From: Higgins, Cortney [mailto:Cortney_Higgins@omb.eop.gov] 

Sent: Friday, May 30, 2014 9:08 AM 

To: Culligan, Kevin 

Cc: Wayland, Robertj; Elman, Barry; Chappell, Linda 

Subject: Interagency Comments on Latest Drafts -- RE and RIA 

Interim target: Some commenters supported EPA’s request for comment on an interim target 

(“option B”) under the main BSER option and asks EPA to restore it in the current version. 

RE building block: Some commenters appreciate EPA’s addition of the alternate RE generation 

building block to support the BSER based on technical and economic potential, but are concerned 

that the specific methodology proposed by EPA may not be the most appropriate to use. They 

recommend EPA delete the new discussion on pages 215-218 of the preamble and replace it with 

the following, which will give both EPA and public commenters more freedom to develop an 

alternative methodology before the final rule next June. 

Additionally, EPA is soliciting comment on an alternative approach to quantification of renewable 

generation to support BSER. Unlike the proposed RE scenario described above that relies on a 

regional application of state RPS commitments, an alternative methodology could rely on a stateby-state assessment of RE technical and economic potential. One such possible approach would 

compare the estimated cost of new renewable energy to the avoided cost of energy from 

implementing the clean energy generation, by comparing the total cost of generation for each 

renewable energy technology by region to the estimated fuel, operating, and capital costs avoided 

by adding that generation. This calculation can be carried out at a high level of granularity when 

data is available, and then aggregated to the state or regional level. 

This general economic potential approach can be summarized in three steps: 

Step 1: Use best available regional information (with areas excluded due to physical features and 

other exclusions) and data on current technology costs and regional construction cost differences 

to estimate a total cost of clean energy for each location. Note this can include an adder for 

potential new transmission or pipeline needs. The result of this is a clean energy supply curve at 

many locations, with the cost and available generation for that region. 

Step 2: Estimate the avoided energy cost. This is calculated based on the particular generation mix 

by region, providing information about the generation that would be displaced by the clean energy 

technology. This is composed of avoided fuel and operating costs, avoided capital costs, and a 

range of costs for avoided environmental externalities. 

Step 3: For each resource area, compare the cost of new clean generation (found in step 1) to the 

avoided costs (found in step 2). If the costs are lower than avoided cost, include the generation 

and capacity available in this region in the “cost-effective potential”. Sum the supply curve for each 

state and region to estimate cost-effective potential at those scales. 

EPA can use this method to calculate BSER for renewable energy generation by state, while 

limiting BSER to renewable energy penetration levels of leading states. EPA may wish to take 

comment on this approach as well as other suggested approaches to building the renewable 

energy building block that rely on economic and/or technical renewable energy potential by region. 
If EPA rejects this recommendation and wishes to keep its current language, the commenters 

recommend that language be added to indicate that the methodology proposed by EPA is one 

possible methodology relying on technical and economic renewable energy potential, and that EPA 

wishes to take comment on this or any other recommended techno-economic approach to 

developing the RE building block. 

Other comments: 

1. Executive Summary Page 4, IPM is first mentioned but the Integrated Planning Model (IPM) 

acronym is introduced on page 8. 

2. Table ES-1 contains a note “Also, as noted above, EPA is not proposing . . . “ but there is 

no such discussion in the preceding text. 

3. Page 9, the italics for the ancillary cost support document appear to extend past the title of 

the document (the text starting “henceforth referred to as...”) 

4. Ch 2, page 16: Refers to Mario rather than Andrew Cuomo. 

5. Page 2-20 and page 2-24: Sources for Figures 2-5 and 2-6 are incorrect 

o Figure 2-5 cites EIA, Annual Energy Outlook 2013 but this chart does not appear in 

that publication. These may have been pulled from the Annual Energy Review, 

however all of the prices are presented in 2011$. The AER presents the information 

in nominal terms, so EPA must have performed some calculations (and should be 

clear modification were made in the table reference). The AEO2013 should not be 

the source.

o For figure 2-6 neither of the two listed sources (U.S. Energy Information 

Administration, Annual Energy Review – Electricity Section, Table 4, September 27, 

2012 or EIA Annual Energy Outlook, 2012a is correct. The source actually 

seems to be Table 4 from the 2011 Electric Sales and Revenue Report. The 

individual state level prices match, as does the national price 9.90 cents/kWh. 

6. Page 2-28, latest EIA data on demand side peak load reduction shows 33.4 GW in 2010 

(the current RIA text has 33.3), 38.4 GW in 2011, and 42.1 GW in 2012. See Table 10.1, 

Electric Power Annual 2012. 

7. Page 3-1, last full paragraph. This paragraph appears to be using the costs in Table 3-7, 

which appears to exclude monitoring, reporting, and recordkeeping (MR&R) costs. On the 

other hand, Table 3-26 appears to include MR&R costs. Which costs should this paragraph 

be using? (Note that it appears that entries in Table 3-26 generally are used in discussions 

of the compliance costs associated with this proposed rule (see, e.g., preamble at pages 

55-62).) 

8. Table 3-7 and Table 3-26. With respect to the discussion of Table 3-7, suggest adding text 

indicating that the table does not include MR&R costs (which appears to be the case), and 

adding a cross-reference to Table 3-26 as the table that includes such costs. 

9. Section 3, page 6-7, it would be extremely useful to provide IPM-projected Base Case state 

emission rates in tabular form similar to Table 3-1. Base case years 2025 and 2030 should 

both be included. 

10. Page 3-15, second paragraph of Section 3.6.2, missing a word such as ‘of’ ‘to’ or ‘for’ in the 

text reading “the additional cost [to/for/of] the end-user purchasing a more energy efficient 

technology (known as the participant costs).” Also in that paragraph, extra word ‘a’ before 

“1.0%” in last sentence. 

11. Section 3 page numbering appears to reset after the full page chart on page 3-25. 

12. Page 3-5 (after page numbering change), Section 3.7.7, extra ‘s’ in the word “Productions” 

in the section heading (Projected Coal Productions . . . ) 
13. Page 3-14, text on implicit representation of continued EE policies/investments in EIA’s 

AEO Reference case (and therefore EPA’s Base Case) states that “To some degree the 

implicit representation of state policies in the EPA’s base case alters the impacts 

assessment, but the direction of change is not known with certainty. This issue is discussed 

in more detail in the Greenhouse Gas Abatement Measures TSD.” This text flags the issue 

but does not provide the directional factors that are currently known: to the extent that EE is 

present in the baseline, incremental targets set by the BSER EE building block are that 

much more stringent. Conversely, state policies that are not included in the baseline 

(because they cause new and/or discontinuous jumps in investment) lessen the relative 

stringency of the BSER EE building block targets. 

14. Page 3-15, missing an ‘s’ in “average retail electricity price are expected . . . “ 

15. Page 3-15, end of second paragraph in Section 3.11, the words “please note” seem out of 

place in this document.