## Salt River Project Responses to EPA **Stakeholder Questions Existing Power Plant Regulation under Section 111(d)** 

On September 23, 2013, EPA posted to the agency’s website a series of questions addressing topics the
agency states are relevant to the potential design of a program to reduce carbon emissions from existing fossil fuel

- fired generating units under section 111(d) of the Clean Air Act (CAA)

. Salt River Project Agricultural Improvement and Power District (SRP) has reviewed the s e questions, and this document offers SRP’s initial thoughts on the questions posed by EPA. SRP strongly agrees with EPA that the
age ncy must engage in a robust discussion with states and other stakeholders regarding the design and implementation of the pending 111(d) program to promote maximum flexibility , ensure cost

- effective solutions, and build upon the leadership of states in achi eving carbon reductions over the past decade.
SRP is a political subdivision of the State of Arizona that provides retail electric services to more than 950,000 residential, commercial, industrial, agricultural, and mining customers in Arizona. SRP is an i ntegrated utility, providing generation, transmission and distribution services, as well as metering and billing services. SRP relies on a diverse portfolio of owned and purchased generation resources that includes coal, natural gas, hydroelectric, nuclea r, solar, wind, biomass, and geothermal. SRP is an owner and/or operator of six coal

- fired power plants located in Arizona, New Mexico, and Colorado, and five natural gas

- fired power plants located in central Arizona. Given SRP’s ownership and operating i nterests related to fossil

- fuel

- fired electric generation, SRP has a clear and significant interest in this pending action.



## 1. **What is state and stakeholder experience with programs that reduce CO**  **2** 

## emissions in the electric power sector?

**SRP Sustainable Portfolio Principles**  Like many other utilities, SRP continues to enhance our use of renewable resources and portfolio of energy efficiency programs to manage system growth and reduce o ur system’s carbon emissions intensity. SRP strongly encourage s EPA to recognize and provide credit for these efforts within the framework of the 111(d) emissions guidelines.
In 2004, SRP’s publicly

- elected Board of Directors directed SRP to enhance its resource portfolio by adding significant amounts of renewable energy and sustainable resources through the development of “Sustainable Portfolio Principles” ( SPP ) . The SPP has matured and intensified over the years and now requires SRP to ensure that 20% of SRP’s expected retail energy requirements will be met with sustainable resources by 2020 . This target includes the percentage of retail energy requirements met with annual aggregate energy

- efficiency savings, pricing measures, hydroelectric generation and other renewable generation, including that which is directly attributa ble to certain customers (such as rooftop solar and Community Solar).
The target for Fiscal Year ( FY ) 201 3 was 10.375 % and increases approximately 1.375% per year until 20% is reached in FY 2020. 1 SRP’ s program includes an incentive for early or accelerat ed acquisition, by

1 SRP operates on a fiscal year of May 1 through April 30.SRP Responses to EPA Stakeholder Questions

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- 13 Page 2 allowing the environmental attributes of sustainable resources to be banked and applied to future years or sold to r educe customer costs. SRP’s target also includes the following annual incremental energy efficiency savings:

• FY 2012

– F Y 2014: 1.50% per year

• FY 2015

– FY 2017: 1.75% per year

• FY 2018

– FY 2020: 2.00% per year

SRP is currently outperforming the SPP targets . In FY 201 3 , 11 % of SRP’s retail requirements were met with sustainable resources and more than 25% of the energy produced by SRP’s resources had no associated greenhouse gas emissions. SRP also exceeded its annual incremental energy efficiency target of 1.50%, achieving 2.25% in FY 2013.

Investor

- owned utilities are regulated by the Arizona Corporation C ommission (ACC) , and are subject to the Renewable Energy Standard and Tariff (REST) approved by the ACC in 2006

. Similar to SRP’s SPP requirements, t hese rules require that regulated electric utilities generate 15 percent of their energy from renewable resources by 2025. Additionally, the investor

- owned utilities have similar energy efficiency targets in place through 2020. Each year, Arizona's utility companies are required to file annual implementation plans describing how they will comply with the REST rules. The proposals include incentives for customers who install solar energy technologies for their own homes and businesses. The Commission’s Renew able Energy Standards encourage utilities to use solar, wind, biomass, biogas, geothermal and other similar technologies to generate “clean” energy to power Arizona’s future.

