# Michigan Municipal Electric Association

809 Centennial Way • Lansing, Michigan • 48917-9277 Phone: (517) 323-8346 • Fax (517) 323-8373 • www.mmeanet.org



## MICHIGAN PUBLIC POWER NEEDS FLEXIBILITY FOR
CRITICAL, SMALL PUBLIC SYSTEMS & SMALL UNITS

UNDER THE PROPOSED "CLEAN POWER PLAN"

Comments from Melanie McCoy, General Manager of Sebewaing,

MI Light & Water, and President of the Michigan Municipal Electric Association (MMEA)

Provided July 31, 2014 at EPA's Public Input Session in Pittsburgh, PA

INTRODUCTION

➢ Introduction: Hello, my name is Melanie McCoy, and I am the general manager of a municipal, public power system located in Sebewaing, Michigan, a rural village of almost 2,000 people in the very tip of the Michigan thumb. I also serve as the President of the Board of the Michigan Municipal Electric Association or "MMEA", which is the state association of more than 40 municipal power systems, some of which own and operate up to 17 fossil-fired plants that may be impacted by this rule, with other systems supplying our customers through power purchased from other energy providers under contracts and through the energy markets. I speak on both MMEA's and Sebewaing's behalf today. These public power systems are also part of the American Public Power Association or "APPA", # representing more than 2,000 municipal systems across the nation, and we have closely coordinated with APPA in the development of our comments here on the "Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units" or the "Clean Power Plan".

➢ Importance of Public Power: Non-profit municipal utilities and their power plants are critical to local communities across the nation. Despite the small size of many of these public systems, these municipal utilities are essential to electric reliability and energy supply diversity, and critical to the communities they serve. These municipal systems are often the only source of power in a local community. These public power systems provide energy to important community facilities such as law enforcement, hospital, and educational buildings. These facilities increase electric reliability and help avoid wholesaleelectric market price spikes. All of the Michigan public power systems I

represent today are "small entities" under the SBREFA statute. And most of our units are very small, from a handful of megawatts each up to 160 MW, with most of these units at less than 80MW in capacity — yet most are still subject to EPA's proposed emissions rule. Other public power systems, like Sebewaing, depend on power from other generators, purchased through contract or on the market, and distributed through our local transmission and distribution systems.

➢ Public Power May Bear the Worst Brunt of the EPA Power Plan: Despite the critical importance of municipal utility systems and their power plants, I am here, because Michigan public power and other municipal systems are gravely concerned that we may bear the worst brunt of the EPA's proposed Clean Power Plan for existing Electric Generating Units or "EGUs" — in ways that could put some of our communities in crisis.

PUBLIC POWER & SMALL ENTITIES WILL BEAR THE WORST BRUNT

➢ Small Units & Small Systems Impacts: Our small systems and small power plants will suffer disproportionately from these' proposed Clean Power Plan requirements, because of the drastic diseconomies of scale involved with changes to small units with small customer bases. This would include diseconomies of scale in trying to achieve heat rate efficiency improvements at these small plants, as suggested as a "Building Block 1" strategy by EPA in this proposed rule. Further, many of our Michigan public power systems have only a single baseload unit, or a very small number of units, with little or no ability to re-dispatch to lower-emitting units or apply controls flexibly across multiple plants. Often these units are located in isolated "load pocket" areas in which there are limited available options for securing power. For the Michigan electric generators that I represent, the plants subject to EPA's proposed rule are the core of the electricity system in the region, often with no readily available alternatives within the service territory — and if a plant shuts down or is made too expensive, it could cause a community and business crisis. Localities like Grand Haven, Marquette, and Coldwater, MI own and operate only one baseload plant, which means that these municipal utilities do not have any flexibility to shift load among other units, as they would if they had a multi-unit
system.

