond the 100 hour limit and therefore would continue to pose no adverse health or environmental impact.

NRECA supports EPA’s decision to allow emergency RICE units up to 100 hours of op eration for demand response and testing and maintenance activities. We support EPA’s decision to temporarily provide these emergency RICE units up to 50 hours for load management activities until April 16, 2017 and for EPA’s provision for up to 50 hours for non- emergency activities. Further, NRECA’s comments will provide justification to remove the sunset provision for load management and to expand load management activities up to 100 hours. We will also provide justification for expanding the definition for triggering demand response to better address local emergency conditions.

NRECA has identified several areas of concern and has provided solutions including:

 The proposed allowance for emergency RICE to be used for up to 100 hours for emergency demand response should include situations where the “local balancing authority or transmission operator” within the local electric system determines that electric reliability including power quality is in jeopardy.

 The proposed allowance for emergency RICE to be used up to 100 hours should include all demand response, load management or non-emergency use without the 50 hour limitation and without any sunset.

 Alternatively, the proposed allowance for emergency RICE to be used up to 50 hours for nonemergency situations after the 2017 sunset should be revised to 100 hours for non-emergencies to include load management except where the RICE generation is distributed to the electric grid.

 EPA should provide appropriate compliance date relief for RICE units subject to these requirements if the final RICE regulations fail to incorporate the proposed increases in emergency RICE operational limit for non-emergency use.

 EPA should adopt work practice standards (WPS) or Generally Available Control Technology (GACT) standards for any RICE units located in remote or sparsely populated areas as defined in the proposal.

Adding a more practical definition of emergency demand response

§63.6640(f)

(ii)

– Emergency stationary RICE may be operated for emergency demand response for periods in which: (a) the regional transmission authority, or equivalent balancing authority and transmission operator has declared an Energy Emergency Alert Level 2 (EEA Level 2) as defined in the North American Electric Reliability Corporation Reliability Standard (NERC) EO P- 002

- 3 Capacity and Energy Emergencies, or (b) the dispatch follows reliability, emergency operation or similar protocols that either directly or indirectly follow NERC, regional, state, public utility commission or local standards or guidelines 1

(iii) Emergency stationary RICE may be operated for periods where this is a deviation of voltage or frequency of 5 percent

or greater below standard voltage or frequency 2

.

1 http://www.nerc.com/page.php?cid=2|20

2 Modern generating equipment may not be operated at frequencies below 5% of 60Hz.Demand Response Background

A key component 3 in ensuring electric reliability at bulk power electric system level includes measures that are taken to prevent system failures, including those at the sub-regional or local distribution levels

. Appropriate actions do avoid cascading effects that otherwise result in bulk power or region-wide disruptions or even blackouts 4

. In many cases potential reliability issues at the sub regional levels are not detectable at the bulk electric system level because reliability planning activities are not always conducted at voltages below transmission levels 5 . Even so, electric systems having sub-transmission or distribution networks necessarily falling outside of FERC or federal jurisdiction have very significant incentives to take

measures as necessary to prevent these system failures and ensure local sub-transmission and distribution reliability

. Further, there are potentially heavy penalties associated with the failure to adhere to NE RC reliability standards. In some areas of the US, there are also requirements imposed by regional, state or local entities, even those which occur at lower voltages.

Reliability or emergency action protocols guiding these sub-regional electric system operation s might be administered by any one of several entities, but they are similar in purpose to those at the bulk electric system levels, which is to provide guidance for operation to avoid system failures and preserve reliability at

the local level.

Limiting emergency RICE operation to situations when EEA level 2 is incurred might prohibit or at the very least strongly discourage necessary RICE operation at local second-contingency conditions that would otherwise ensure electric reliability and power quality, and would more broadly ensure the integrity of the nation’s bulk pow er systems. Extending allowed emergency RICE use that follows or mirrors protocols established by NERC or other organizations having responsibilities for bulk electric system reliability or emergency operation, (such as that referenced under EEA Level 2 ), will ensure that RICE regulations do not jeopardize the local or sub-regional grid reliability which is also necessary to protect human health.

In practice, the use of RICE generators should be allowed when called upon by the balancing area authority to mitigate local transmission and/or distribution limitations so as to avert potential (pre-contingency) voltage collapse or line overloads that, if no mitigation were to occur, could lead to the interruption of power supply in a local area 6

. These steps are more akin to meeting EEA Alert Level 1 where actions are taken in anticipation of an energy deficiency to prevent an escalation. These events can occur even when a balancing area or region has more than adequate energy resources to meet their load, but deliverability into a local area is constrained due to transmission or sub-transmission outages that are either planned or unplanned or areas with inadequate transmission available to import power. While these types of interruptions can result in power loss to thousands of consumers, they do not rise to the EEA level 2 because they are not energy related and they may not materially impact Bulk Electric System reliability (i.e., cascading transmission outages or instability) or they are within a Transmission Operator footprint in non-RTO / ISO areas. Today, these types of interruptions are routinely identified by Transmission Operators who, anticipating low-voltage situations, take appropriate steps which may include the operation of RICE generators as a pre-contingency measure to mitigate the loss of load due to the occurrence of a second-contingency event.

