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Arizona’s	Non-IPM	Questions	on	Clean	Power	Plan	Proposal

Question EPA	Region	9	Guidance Follow-Up With	HQ

Priority Concern 1

I. Can EPA briefly explain how it envisions the 

state might apply “remaining useful life” 

during the plan development phase? Does 

EPA view the concept as limited to 

analyzing costs under Building Block 1 or 

can the state look more broadly at overall 

impacts from Building Blocks 1-4 and the 

impact on source utilization versus design 

life (e.g., if goal suggests shutdown in 2020, 

does the “remaining useful life” concept 

provide a basis for extending the operating 

period to reduce costs to a statedetermined reasonable amount)?

Discussed on 8/14/2014 call.

See 79 Fed. Reg. at 34925-26:

“Under the proposed guideline, states would 

have the flexibility to adopt a state plan that 

relies on emission reducing requirements that do 

not require affected EGUs with a short remaining 

useful life to make major capital expenditures or 

incur unreasonable costs. Indeed, the EPA’s 

proposal would provide states with broad 

flexibility regarding ways to improve emission 

performance through utilizing the emissions 

reduction methods represented by the four 

‘building blocks.’”

None1

 

1

Indicates that Arizona believes it understands EPA’s position and that further discussion with EPA HQ will probably not be productive. ADEQ may nevertheless 

submit comments critiquing EPA’s position.
2

Question EPA	Region	9	Guidance Follow-Up With	HQ

II. Did EPA’s goal consider the time and cost 

impacts of existing regulations on new 

infrastructure?

a. AZ likely to need new natural gas plants and 

associated infrastructure by 2020 to comply 

with interim goals.

b. Siting, permitting, and constructing this 

new infrastructure will be difficult over 

such a short timeframe.

c. New gas pipeline and transmission line 

infrastructure will be subject to 

requirements like NSR or the National 

Environmental Policy Act (NEPA).

Yes. This is the reason for a 10-year compliance 

period.

None

III. Can AZ’s plan include credit for the 

retirement of a coal unit located in a 

different state, yet which serves AZ, 

without entering into a full multi-state plan, 

provided the state where the retiring unit is 

located does not also account for that 

retirement (no double counting)?

Seeking comment on this issue at 79 Fed. Reg. at 

34911.

None

Priority Concern 2

I. In applying Building Block 2 (BB2), EPA 

shifted all existing coal generation to 

“available” natural gas combined cycle 

(NGCC) generation. Did EPA’s modeling 

consider both the interstate gas 

transportation requirements as well as the 

peak generation capacity available to 

displace existing coal generation?

Discussed at GHG Abatement Measures TSD at 3-

14 to 3-20.

At page 3-15, the discussion could be 

read as assuming that coal can be 

used for peaking and that because its 

use will be limited, this will not 

jeopardize compliance with the ratebased goal.

Is this correct? Does EPA have any 

other response to the peaking issue?
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Question EPA	Region	9	Guidance Follow-Up With	HQ

a. Given the relationship between AZ’s winter 

gas requirements (usage weighted by 

residential/commercial heating) and 

summer gas requirements (usage weighted 

by power generation), did EPA’s modeling 

consider the pipeline infrastructure impacts 

of base loaded combined cycle generators 

during the winter gas season?

None

b. Did EPA’s modeling factor in summer 

derates on nameplate capacity to account 

for AZ high summer temperatures?

None

c. Did EPA’s modeling factor in any federally 

enforceable emission permit limits on 

allowable usage?

None

d. Did EPA’s modeling factor in existing 

purchase power agreements that are tied 

to existing AZ merchant owned combined 

cycle units? (Thus reducing the available 

capacity to displace existing coal fired 

generation).

No. None

e. Utilities cannot count on these units when 

contemplating “available” NGCC capacity to 

dispatch in place of coal generation 

because the utilities do not own or operate 

them. Federal laws require fossil-fuel fired 

capacity to held in reserve to ensure 

reliability of the grid when renewable 

energy like solar and wind is unavailable, or 

if there is catastrophic failure of a base load 

unit.