**Renewable Resources** The table below shows the renewable resource capacity mix tha t made up the renewable energy portion of SRP’s Sustainable Portfolio in FY 20 12.

SRP believes that EPA must recognize that renewable energy resources serve differing needs within a utility’s generation portfolio and therefore the agency cannot apply general assumptions to how these resources might displace traditional fossil generation sources. For example, geothermal is able to provide baseload generation by producing emissions

- free energy 24 hours a day, seven days a week. Solar and wind, on the other hand, are available only when the sun is shining or the wind is blowing. Therefore, utilities must plan accordingly for resource availability when adding renewable generation to SRP Renewable Energy Mix FY 2012

Source Megawatts (MW)* Biomass Purchases 13 Community Solar/Large Solar 20 Rooftop Solar 42 SRP and Community Partnership Solar 1 Dry Lake Wind Power Project 1 and 2 Purchases 127
Wind Purchases 50 Geothermal Purchases** 50 Landfill Gas Purchases 22 Hydropower (owned and purchased) 391 Total 716 MWSRP Responses to EPA Stakeholder Questions

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- 13 Page 3 the resource mix. This includes planning for adequate backup , fossil

- fuel

- fired generation when intermittent renewable resources are unavailable.
**Energy Efficie ncy**  Energy

- effic iency programs contribute to SRP’s overall Sustainable Portfolio goal each year. For FY 2012 , SRP exceeded the annual incremental energy

- efficiency savings goal of 1.5% of retail sales by achieving 1.81%. During the past few years, SRP has introduced more than 25 new energy

- efficiency programs for residential and commercial customers. These programs help customers reduce energy use and costs. In addition, energy efficiency plays an important role in SRP efforts to meet current and future pow er demand

. As in other states, Arizona’s electricity customers are served by a mix of energy providers including public power, investor

- owned utilities, rural electric cooperatives, and merchant entities. The regulatory structure providing oversight of re newables, energy efficiency and other program s that reduce carbon emissions is not uniform and SRP expects this will complicate crediting of such programs within the framework of a 111(d) compliance schema. However, the value of these programs to states

a nd customers should not be underestimated, and EPA should provide opportunity for stakeholders to work together to address the issues necessary to allow crediting of such programs. 

### Navajo Generating Station Proposed Alternative to Bes **t Available Retrofit Technology**  EPA is in the process of finalizing a Best Available Retrofit Technology (BART) rule for the Navajo Generating Station (NGS) that addresses r egional h aze . While the BART proposal focus es on the reduction of nitrogen oxides ( NO x ) as a visibility impairing pollutant , a BART alternative proposal submitted by a Technical Work Group (TWG) would likely lead to carbon emission reductions.
**EPA’s February 2013 Proposal** On February 5, 2013, EPA issued a proposed BART rule for NGS. This 2,250 MW (net) coal

- fired baseload plant is located on the Navajo Nation in northern Arizona and has six participants : U.S. Bureau of Reclamation, Salt River Project, Los Angeles Department of Water and Power, NV Energy, Arizona Public Service and Tu cson Electric Power. SRP is the plant’s operating agent.

EPA’s February 2013 p roposal would impose a plant

- wide average NO x emission limit of 0.055 lb/MMBtu, which would require installation of selective catalytic reduction ( SCR ) equipment on all three uni ts at NGS within five years of the final rule . EPA also proposed an alternative that would give the NGS owners credit for early installation of low

- NO x burners and separated overfire air ( LNB/SOFA ) at NGS, and allow SCR to be installed on one unit per yea r between 2021 and 2023.

Both the EPA’s BART Determination and the BART Alternative require the installation of controls on a schedule that is potentially unworkable for the NGS participants and threatens the future viability of the plant, due to the com plicated nature of the lease agreement for the plant si t e, the partial federal ownership of the plant , and other factors.