Likewise, for municipal systems without their own EGUs like in Sebewaing, we have no ability to influence the pollution control choices that will be made by our energy suppliers, and we will be subject to the vagaries, uncertainties, and

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### higher costs of "environmental dispatch" that may affect our power supplies

because of the rule.

➢ 

### EPA Recognizes the Challenge to Small Systems and Units

— 

### But Offers No Help: EPA itself has recognized that municipal power and small entities may receive the worst brunt of the rule. But the only solace offered by EPA is that there is a long time to figure this out. Indeed, EPA actually says that EPA's proposal will have no impact on small entities, because it is really the States that will impose these requirements, not EPA — and maybe your state can cut these small entities a break. See 79 Fed. Reg. at 34,887 and 34,946-47. EPA notes that single-unit generators — which describes many public power systems — may face major challenges in meeting the requirements of the rule imposed through states. But again, EPA offers no relief or ideas for how to mitigate these single-unit challenges, other than making a vague suggestion that these small utilities should use "longer-term capacity planning strategies." Id. 

### at 34,887. EPA notes that small plants in rural areas (which describes many municipal systems) might have great challenges meeting these rules, but offers only that EPA met with the U.S. Department of Agriculture on that issue, with no further explanation or potential solutions. See Proposed Rule at 34,899. Michigan public power has serious concerns that this inadequate level of effort by EPA, even though it recognizes the challenges for small systems, small units, and public power, does not comply with SBREFA requirements.

➢ 

### Other Concerns about the Proposed Rule Will Worsen These Impacts: Michigan public power has several other concerns about how the rule may exacerbate these threats to the viability of these critical municipal systems and units, which I will summarize briefly:

o No room for economic growth: The State emissions goals and standards proposed by the rule do not provide an adequate factor for economic and load growth over the compliance periods leading up to 2020 and 2030. The rule essentially assumes that our communities and economies won't grow, and the rule hurts our energy systems if we do grow our manufacturing, our jobs, and our local and state economies.

o Disconnected from other Clean Air Act rules: The proposed carbon emissions rule may have the impact of closing down a lot of plants, including in small public power communities that depend on these critical units. At many of our plants, we have already spent millions of dollars on plant improvements to address EPA's Clean Air Act rules for NOx, SO2, mercury, and other pollutants like the CAIR, CSAPR, and MATS rules. Yet this investment may be stranded and abandoned by municipal power entities

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### that have no other choice than to shut, after our good faith efforts to comply

with those other EPA Clean Air Act rules. Although EPA's proposal recognizes the appropriateness of recognizing the "remaining useful life" of units when applying requirements, EPA does nothing to address that issue, instead merely mentioning that States can consider those remaining useful life issues. 79 Fed. Reg. at 34,925.

o No credit for clean energy actions: The EPA's proposed rule also provides no credit for plant improvements, energy efficiency programs, and renewable energy projects undertaken by utilities between the proposed rule baseline of 2005 and the proposed start-date for compliance of 2012. Public power is in the lead in the utility industry for clean and green power efforts, and we are committed to genuine action on climate change, if it is balanced with economic, cost, and community issues. I spent years as the general manager of Wyandotte Municipal Utilities, just south of Detroit, where we
undertook one of the most ambitious efforts in the nation to transform our fossil-fired community to a green energy community. Using resources from the Obama Administration's EPA and Department of Energy's green energy programs, together with state, local and private resources, we launched major energy efficiency programs for our residents, we installed the largest solar photovoltaic project in the State of Michigan on a public building, and we launched a major, downtown geothermal project. All between 2009 and 2012. Under EPA's proposed rule, none of that counts for Wyandotte — punishing a progressive, clean energy community. These types of clean energy actions have been taken by many Michigan public power systems, but they will not get any credit under EPA's approach.

One specific area of local clean energy action that should be credited under the Clean Power Plan is to account for existing hydroelectric energy generation, for hydro plants of less than fr 1 OMW in capacity, in the calculations used to set State goals and standards for emissions reductions.Public power has invested substantial resources into these environmentallypreferable, renewable energy sources, and small, existing hydro should be part of the mix under the Clean Power Plan rule.