Ownership not accounted for. None
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Question EPA	Region	9	Guidance Follow-Up With	HQ

f. If a State can demonstrate that certain 

NGCC capacity is not available, can that 

reduced capacity be accounted for under 

BB2 in setting the state goal?

None

g. Did EPA’s modeling consider intrastate 

transmission limitations, including load 

serving entities’ existing transmission 

scheduling rights in its coal redispatch 

assumptions. If so, how?

None

h. Did EPA consider reliability impacts from 

coal-fired unit retirements associated with 

increasing NGCC annual capacity 

utilization? Coal units would be unavailable 

to assist with peak capacity needs as these 

units are not designed to operate in a 

peaking fashion.

None

II. How does EPA contemplate treating new 

generation resources that are built to 

displace existing coal capacity? Will they 

fall under the New Source Performance 

Standard (NSPS) and will these new 

resources be regulated on a stand- alone 

basis? Or will these new resources fall into 

the Existing Source Performance Standard 

(ESPS) category with their output being 

included along with the existing state 

generation resources?

Comment on this issue is requested at 79 Fed. 

Reg. at 34923.

None

III. Does EPA believe it has legal authority to 

allow states to include 

new/modified/reconstructed units subject 

to 111(b) in the plans developed under 

111(d)?

See above. None
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Question EPA	Region	9	Guidance Follow-Up With	HQ

IV. Has EPA considered how a presently nonaffected unit that becomes subject to the 

rule (e.g., due to an increase in utilization 

above the capacity factor threshold) will 

affect compliance with the State goal?

EPA solicits comment on use of operational data 

as applicability criteria in NSPS proposal. 79 Fed. 

Reg. at 1460-61.

Required. The cited material does not 

explain how the program will apply to 

existing units that become affected 

units after the effective date. 

Priority Concern 4

I. In establishing the goals, it appears that 

EPA accepted state renewable and energy 

efficiency goals, although it “regionalized” 

them for some purposes. Did EPA conduct 

an “enforceability” review of these state 

goals before accepting them in establishing 

EPA’s proposed goals?

a. If not, will EPA do so prior to the final rule 

and commit to only including those 

measures that are deemed acceptable in 

establishing the state goals?

b. If EPA does not feel it can commit, what 

assurance does the state have that its 

programs used to establish the goal – and 

hence the binding state target – will be 

accepted?

See GHG Abatement Measures TSD 4-9 to 4-11

Methodology for setting goal was inherently 

conservative.

None
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Question EPA	Region	9	Guidance Follow-Up With	HQ

II. Is EPA considering applying Clean Air Act 

§110 requirements for surplus, enforceable, 

creditable and permanent emissions 

reductions?

a. Existing renewable energy (including 

distributed generation) and energy 

efficiency standards may not meet 

standards.

b. Existing local ordinances are unlikely to 

meet standards.

c. Existing energy efficiency programs may 

not be creditable, even though the actual 

benefits are real.

79 Fed. Reg. at 34887:

RE and EE requirements already included in SIPs. 

Guidance for inclusion cited in footnotes 228 and 

232:

Guidance on SIP Credits for Emission Reductions 

from Electric-Sector Energy Efficiency and 

Renewable Energy Measures (Aug. 2004), 

http://www.epa.gov/ttn/oarpg/t1/memoranda/e

reseerem_gd.pdf

Incorporating Emerging and Voluntary Measures 

in a State Implementation Plan (SIP) (Sept. 2004),

http://www.epa.gov/ttn/oarpg/t1/memoranda/e

vm_ievm_g.pdf.