I n recognition of the unique and complex nature of this issue, EPA also invited the submittal of other BART alternatives that achieve the same or greater emission reductions as EPA’s BART determination.SRP Responses to EPA Stakeholder Questions

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- 13 Page 4 Given the challenges imposed by the schedules proposed by EPA in its BART determination and BART

a lternative, SRP proceeded with development of an alternative BART proposal.

**Technical W ork Group Agreement**  For several months, SRP collaborated with a TWG to develop a BART alternative for submittal to E PA

. The TWG includes SRP, the Central Arizona Wat er Conservation District , the Environmental Defense Fund, the Gi la River Indian Community, the Navajo Nation, the United States Depar tment of the Interior , and th e Western Resource Advocates

. The TWG reached an agreement that was submitted to EPA on July 26, 2013 (“TWG Agreement”). The TWG Agreement includes a BART a lternative (“TWG Alternative”) that would achieve even greater emissions reductions than EPA’s BART determination, while providing greater flexibility to the NGS participants to resolve the uncertainties facing the plant before having to invest significant capital in additional controls.

The TWG Alternative includes two alternatives that both achieve even greater NO x emission reductions than EPA’s p roposed BART determination

. While the BART alternatives currently under consideration focus on the reduction of NO x , SRP notes that if EPA proceeds with adoption of either TWG alternative , there would also be significant reduction of carbon emissions at NGS due to a commitment to curtail coal generation or cease coal generation on one of the plant’s three units

. If the TWG alternative is promulgated in the final BART rule for NGS, SRP believes that NGS owners should receive credit towards compliance with any emissions reductions targets established under Section 111(d). 

### Research and Development **Activities** According to the Electric Power Research Institute (EPRI), “no single technology will su ffice in meeting [ carbon ] emissions reduction goals

– a diverse portfolio of advanced technologies is needed.” 2 To this end, SRP invest s in research on technologies t o achieve carbon emission reductions from SRP’s power generation fleet. S ince 2000, SRP has invested more than $50 million in research and development through EPRI and local universities, with a particular focus on topics such as energy efficiency, power plant efficiency improvements, renewable resources, and carbon capture and sequestration (CCS).
Through EPRI, SRP has partnered with process developers, the U.S. Department of Energy (DOE), and other electric utilities to demonstrate technologies through c onstruction and operation of pilot

- scale and process validation

- scale systems. In addition to validating the process efficacy for removing carbon dioxide ( CO 2 ) , a major goal of the demonstrations is to reduce the large energy requirements

– both electrical for pumps and compressors; and steam that is extracted from the power generation cycle.
In addition to these demonstration projects, SRP has been supporting EPRI’s strategic research on three major activities:

• Process Simulations

– These efforts include i n

- house modeling to identify target properties of solvents, solid sorbents, and membranes for CO 2 capture; develop new hybrid separation schemes; and evaluate third party carbon capture processes.

2 Electric Power Research Institute, T he Full Portfolio , Electric Perspectives, January/February 2008, Page 51.SRP Responses to EPA Stakeholder Questions

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- 13 Page 5 • Materials Development

– These efforts focus on develop ment and test ing of early stage, novel separation materials at laboratory scales.

• Bench

- and Pilot

- testing

– These efforts involve testing of potential capture processes

. EPA should recognize that research and development investments such as those funded by SRP are critical to ensuring continued progress in development carbon reduction technologies , but should also acknowledge that significant additional work is needed before many of these technologie s are market ready and cost

- effecti ve for commercial deployment at the utility scale.



## 2. **How should EPA set the performance standard for state plans?**

SRP understands from review of the statutory provisions of Section 111(d) that states

– not EPA

– have the primary responsibility and autho rity to establish and implement performanc e standards for existing fossil

- fuel

- fired electric generation sources. EPA is to establish emissions guidelines that are provided to the states that provide direction to the states to set performance standards.