These events can be and are documented on a local level. Operation of RICE generators for such circumstances should be allowed when the responsible Transmission Owner/Operator has a documented

3 Elements of electric system reliability planning include the assurance of adequate installed capacity, available energy producing resources, and sufficient transmission infrastructure to meet anticipated customer loads at design voltage and frequency conditions.

4 This second condition leading to the interruption of service is commonly called a second contingency, that is, an event that by itself would not lead to an interruption of service (line interruption due to weather-related events), but which following on the heels of an earlier event (the unplanned generating unit outage) has the combined effect of causing the

loss of load.

5 Bulk electric system (BES) transmission voltage level is that which is greater than 100 Kv

. Voltage levels below those are simply call ed “sub

- transmission” or distribution.

6 Mitigating pre-contingency actions that can be undertaken include shifting loads between or among different transmission lines, shifting loads among or between different distribution lines or circuits, the operation of municipal generation, load control by shedding interruptible loads and implementing demand response measures, public appeals to reduce the use of electricity, and finally rotating outages. These are also post-contingency actions when restoring the grid after the loss of load.mitigation plan approved by the appropriate regional coordinating group that provides for RICE generators

to operate. The mitigation plan may specify procedures and alternatives for mitigating the interruption ; such alternatives could include measures such as the implementation of demand-side management

, reduction in supply to interruptible customers, and load shedding on a pre-contingency basis in addition to the use of RICE generators. The use of emergency generation including RICE generation is preferred to any preventable black out.

Under an approved mitigation plan, the Transmission Operator would direct load-serving entities and distribution providers in the local affected area to reduce load on a pre-contingency basis to avert localized voltage collapse o r line overloads. Use of RICE generators, which are within the local area, can accomplish all, or part of the required load reduction and thus support voltage stabilization to mitigate the interruption before it can impact the bulk electric system. RICE generator use should be permissible anytime they meet the requirements of a mitigation plan facilitating pre-contingency load interruption as documented in a regional, or Reliability Coordinator wide, transmission advance assessment. Distribution Providers and Load Serving Entities should also be permitted to use RICE generators in response to a Transmission Operators (Transmission Service Provider) directive to reduce load and to support voltage requirements on a pre-contingency basis to avert a blackout of the local area. In those instances when mitigation plans have not been developed and approved in advance of the event, evidence (voice recordings of directives or emails) can be retained to demonstrate that operation was for reliability purposes and in response to a NERC Transmission Operator directive.

Allowing compliance with annual hours of allowed operation based on three year rolling average

Compliance with any hours of limitation in §63.6640 shall be based on a calendar year three-year rolling average with the first annual compliance period beginning three years after the year in which the June 7, 2012 proposal is finalized.

Rolling Average Background

The very nature of emergency RICE annual operation is based on unpredictable circumstances that require use of these units to address reliability 7 and emergency operations 8

. Data on these triggering events demonstrate that the annual limitation on average is expected to be well below the numerical limitations in the existing and proposed RICE regulations. However, as several commenters have noted in the response to the June 7, 2012 proposal certain events such as those that have occurred in the past, while rarely occurring, may necessitate emergency RICE operation that surpasses the proposed annual limitations.

Currently, EPA’s proposal would permanently bar any RICE unit from maintaining its “emergency status” if its operation exceeds any of the proposed annual hours of limitation thresholds. The requirement is unnecessarily draconian and would severely penalize RICE owners and operators who took actions necessary to ensure reliable power for consumers during rare unanticipated events.

Incorporating a three-year rolling annual average would allow RICE owners and operators latitude to operate the RICE units in these instances without undue concern of losing emergency status. By determining annual compliance over a three-year averaging period there is a high probability that, even if a

unit’s individual yearly operation should surpass an annual threshold, the three-year annual rolling average limitation could most likely be met.

