FEDERAL ENERGY REGULATORY COMMISSION WASHINGTON , D

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### Janet G. McCabe Acting Assistant Administrator Office ofAir and Radiation U.S. Environmental Protection Agency 1200 Pennsylvania Avenue, N.W. Washington, D.C. 20460 May 15, 2015

Dear Acting Assistant Administrator McCabe:
Thank you for your letter ofMay 6, 2015, regarding the Environmental Protection Agency's (EPA) Clean Power Plan proposal and the Commission's recent conferences on the proposal. We appreciate the attendance and participation by you and other EPA representatives at those conferences, and your openness to the perspectives offered by us and others there. We also appreciate the fact that you and others from EPAhave met with each member ofthe Commission on more than one occasion. As you know, the conferences focused on the proposal's possible effects on three aspects ofthe Commission's responsibilities: electric reliability; energy infrastructure; and wholesale energy markets. Our letter today addresses the reliability issues discussed at the conferences

. First, as you know, many ofthe conference speakers expressed concern about the interim goals in the proposed Clean Power Plan, and suggested a need for more flexibility in the early years ofcompliance. This issue may be the most prominent, and most discussed, ofthe reliability issues raised at the conferences and elsewhere. As your letter recognizes, EPA's final rule shouldprovide enough time and flexibility for affected entities to take the actions that they musttake to ensure system reliability. These actions could include the construction ofgas or electric infrastructure to support the addition ofnew capacity. Thus, we trust EPA will consider the concerns raised with the interim goals, and other views expressed on this issue, as EPA finalizes its rule. Various commenters indicated, for example, that more flexibility on the interim goals may lessen reliance on other processes for addressing reliability. Apart from this issue, we will focus on how the Commission can continue to fulfill its responsibility on Bulk-Power System reliability after EPAreleases any final rule on the Clean PowerPlan. Numerous panelists at the conferences urged the Commission to work with EPA to address any reliability issues that arise as-2-
states comply with the Clean Power Plan. Specifically, panelists recommended that the Commission work with EPA to establish processes for modifying compliance obligations when unforeseen delays in implementation efforts could otherwise risk harm to reliability (a "Reliability Safety Valve") and for generally reviewing state plans for interstate impacts on reliability ("Reliability Monitoring and Assistance"). Reliability Safety Valve
Forthe purpose ofthis letter, we define the Reliability Safety Valve as a process through whichthe affected entities can petition the EPA for temporary waiver or adjustments to the emissions requirements or compliance timelines in an approved state plan to preserve Bulk-Power Systemreliability.
Ifthe EPA chooses to adopt a Reliability Safety Valve, the Commission's participation should be clearly defined, as in the process for the Mercury and Air Taxies Standards (MATS) fifth year. 1 Specifically, after a plan is approved and in place, the Commission could review a petitioner's claims that unforeseen or emergency system conditions will result in violation ofa Commission-approved Reliability Standard or reserve margin deficiency, unless a compliance obligation is adjusted. In addition, as we indicated for the MATS process, we could identify issues, pursuant to our other areas ofauthority, such as requirements in a Commission-approved tariff. Similarly, the Commission could review the petitioner's proposed mitigation as to whether it will resolve the Reliability Standard violation or reserve margin deficiency. In this narrow role, the Commission would not opine on other issues that EPA could consider, such as whether an applicant had made sufficient efforts to resolve the Reliability Standardviolation without deviating from approved emissions requirements or compliance timelines or whether there were other ways to resolve the Reliability Standard violation or reserve margin violation deficiency. That is, the Commission's role would be to consider whether a specified set ofloads, resources and grid facilities would cause a Reliability Standard violation or

1See PolicyStatement on the Commission's Role Regarding the EnvironmentalProtectionAgency'sMercury andAir Taxies Standards, 139 FERC

**~** 61,131 (2012); The Environmental Protection Agency's EnforcementResponse Policy For Use OfClean Air Act Section 113(a) Administrative Orders In Relation To Electric Reliability And The Mercury and Air Taxies Standard (Dec. 16, 20 11), http://www.epa.gov/compliance/resources/policies/civil/erp/mats-erp.pdf.-3-

reserve margin deficiency, not whether the applicant or EPA should pursue a differentl set ofoptions and, ifso, which options.
I:fJEPA is interested in further developing this concept, our staffis available/ to workwith EPA staffon the specific reliability-based information that applicants should be required to provide to facilitate our assessment ofa request for relief l Our expectation is that this information couldbe similar to the information required ofapplicants seeking a fifth year underMATS, with any modifica J

ions needed for the context ofthe Clean Power Plan. Reliability Monitoring and Assistance As noted above, various panelists at our conferences advocated a process that takes place priorto, or in parallel with, EPA's review ofstate plans to identify and potentially mitigate potential reliability concerns. Industry participants suggested that this oversight consist ofCommission and/or North American Electric Reliability Corporation (NERC) review ofall state plans to ensure that the combined effects ofstate plans do not negatively impact electric reliability.
Before turning to the technical aspects ofthese proposals, it is importantto note thatl the Commission's role on reliability is defined by Congress, and generally consists ofapproving proposed reliability standards for the Bulk-Power System, ifthey meetthe statutory criteria, and then enforcing or overseeing enforcenient ofthose standards. The Commission's exercise ofits ratejurisdiction also, at times, has effects on reliability issues. But, reliability also depends on factors

**yond** the Commission'sjurisdiction, such as state authority over local distribution and integrated resource planning. Similarly, state authority to propose plans for compliance with the federal Clean Air Act does not depend on, or require, Commission approval. The Commission also lacks specific statutory authority to require a public utility to build a new powerplant ornew transmission line. The Commission is not seeking to alter this balance ofFederal and state roles
or to assb rt authority over state plans. Any Commission role in this area mustbe crafted



### refully to respect the authority and responsibility ofstates. 

### I With this background, we believe a process to review state plans for potential! reliability concerns shouldrely primarily on existingprocesses for identifying and addressing reliability issues, adjusted as appropriate for the



### circumst **nces.** Planning authorities such as RTOs and ISOs or, in other areas, NERC, Regional Entities orreliability coordinators currently model the electric grid to plan and assess the reliability ofthe Bulk-Power System. These processes are generally adequate, although increased effort by industry will be needed as-4- State plans are developed. As appropriate, the Commission could then review the analysds, suggest or request additional or modified analyses or, in limited cases, perform analyses itself. Under existing FERC statutory authority, the Commission could look more closely at particular areas or issues, subject to resource 

### availabrlity, and taking into considerationrequests byEPA, States, or others.
For areas or issues ofconcern, the Commission could convene technical conferences, require presentations at Commission meetings, or engage in other forms qfoutreach at fora such as the National Association ofRegulatory Utility Commissioners and NERC meetings. Ifrequested by EPA, the Commission could providJ formal input on aparticular plan or set ofplans, subject to resource availability. In any event, the Commission's role generally should focus on the regional aspects ofClean Power Plan compliance. Our staffis prepared to work I

**withE**

**~**A staffto provide this Reliability Monitoring and Assistance. Conclusion 

### I 1fhe Commission intends to stay informed about the development ofstate plans

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that the Commission will be able to respond to Bulk-Power System reliability issues that might arise. We appreciate EPA's engagement with the Commission on howthe Clean PowerPlan may affect the reliability ofthe Bulk-

1 Power System and hope to continue this dialogue as the Clean Power Plan is finalizd d and implemented.

Norman C. Bay 

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**·** Cheryl

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LaFleur 

### Comm jssioner

Colettei D. Honorable Commissioner Sincerely,

Philip D. Moeller



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Commissioner