### Emissions **Guidelines** In establishing the emissions guidelines, EPA is required to define the parameters for states to set performance standards for sources using the B est S ystem of E mission R eduction (BSER) that has been determined to hav e been “adequately demonstrated ” and is “achievable” for each source type. Section 111(d) allows for consideration of the cost of achieving such reductions and any non

- air quality health and environmental impacts and energy requirements that may result. Because the emissi on s guideline s must be achieva ble by each source type, SRP believes EPA must establish separate guidelines for electric generating units based upon fuel source and technology. For example, there should be separate emissions standard for coal

- fired units an d natural gas

- fired units, and further sub

- categorization for pulverized and fluidized bed coal

- fired boilers, and combined cycle and simple cycle natural gas turbines.

Currently, there are no GHG controls for existing sources that could serve as the ba sis for an emission standard. EPA may look to setting the standard based upon what can occur within the plant fence line, including improvements to unit heat rate s

. SRP is aware of a desire by some stakeholders to include fuel switching and co

- firing of coal with lower carbon fuels as a basis for establishing BSER, but SRP believes that such a mandate would result in significant economic impact on utility ratepayers and that EPA must recognize that alternative fuels are not available in all locations. Fo r example, while there is significant natural gas availability in the western U.S. , natural gas transmission is limited in some locations (Figure 1)

. Similarly, access to biomass fuel for co

- firing is extremely limited in the western U.S (Figure 2) , and may be further constrained by an inability to cost

- effectively harvest and ship the fuel to plant locations

.
EPA must take into account regional differences in the current generation resource mix as well as regional factors that affect future resource dev elopment in establishing the BSER. Important baseload resources should not be penalized by a BSER that is plainly not achievable due to infrastructure constraints.SRP Responses to EPA Stakeholder Questions

12-17- 13 Page 6 Figure 1. U.S. Natural Gas Transportation Corridors, 2008

Figure 2. U.S. Biomass PotentialSRP Responses to EPA Stakeholder Questions

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- 13 Page 7 In addition to infrastructure constraints, SRP notes that the western U.S. is different in other respects that warrant consideration in development of emissions guidelines. For example, there are a number of large power plants in the western U.S. generati on fleet that have multiple owners. Decisions regarding capital investments and operational changes in jointly owned plants can be complicated and time

consuming efforts due to the differences in the corporate and governance structures of participating

ow ners. However, these assets are often critical providers of baseload power to customers, and are not easily replaced. Furthermore, these plants, and many other western plants, are located in remote locations where they are vital economic engines for the rural communities in which they are located. They provide local tax revenue that supports colleges, schools, ro ads, health care and other necessary community services. SRP encourages EPA to produce guidelines that accommodate continued operation of these valuable western assets

.


### New Source Review and BSER In establishing BSER, EPA must account for constraints and costs that may apply as a result of other CAA
programs. Of particular concern is the effect the New Source Review (NSR) permitting program may h ave on “inside the fence” efficiency projects. Under the current NSR rules, t here is a possibility that eff iciency improvement projects could trigger NSR. SRP believes that the only way to address this issue is by providing a clear and direct exclusion from NSR applicability for projects that are undertaken at affected sources to improve efficiency and reduce GHG emissions. For example, EPA could change the NSR applicability rules to measure emissions increase for efficiency projects in terms of an ou tput

- based measure (e.g., lb / MW h ), thus recognizin g that such projects result in decreased emissions. Another way to address t he issue, short of providing an NSR exclusion, would be to account for the potential cost of NSR perm itting

– which is typically large

– in determining BSER, as the CAA requires. At a minimum, EPA should make clear that the states may, in their own implementation rules or on a case

- by

- case basis, determine that an efficiency project that would trigger NSR permitting would not be considered BSER, because of cost.


### State Performance Standards under Section 111(d) Section 111(d) of the CAA gives states primacy in developing performance standards to comply with EPA guidelines. Although states should have the opportunity to adopt strategies that are best ali gned with their state energy policy and electric generation resource mix, EPA will need to provide guidance on the range of the emissions reduction measures states may use for compliance and what procedures and criteria states should use to demonstrate tha t their plans are satisfactory. Potential flexible, systems

based measures include actual and planned plant retirements, fleet averaging, renewable energy, energy efficiency programs, clean energy standards and emissions trading.

