EPA PUBLIC MEETING, ATLANTA PROPOSED CO2 EXISTING SOURCE RULE

JULY 29, 2014 SANTEE COOPER STATEMENT Santee Cooper

• Good afternoon. I am Elizabeth Warner, Corporate Secretary and Vice President of Legal Services for Santee Cooper, headquartered in Moncks Corner, South Carolina.

• Santee Cooper is South Carolina's state-owned electric and water utility and the state's largest power producer, supplying electricity that powers more than 2 million South Carolinians in all 46 counties of the state. We serve retail customers, industrial customers and have a wholesale division that serves the state's electric cooperatives and several municipalities.

• As a public power entity with no shareholders, Santee Cooper works to provide affordable, environmentally responsible and reliable electricity that promotes economic development.

• Santee Cooper will submit additional comments in writing that detail, among other points, concerns about EPA's legal authority to regulate CO2 with this proposed rule. I will focus my remarks on South Carolina's unique situation, and especially our concerns with the way this plan treats nuclear units under construction. 

### Santee Cooper CO2 Reductions

• Years ago, Santee Cooper and other South Carolina utilities began planning for strategic reductions in CO2 emissions.

• Santee Cooper wanted a measured approach, one that balances environmental stewardship, reliability and costs.

• We have had many successes in this effort.

■ We are running our fossil plants at maximum efficiency. ■ We have increased our use of natural gas generation. ■ We have closed 4 older coal fired units — about 10 percent of our generation. ■ We were the first utility to generate and deliver electricity from renewable resources in South Carolina, and we maintain the largest portfolio today. Based on the resource mix for our state, the portfolio includes landfill gas, biomass, solar and a little wind.■ We have rebates and other incentives for customers to make their homes and businesses energy efficient, with an ambitious 2020 target we are on track to meet. ■ In partnership with South Carolina Electric & Gas, we are building two of the first new nuclear units in the country. ■ Santee Cooper has already cut our CO2 emissions by 23 percent since 2005. With all of the above initiatives appropriately accounted for, Santee Cooper expects to cut our CO2 emissions a total 44 percent by 2029, compared to 2005. ■ These initiatives are costly, but Santee Cooper has saved customers and the state money by being proactive in launching them, rather than waiting until we were forced to act. Now, it appears our early actions are being discounted and South Carolinians will be asked to spend far more money to achieve a target stricter than that asked of 47 other states. The EPA Proposed CO2 Existing Source Rule

■ South Carolina's 2012 emission rate, taking into account all current generating units that can be used to meet the goal, is 1587 lbs. CO2 per MWh — that is about the midpoint among the states. The draft rule sets a final 2030 target for South Carolina of 772 lbs. CO2 per MWh.

■ That equates to a 51% reduction, the 3 rd most significant percent reduction from 2012 levels among all 50 states. ■ Other states with similar current emission rates are treated much differently. For example, Iowa emitted 1,552 lb CO2 per MWh and faces a target emissions reduction of just 16%. Again — South Carolina's reduction would be 51 percent and Iowa's, 16 percent. Challenges

• This draft CO2 rule comes in the midst of a tremendous series of new-industry announcements bringing thousands of new jobs and capital investment to South Carolina, a welcome rebound after a tough recession and post-recession period here. Santee Cooper is always focused on keeping power costs affordable for all of our customers, and our industrial power costs are 29 percent below the national average. Electricity is often one of the largest expenses for industry, and the extreme efforts required to meet the proposed EPA target will certainly drive up costs to power those plants.

• The draft rule makes many assumptions about electricity generation in South Carolina. We want to make sure EPA understands our state's specific challenges.

### • EPA has proposed building blocks to help states achieve lower emissions, things like

increasing nuclear generation, natural gas, renewables and energy efficiency. However, many of the assumptions for these "building blocks" are not a good fit for South Carolina. o Most critical, in terms of costs, is the way this proposal treats new nuclear already under construction. ■ Our new nuclear project with South Carolina Electric and Gas will cost about 10 billion dollars, and South Carolina electric consumers are already paying into the project. ■ By considering these under-construction units as if they are already built, and in doing so setting our goal more restrictively, you are punishing South Carolina for being proactive in its CO2 reductions and investing early in this project. ■ The end result is consumers in South Carolina will have to pay again for high cost CO2 reductions from renewables and other measures that are not cost effective for our state. ■ EPA should not count under construction nuclear as part of the state target, but should allow it to be used for compliance with the revised target. This approach would give South Carolina full credit for its efforts and our customers would not bear the burden of paying for additional reductions.

o EPA advocates more use of natural gas. South Carolina, especially the eastern half, has no infrastructure to add natural gas generation, since the nearest pipeline runs along our western border. Santee Cooper is already running our gas units as much as we can. In fact, our two largest units ranked No. 1 and No. 4 on your list of the nation's natural gas units and how much they ran in 2013.
o There are differences between South Carolina and other states in the amount and type of renewables available for electricity production, and it is unfair to hold the Southeast region to the target of the one state here — North Carolina - that has an RPS. We do not have the resources to meet a renewable requirement of 10 percent by 2030.

o An estimated 36% of all of South Carolina's retail sales are to industrial customers. It is not reasonable to assume that large increases in energy efficiency are available to this customer class. Therefore, achieving a 10% increase in energy efficiency savings in South Carolina is not a feasible goal. • EPA should recognize South Carolina's particular situation with regard to opportunities for CO2 reduction. The initiatives we have already proactively undertaken will reduce CO2 emissions by 44 percent for Santee Cooper — that is far more than the 30 percent target EPA has set for the nation. When other utilities are counted in the state, we are still

### far ahead of your national average. To ask us to do more simply because we got a head

start is patently unfair to the people of South Carolina, who bear the ultimate burden for these measures.

Contact Information Elizabeth Henry Warner Vice President, Legal Services and Corporate Secretary Santee Cooper One Riverwood Drive (M603) Moncks Corner, SC 29461 Ph: (843) 761-7044 Email: ehwarner@santeecooper.com