Roadmap for Incorporating EE/RE Policies and 

Programs into SIPs/TIPs (July 2012),

http://epa.gov/airquality/eere/manual.html

Has anyone successfully received 

approval for RE or EE in a SIP? Can we 

get examples?
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Question EPA	Region	9	Guidance Follow-Up With	HQ

III. Is participation in a multi-state plan the 

only way to get credit for reductions 

attributable to out-of-state resources?

a. Would EPA allow for a hybrid plan that 

incorporates state agreements to handle 

specific issues, such as renewable energy 

credits (RECs)?

b. If not, which State gets credit if an AZ 

utility-portfolio based plan results in 

reductions at a unit in another State?

c. The renewable portfolio standards that EPA 

relies upon in setting the state targets 

currently allows for utilities to count 

renewable generation located in another 

State if the RECs are owned by a utility and 

its customers.

d. If EPA does not allow for out-of-state RECs 

to be applied in determining compliance 

with AZ’s emission goal, will the EPA revise 

the target to likewise remove these RECs 

from the goal determination under BB3?

EPA is open to RECs as a compliance pathway.

79 Fed. Reg. at 34913 (second column, paragraph 

starting with, “An emission standards is nonduplicative....”) (Doesn’t seem pertinent).

State Plan Considerations TSD at 60-69:

Under a bilateral contract model: 

“A renewable energy supply contract also 

generally addresses the ownership of the RECs 

related to the renewable energy generation. 

Under such a contract, purchase of the RECs 

should accompany the purchase of the electricity, 

in order for the utility to satisfy its RPS 

obligations through the contract. ... This ensures 

that multiple parties are not using the same 

MWh of renewable energy generation to comply 

with their RPS obligations.” TSD at 65-66 & n. 93.

Under a REC model:

“The renewable energy generator can then sell 

the renewable electricity as a bundle (both the 

commodity electricity and the associated REC) or 

unbundle the RECs from the electricity and sell 

the two products separately.”

Doesn’t say whether bundling should be required 

for CPP credit.

Does the state plan have to establish 

whether and if so how RECs are 

recognized for purposes of satisfying 

RE requirements? Or will EPA 

establish a federal, nationwide 

approach?

If the states are responsible, how will 

EPA handle inconsistent approvals or 

late approvals (so that the 111(d) 

version of a “SIP gap” occurs)?
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Question EPA	Region	9	Guidance Follow-Up With	HQ

General Comments

I. Will EPA consider population shifts in 

setting the interim and final goals?

a. States with declining population 

(Northeast) can comply with the goals while 

shifting burden to growing states.

b. States with growing population will have to 

achieve greater reductions to 

accommodate growing population.

c. Exclusion of growth precludes the 

availability of a mass-based approach for 

growing states.

See Projecting EGU CO2 Emissions TSD at 10-12

(Growth Tools), 15 (Projection Scenarios):

Growth tool “algorithms generally seek to 

examine how operation and emissions from 

individual EGUs could be expected to change with 

changes in environmental regulations or installed 

pollution control retrofits and additional or 

reduced hourly electricity demand.” TSD at 11.

Assumptions in constructing reference case 

include “Electricity load growth projections 

(energy and peak demand)” TSD at 17.

Does EPA contemplate increased 

usage of existing affected units as a 

permissible way of meeting future 

demand growth?

II. EPA’s proposal contemplates States making 

changes to plans. What are EPA’s 

procedures for processing these changes? 

Will these procedures include time 

requirements for EPA review and approval?

a. How will the state credit new renewable 

generation or energy efficiency measures in 

the state plan if they are not included in the 

original plan?

Partial response: 34917 #6 Modification of an 

Approved State Plan

None

III. Can a unit be derated to less than 73 MW 

to exit the program? If so, what is required 

to make the deration effective?

Still needed.
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Question EPA	Region	9	Guidance Follow-Up With	HQ

BB1

I. Did EPA determine whether 111(d) will 

subject efficiency improvement changes to 

NSR permitting?

a. NSR permits will delay implementation of 

efficiency gains.

b. Additional air pollution controls required 

for criteria pollutants absorb energy savings 

gained from efficiency projects.

c. Were costs associated with additional air 

pollution controls required as a result of 

NSR permitting considered in the economic 

analysis?