To accommodate the differ ent economic conditions in the states, S RP believes s tates should have the flexibility to use either a mass

- based or emission rate

- based standard of performance to achieve program targets. Either of these systems has the ability to achieve carbon reduction s, particularly if coupled with incentives for states to grow or enhance energy programs and policies that credit carbon emissions reductions that take place outside of the plant fence line. It is important that a 111(d) program not constrain economic gro wth. EPA should recognize that it is not necessary for this programSRP Responses to EPA Stakeholder Questions

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- 13 Page 8 to take a more traditional approach to regulation due to the premise that carbon reductions will provide global benefit rather than local improvement in ambient air quality.

SRP also b elieves it is essential to provide credit for actions that have a co

- benefit of carbon reductions

. For example, t he possible retirement or generation curtailment of a unit at NGS could have the effect of reducing the carbon emissions from this plant by as much as one

- third. As the changes to NGS are being undertaken to address NO x , not carbon , there should be no constraints placed on crediting the carbon reductions under a 111(d) program. 

### Credit for Early Action A number of states , including Arizona, have implemented policies or taken actions that have achieved significant carbon emission reductions in advance of Section 111 (d) rulemaking. These programs have and will contribute to emissions reductions following the ado ption of carbon standard s for e xisting sources. These early action efforts have be en paid for by customers and should be accounted for in crediti ng states for carbon reductions. Recognition by EPA of the se early actions in the emissions guidelines docu ment, particularly in informing the timeline for compliance established in the guideline, is important , as such recognition increases the cost

- effectiveness of any given level of emission reductions and creates a more consistent and equitable carbon regulatory program among states.

Regar ding setting a baseline from which to measure future carbon emission reductions, SRP agrees with other commenters that 2005 would be an acceptable baseline year that would adequately recognize previous state actions to reduce carbon emissions through adopt ion of renewable energy and energy efficiency programs.



## 3. **What requirements should state plans meet, and what flexibility should be provided to states in developing their plans?** 

As stated previously , SRP believes that s tates should have broad flexibility in developing programs to comply wi th Section 111(d). S tates should be able to design their own plans and programs for compliance , but EPA must make it clear what criteria each plan should meet to be approved by EPA. 

### Remaining Useful Life
SR P believes this component of the 111(d) regulatory framework plays a critical part in implementation strategy in Arizona and other parts of the western U.S. In general, western coal

- based generation is newer and has more pollution controls than coal

- based generation in other parts of the country. This is because western coal

- based generation was gener ally constructed later, and was subject to additional pollution controls (and their attendant capital and operating costs) requirements than units developed prior to the CAA. Further, numerous western electric generating units have recently been mandated by EPA to install additional, expensive pollution controls under the BART provisions of the Regional Haze Rule. SRP is extremely concerned about the impacts to our ratepayers from stranded investment s if carbon standards under 111(d) drive premature retirement of these important baseload assets. AnySRP Responses to EPA Stakeholder Questions

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- 13 Page 9 rulemaking under CAA § 111(d) must allow states to fully consider the “remaining useful life” of each

source i n development of state plans and associated compliance timelines to avoid unfairly and disproportionately impact ing units that are critical to our customers’ secure energy supply, and Arizona’s and other western states’ energy infrastructure. 

### Energy Effic **iency Programs**  EPA faces challenges in incorporating utility energy efficiency programs into the framework of a 111(d) regulation as energy efficiency programs are not designed to directly displace specific generation units, but rather are a cost

- effective way to avoid use of current generation resources or delay construction of new generation resources

. Certain e fficiency programs can also reduce the need to install, upgrade or replace transmission and distribution equipment.