4EPA SHOULD TAKE ACTION TO REDUCE THE IMPACTS OF THE RULE ON SMALL

MUNICIPAL SYSTEMS & UNITS

Given the critical importance of public power systems and EGUs, and in light of EPA's specific request for comments on how to address the potential challenges to small municipal utilities, Michigan public power urges EPA to take real, meaningful, specific action in the final Clean Power Plan rule to support compliance flexibility and options for small public power. This should include:

1.) Set the Affected EGU Threshold at >73 MWs: Section 60.5795(b)(1) of the proposed Clean Power Rule states that the rule applies to EGUs with a baseload rating of 73 megawatts, but states in a parenthetical that this capacity is equivalent to a 250 MMBtu/h heat input rate. However, it is definitely not necessarily the case that a 73MW plant equals that 250 million heat input. Indeed, most of the Michigan public power units I represent today are less than 73MW in capacity, but many would nevertheless be affected by the 250 million Btu/h heat input factor listed by EPA. The best way for EPA to avoid causing disproportionate and potentially devastating impacts to small municipal power is to clarify the applicability threshold to apply this rule and EPA's emissions and allocation assumptions only to units greater than 73MW in net rated capacity.

2.) Include Small, Existing Hydro Resources in the Baseline State Goal
Calculations: Existing hydroelectric plants of 10MW or less in capacity should be calculated into State goals/standard baselines for purposes of emissions
reduction allocations.

3.) Make Clear that States Can — and Ought — to Subcategorize Affected EGU Sources to Address Small Municipal System and Unit Concerns: EPA's legal analysis of the proposed Clean Power Plan rule suggests that States implementing this rule may have the authority to subcategorize sources to take into account costs, impacts and other factors. If I have made anything clear in my comments today, it is that small public power systems and units, particularly systems with only one unit or a few units, are in a class of their own when it comes to challenges under this proposed rule. EPA should thus make explicit and clear in its final rule that States should take this into account, and that States have authority to exclude small public Power from the rules, allocate hardship credits to these units in the form of less stringent or more flexible standards, or otherwise provide flexibility and support to these units.

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### 4.) Make Sure the Rule has Maximum Flexibility to Enable States to Address

Municipal Power Concerns: Finally, Michigan public power urges EPA to do all that it can to listen to the concerns of states, and to provide the maximum flexibility possible, in ways that will enable states to address these municipal utility challenges and concerns. This flexibility should be provided by EPA in terms of the timing for state plan development, the flexibility provided states to adopt compliance approaches, the inclusion of load growth factors in stateemissions goals/standards, and the support provided to States to develop intrastate or inter-state carbon emissions trading programs.

In Michigan, for example, we have been very pleased that the Michigan Department of Environmental Quality has adopted a "hardship credits" approach to implementation of nearly all of the NOx, S02, and mercury programs implemented under EPA's Clean Air Act rules, SIP calls, and other EPA requirements. These hardship emission trading credits have taken into account the drastic, disproportionate impacts and diseconomies of scale in pollution controls that would have impacted public power, if the State had not provided extra allocations of trading allowances to public power systems that demonstrated a true need for this support. However, we fear that the immense size and complexity, and short timelines, of EPA's Clean Power Plan rule may make it difficult or impossible for states like Michigan to develop flexible, creative approaches including carbon trading approaches, thus making State support for municipal power hard or impossible to provide.

In closing, public power like Michigan's municipal utilities have grave concerns that our small systems and small units may suffer the greatest brunt of the proposed EPA rule. We urge EPA to adopt the right applicability threshold, and the maximum flexibility for states to address these issues, in order to avoid drastic and disproportionate impacts to our communities. Thank you very much for this hearing, and for your attention to our concerns. I wish to submit my comments into the official record today.

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