See 79 Fed. Reg. at 34928: States could limit NSR 

applicability through plan provisions or synthetic 

minor permits. EPA seeks comment on this issue.

No definitive answer to (c); but see IPM Modeling 

Introduction, Fig. 1-1.

None
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Question EPA	Region	9	Guidance Follow-Up With	HQ

II. How did EPA consider transmission loss, 

and would EPA give credit for efficiency 

improvements in transmission?

Yes, EPA will give credit for transmission 

efficiency improvements. (Fed. Reg. pages 34923) 

“Beyond the types of state plan

measures already discussed in this

section of the preamble, the agency has

identified a number of other measures

that could also lead to CO2 emission

reductions from EGUs. These include,

for example, electricity transmission

and distribution efficiency

improvements, retrofitting affected

EGUs with partial CCS, the use of

biomass-derived fuels at affected EGUs,

and use of new NGCC units.”

34924 “Building block 4 focuses on

improving end-use energy efficiency.

Another way to reduce the utilization

of, and CO2 emissions from, affected

EGUs is through electricity transmission

and distribution upgrades that reduce

electricity losses during the delivery of

electricity to end users. Just as end-use

energy efficiency can reduce mass

emissions from affected EGUs, so can

transmission upgrades.”

None

BB2

I. Why did EPA use the name plate capacity 

instead of net capacity for each affected 

unit?

a. Name plate can be as much as 20% higher 

than actual capacity, overstating available 

reductions.

None
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Question EPA	Region	9	Guidance Follow-Up With	HQ

II. Did EPA consider existing energy policies 

and regulations when setting the goal?

a. Would a State Plan take priority over 

bilateral contracts between a buyer of 

power in one State and a seller of power in 

another? If so, how and under what 

authority?

State would need to show legal authority to 

override contract, if necessary for plan.

None

BB3

I. It appears that EPA’s goal is to preserve the 

6% of nuclear energy that is “at risk.” What 

methods does EPA anticipate States must 

use to demonstrate compliance?

See 79 Fed. Reg. at 34958: “Policies that ... 

discourage premature retirement of nuclear 

capacity could be useful elements ....”

See 79 Fed. Reg. at 34970.

Explains basis for goal setting methodology, but 

not how compliance would be demonstrated.

The NPRM discussion explains the 

basis for using at-risk nuclear to set 

the rate-based goal, but ADEQ feels it 

is still unclear how states are to 

address this building block when 

projecting and demonstrating 

compliance with the goal.

II. Has EPA considered including a force 

majeure provision to accommodate the 

sudden and unavoidable shut down of a 

low- or zero-carbon emitting electric 

generating unit?

a. Grid reliability requirements will mandate 

nearly immediate replacement electricity to 

prevent brown/black-outs.

b. The most reliable reserve electric 

generating units burn fossil fuel resulting in 

increasing and unexpected carbon 

emissions.

Averaging periods (10 years for interim goal, 

rolling 3-year for final goal) are designed to 

preclude the need for force majeure.

None
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Question EPA	Region	9	Guidance Follow-Up With	HQ

BB4

I. Will there be a standardized Measurement 

and Verification (M&V) approach for 

counting savings?

a. Different approaches for reporting under 

State energy efficiency standards and under 

111(d) State Plans could be duplicative and 

costly.

b. How will persistence and variables such as 

the life of measures be considered and 

determined if current State M&V standards 

on this issue differ from EPA standards?

EPA intends to issue guidance describing 

minimum levels of EM&V. (p. 34909).

State Plan Considerations TSD at 34-60

When will the guidance come out?

II. What ‘discount rates’ or other adjustments 

does EPA expect to be applied to savings?

a. Net to gross issues to account for free 

riders and program spillover?

b. Discount rates for take-back effects?

State Plan Considerations TSD at 34-60, especially 

53.

None

Additional question:

When will the rate-to-mass conversion documentation be available?