By allowing utilities to reduce or manage the energy consumption on their systems, energy efficiency programs reduce fossil fuel use and associated carbon dioxide emissions. For this reason, SRP believes that EPA should allow states to include energy effi ciency programs as a measure to help achieve 111(d) performance standards. In addition, EPA should p rovide states with the flexibility to determine the appropriate calculation mechanisms for use in that state, as there will not be uniformity in current
pr ogram accounting across states. Also, states served by multiple utilities may not have uniformity in program accounting within the state. For example, some utilities may be subject to specific requirements imposed by a public utility commission (e.g., an investor

- owned utility), while others may be governed by voluntary efforts or an alternate regulatory structure (e.g., a rural electric cooperative or public power utility).



### Renewable Resources SRP believes EPA has already recognized that renewable reso urces will be an integral part of any 111(d) program. A Renewable Portfolio Standard (RPS) program is an important policy mechanism to encourage development of renewable energy , and such programs have been adopted by the majority of
states. These policie s require or encourage electricity producers within a given jurisdiction to supply a certain minimum share of their electricity from designated renewable resources. Generally, these resources include wind, solar, geothermal, biomass, and some types of hydr oelectricity, but may include other resources such as landfill gas, municipal solid waste, and tidal energy. However, s tates without RPS policies have also seen significant increases in renewable generation over the past few years

r esulting from a combina tion of federal incentives, s tate programs, and market conditions. Increases in renewable generation have been driven by the availability of f ederal tax incentives, as well as by s tate RPS policies.

Because utility management of renewable resources varie s between systems and between states, EPA will need to provide flexibility to states in how renewable resources are incorporated into 111(d) plans

. As stated earlier in this document, SRP has in place Board

- mandated Sustainable Portfolio Principles (SPP) that guide integration and use of renewable resources on the SRP system. Based on our experience with the SPP, SRP would recommend the following be considered when addressing use of renewable resources in a 111(d) program:SRP Responses to EPA Stakeholder Questions

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- 13 Page 10 • Hydro

- generation must be include d as a form of renewable energy regardless of facility size, or whether or not it is considered “low

- impact” hydro

- generation (i.e., it should not matter if electricity is generated by natural change in elevation vs. man

- made change in elevation).

• R enewab les used to meet a greenhouse gas standard should also be creditable towards meeting National Ambient Air Quality Standards (NAAQS) for criteria pollutants . As carbon dioxide is not a criteria pollutant regulated under the NAAQS provisions of the CAA, cri teria pollutant reductions that are achieved as a co

- benefit of 111(d) requirement s should be available for crediting in State Implementation Plans prepared for the NAAQS program.

• SRP believes emission reductions should be assessed using a system

- wide e mission factor that is applied to energy prod uction

. In addition, EPA needs to accommodate the contractual provisio ns of purchased power agreements (PPA) for renewable generation where the power purchaser has also purchased the “environmental attributes” of the renewable resource regardless of the resource’s location

– i.e., if the purchaser is located in one state and the resource is located in a different state, carbon reduction credits need to be preserved per the terms of the applicable PPA, and not al so counted by the state where the resource is located.

• EPA should allow for “super

- compliant” credits to be held in a bank for future use. In Arizona, both SRP and A CC

- regulated utilities currently take advantage of credit banks.

• EPA should allow program implementation and compliance to occur across a utility’s ownership share (including purchased power), so SRP may obtain credit for renewable energy that it purchases from other states

. 

### Unit Retirements Although the timeline for a 111(d) program has yet to be determined, SRP assumes fossil fuel unit retirements will occur during the program’s duration. As unit retirements will likely offer the greatest opportunity for carbon reductions under a 111(d) pro gram, unit retirements should be creditable in any state plan. The absence of crediting could provide the perverse outcome of encouraging marginal operation of existing units in order to avoid the costs associated with permitting and construction of

new s ources. Additionally, many coal

- fired generating plants are co

- owned by several utilities and are located outside Arizona. Any credit methodology must take into account these complexities. 

