Moritz, Brigette From: glazec@pjm.com Sent: Thursday, January 30, 2014 10:49 AM To: Mccarthy, Gina Cc: Feldt, Lisa; Vaught, Laura; boston@pjm.com Subject: Section 316(b) Rulemaking: Letter from PJM Interconnection CEO to Administrator McCarthy re: Impacts of Rule on the Existing Nuclear Fleet Attachments: EPA --- Section 316(b) ---- Letter from PJM CEO to Administrator McCarthy--January 30, 2014. pdf
Administrator McCarthy: On behalf of PJM President and CEO Terry Boston, I am transmitting to you the attached letter asking for your consideration of the economic viability of the existing nuclear fleet in your deliberations on the timing and scope of your final Section 316(b) rule. Please contact me or Terry Boston, PJM CEO if you wish to discuss further. Once again, we appreciate the excellent working relationship we have had with EPA staff and appreciate your consideration of this request. Thank you.

Craig Glazer Vice President-Federal Government Policy PJM Interconnection, L.L.C. r..3 202-423-4743 m FT-; GLAZEC@PJM.COM ^ _C? C_
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The Honorable Regina McCarthy Administrator U.S, Environmental Protection Agency William Jefferson Clinton Federal Builtling 1300 Pennsylvania Ave., NW Washington, DC 20460-0001 Dear Atlministrator McCarthy: PJM Interconnection, L,L,C. ("PJM") is the Regional Transmission Organization responsible for ensuring the reliability of the electric power grid in a 13-state region covering all or parts of New Jersey, Pennsylvania, Delaware, Maryland, Virginia, North Carolina, West Virginia, Ohio, Kentucky, Tennessee, Michigan, Indiana, Illinois antl the District of Columbia. PJM manages the dispatch of over 180,000 MW of generating capacity in a region that includes 60 million people and accounts for over 20% of the U,S. economy. We are managing a significant shift in our region's generating mix that is occurring due to the increased availability of natural gas, state and federal regulations that have raisetl costs for coal-fired power generation, the aging of certain generating resources and other factors. More than 16,000 MW of coal-fired resources will retire by 2016 and new gas and renewable generating units are rapidly interconnecting to our system. We are working constructively through these changes and appreciate the ongoing working relationship we have had with your Staff. Nevertheless, the rapid shift in the profile of the generation fleet and our most recent winter experience underscores the importance of our maintaining fuel diversity in this region. Effectively managing the timing of such a dramatic supply shift is an intricate process which triggers the need for significant investments in transmission and other infrastructure. This infrastructure does not spring up overnight --- transmission facilities and new baseload generation can sometimes take years to move from initial concept to integration onto the grid. For this transition period and hopefully into the future, PJM is fortunate to be able to rely on more than 30 nuclear units provitling over 30,000 MW of baseload capacity in this region. The region's nuclear resources allow us to maintain fuel diversity in our generation profile. These resources will, if anything, become even more important for reliability purposes as more intermittent resources are adtled to the mix. We are concerned about the economic viability of the existing nuclear fleet in our region due to pricing pressure from all of these exogenous events. Analysis conducted by PJM's Independent Market Monitor demonstrates that the nuclear fleet in the PJM region has seen net revenues for 2012 and 2013 decline to the point of covering less than one-third of the fixed costs of a typical nuclear unit within the region. While it remains to be seen whether these economic pressures will continue and what impacts they may have on individual nuclear units, we urge caution in the imposition and timing of new regulatory costs on existing nuclear plants. Specifically, we respectfully ask that the present economic challenges facing the existing A^^..

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fleet be considered as you develop Section 316(b) regulations, including the timing and scope of the Final Rule's implementation requirements on the existing nuclear fleet. From PJM's perspective as a transmission operator charged with ensuring reliability for the region, it is critical that the nuclear fleet in our region remains economically viable particularly as we head into this multi-year transition of the rest of our resource profile. We appreciate your consideration of our perspective as you proceed with the Section 316(b) rulemaking. We thank you again for your consideration and reiterate our commitment to continue the excellent working relationship we have had with EPA Staff on these issues. Sincerely,

Terry Boston

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