7 Pre-contingency actions or measures

8 Post-contingency actions or measuresSample quotes from the docket consistent with NRECA’s recommendations :

“ There may be unique circumstances related to particular transmission constraints, load pockets, or other conditions on the grid that require operation of certain RICE to operate purely to address legitimate reliability concerns unrelated to the economic dynamics associated with competitive power markets. Accordingly, the exemption from emissions controls provided by the Proposed Rule should only be available for emergency RICE that operate exclusively for reliability and do not participate in an ISO- or RTO-organized competitive wholesale market and receive revenue as a result of procurement of their

resource in such market. ” [August 9, 2012 Calpine Corporation comments ID EPA- HQ -OAR- 2008

- 0708

- 1134 ]

“...EPA should, at a minimum, prohibit backup generators from exploiting the exemptions(s) to obtain capacity payments, since the sal e of capacity occurs even in hours where no emergency has been declared.” [August 9, 2012 EPSA Comment ID EPA- HQ -OAR- 2008 -0708-1123]

“In California, since the mid-1980s, investor-owned utilities have been authorized to offer optional “interruptible or curtailable” electric service to customers at discounted rates in exchange for the customer reducing power consumption from the grid during periods when available grid power is insufficient to meet all demand while maintaining an adequate reserve margin. These interruptible programs serve as a type of insurance policy against uncertainty and function to provide statewide grid reliability and reduce the probability of experiencing rotating outages or catastrophic system collapse. [August 9, 2012 CARB

comments EPA- HQ -OAR-2008- 0708 -1012]

“Emergency engines in New Hampshire are permitted for up to 500 hours per 12 -month consecutive period with no special carve outs for emergency DR. NHDES made the above change because it believes that the air quality impacts from operating emergency engines to prevent a power outage are outweighed by the public health impacts created if a power outage were to occur.” [August 9, 2012 NHDES comments ID

EPA- HQ -OAR- 2008

- 0708 -1088]

“We believe that the proposal to implement management practices as generally available control technologies for these remote engines is appropriate. NACCA request that the remote exemption proposed for certain existing spark-ignition engines at area sources of HAP emissions also be extended to existing remotely located agricultural compression engines at area sources of HAP emission in federal attainment areas and areas that do not significantly impac t nonattainment areas.” [August 9, 2012 National Association of Clean Air Agencies comments ID EPA- HQ

- OAR

- 2008

- 0708 -1047]

“Emergency engines in New Hampshire are permitted for up to 500 hours per 12 -month consecutive period with no special carve outs for emergency DR. NHDES made the above change because it believes that the air quality impacts from operating emergency engines to prevent a power outage are outweighed by the public health impacts created if a power outage were to occur.” [August 9 20 12 NHDES comments ID

EPA- HQ -OAR- 2008

- 0708 -1088]

“Denver Water recommends that the 50 hours be increased to the 100 hour limit that can also be used for testing/maintenance, emergency demand response, and other non-emergency uses. Also, Denver Water

recommen ds that the April 16, 2017 cutoff date be eliminated... Since these engines are very rarely called for non-emergency demand response, there are no additional public health risks or emissions because the operation of the engines is minimal. If Denver Water were required to install the required diesel oxidation catalysts and other engine upgrades along with performing stack testing and other requirements... the associated costs would require Denver Water to remove its engines from the non-emergency demand

respon se program... This could lead to an increase in central power capacity being required.” [August 9,

2012 Denver Water comments ID EPA- HQ -OAR- 2008 -0708- 1065]

“If facilities have to install diesel oxidation catalysts, monitoring equipment, perform stack testin g, and make other changes to its engines, they will drop out of the program due to the additional regulatory burden of compliance... Finally, EPA is proposing to allow up to 5 0 hours per years... to be used for non

emergency DR or peak shaving, but only until April 16, 2017. It is recommended that EPA increase this 5 0 hours to be made part of the total 100 hours that could be used for other purposes. Also, it is recommended that the April 16, 2017 cutoff date be eliminated.” [July 20, 2012 Elmhurst Memorial Hospital comments

ID EPA- HQ -OAR- 2008

- 0708

- 0918]“ Fargo Schools has 10 generators that are affected by this ruling. Typically these generators run

approximately 50 to 60 hours per year to cogenerate power when the grid is being stressed to its capacity. It will cost Fargo Schools approximately $600,000.00 to meet this new ruling which will take money away from education of our students unnecessarily .” [August 8, 2012 Fargo Public Schools comments ID EPAHQ -OAR- 2008

- 0708 -0995]

The KDHE supports EPA’s proposal to allow emergency generators 100 hours for testing and maintenance, emergency demand response, and voltage support and 50 of the 100 hours for non-emergency use and peak shaving for units at area sources of HAPs. The KDHE requests that EPA consider a provision for use during extreme ambient temperature conditions. Extreme cold and extreme heat, such as that experienced in Kansas and much of the central U.S. this summer, are critical times when limitations on emergency generator use could endanger human health and welfare and should not be considered when counting use hours against the 50/100 hours allowance. [August 8, 2012 Kansas Department of Health & Environment

comments ID EPA- HQ -OAR- 2008 -0708-1002]