### Phased Implementation Approach It is important that a 111(d) progr am not constrain economic growth. O ne way EPA could help moderate the economic impacts of the program is to apply a phased approach to implementation. SRP believes this approach offers promise in creating additional compliance flexibility, and would allo w states to better tailor 111(d) programs to align with existing renewables mandates, energy efficien cy programs, emissions trading programs, or other mechanisms. It would also allow time for new carbon reduction technologies to be tested and made availab le for commercial deployment.SRP Responses to EPA Stakeholder Questions

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- 13 Page 11 Under this approach, states could establish a series of “increments” at a rate

- or mass

- base d level based on measures that are more likely to be achievable in the shorter term and in the longer term. For example:

• Short

- term reductions are based on cost

- effective “low

- hanging

- fruit” (i.e.
, basic plant efficiency upgrades , incorporation of existing renewables and demand

- side efficiency programs ). 3

• Mid

- term reductions incorporat e additional measures that are more difficult or mo re capital intensive to implement (such as more complex efficiency upgrades, fuel switching, and unit retirements).

• Long

- term reductions could include retirement of units that have been identified for longer term operation due to significant capital inves tments made under other EPA programs (e.g., BART, CSAPR, and NSR).


### Interstate Cooperation If EPA allows states to pursue alternative, flexible compliance approaches

– such as credit for plant retirement, trading and fleet averaging

– interstate coop eratio n in the regulation of carbon emissions will be an important design issue. Section 111(d) establishes a process for state

- specific plans. SRP has ownership in generation and transmission facilities across several states (Arizona, Colorado, and New Mexico) and on the Navajo Nation (in Arizona and New Mexico). SRP believe s that EPA must incorporate provisions into the agency’s 111(d) guidelines that provide explicit incentives to states to work together to achieve emissio ns reduction goals as i nterstate cooperation will be a crucial component in advancing the environmental benefits of the 111(d) program. SRP believes the potential for emissions reductions will be constrained, and program costs will increase, if there is n o ability to design state programs to accommodate system

- wide compliance by affected utilities.


### Flexible State Plan Development and Approval Schedule EPA should recognize the significant effort that will be required of states in developing standards that
p rotect potential economic growth, but also achieve carbon reductions consistent with EPA’s guidelines. EPA should also acknowledge that many states have limited resources available to accomplish this significant task, and that those resources are heavily constrained by the need to develop plans for other regulatory requirements , such as the NAAQS program . With this in mind, EPA should provide states with more than one year develop and submit plans, particularly in cases where the state wishes to work
coop eratively with other states and jurisdictions in development of an approvable plan. States should retain primacy in this process and not be subjected to a federal plan solely due to an inability to meet the deadline included in the President’s Climate Act ion Plan.

3 SRP notes that many utilities have already implemented efficiency improvements at existing power plants in recent years in association with major pollution control projects driven by o ther regulatory requirements. While additional “low hanging fruit” may still be available, SRP suspects that this universe is small and likely constrained by either projected capital cost s and/or NSR regulations.SRP Responses to EPA Stakeholder Questions

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## 4. **What can EPA do to facilitate state plan development and implementation?** 

EPA should recognize the diversity of individual states and their energy resource mix. It is important that EPA minimize r egulatory u ncertainty by providing clear guidance to states on how to design an approvable state plan

. EPA should establish criteria for such t hings as state reduction targets and qualifying energy effi ciency and renewables programs

. EPA guidance should also provide options for implementing fleet averaging and trading of emissions for compliance purposes between two or more
states. EPA should provide a reasonable and achieva ble timeline for compliance, but also provide states with guidance on how to craft an approvable alterna te timeline. With re spect to program emissions targets, EPA’s guidance should provide the ability for each state to have a unique emissions target taking into account such things as local fuel supply and emissions reductions programs already in place

.
S RP encourages EPA to work closely with states and to provide time and flexibility to allow states to develop plans on a reasonable timeline, recognizing resource constraints and the challenges associated with this rulemaking effort. This will avoid the ne ed for imposition of federal plans and promote effective cooperation and achievement of the emission reduction objectives set forth in EPA’s guidelines.