South Mississippi Electric Power Association

White Paper on

Proposed Carbon Pollution Emission Guidelines for Existing Stationary Sources:

Electric Utility Generation Units

White House and EPA Meetings

October 9, 2014Outline of Discussion Points

South Mississippi Electric

October 9, 2014

– Meetings with EPA and White House

I. Introduction to South Mississippi Electric and its Member Systems

II. SMEPA Cannot Achieve the CO 2 Goals EPA Has Set for Mississippi

III. Major reasons for SMEPA’s inability to achieve Mississippi’s CO2 goals

includes: 1) receiving no credit for early action, 2) financial impact of

premature retirement of coal fired facility, 3) flaws in the building blocks

associated with renewables and demand side energy efficiency.

IV. SMEPA has been investing or making plans to invest in projects to lower our

carbon intensity for the last several years, yet we get no credit for these

strategic decisions and, in fact, we are penalized for our efforts to lower our

emissions.

 Attachment No. 1

– 5 Year Financial Forecast

V. The Proposed Rule’s shift to natural gas combined cycle results in early

retirement of SMEPA’s coal fired generating station, Plant Morrow, causing

additional financial burden on SMEPA and our members.

VI. In summary, the EPA’s failure to consider recent investments SMEPA has

made to lower the carbon intensity of its generation fleet and the financial

impact of stranding the Plant Morrow asset results in the very real

possibility of SMEPA being financially unable to implement methods, if they

exist, to meet the CO 2 goal for Mississippi.

VII. EPA fails to consider the realities of renewable energy and demand side

energy efficiencies in the state of Mississippi.

 Attachment No. 2

– 2012 Southeast Renewable Energy Data

 Attachment No. 3

– Coast Electric Power Association’s Energy

Efficiency Program Overview

VIII. SMEPA recommends that the Mississippi CO 2 goal be recalculated.

1. Remove “at Risk” Nuclear

2. Revise Baseline for Renewable Energy

3. Remove Energy Efficiency from Calculation4. Remove Kemper IGCC from Calculation

 Attachment No. 4

– Graphic Representation of Mississippi Revised

Goal

IX. Included as Attachment No. 5 is SMEPA’s White Paper on the Clean Power

PlantCONFIDENTIAL WORK PRODUCT

KEY INDICATORS

Actua l Ac tual 6-6 Estimate

2012 2013 2014 2015 2016 2017 2018

Sales to Members, $ Million 761 $ 769$ 810$ 823$ 914$ 937$ 943$

Sales to Members, 000 MWh 9,838 10,167 10,253 10,335 10,480 10,601 10,662

KWh Sales Growth (3.2)% 3.3% 0.9% 0.8% 1.4% 1.2% 0.6%

Wholesale Rate, Mills/KWh 77.3 75.7 79.0 79.6 87.2 88.4 88.4

Change, Mills/KWh 3.5 (1.7) 3.3 0.7 7.6 1.2 0.0

Sales to MISO, $ Million 107 $ 135$ 129$ 109$ 102$

Sales to MISO, 000 MWh 1,958 2,658 2,483 2,062 1,876

MISO Average Selling Price $/MWh 54.6 50.9 52.1 53.0 54.5

Total Sales, $ Million 761 $ 769$ 917$ 958 $ 1,044$ 1,046$ 1,045 $

Total Sales, 000 MWh 9,838 10,167 12,212 12,992 12,963 12,664 12,538

(Mills/KWh)

Environmental(CAIR) Costs 0.6 0.1 0.1 0.2 0.3 0.4 0.5

Fuel Rate 38.7 32.7 38.0 33.0 32.4 32.4 33.6

Purchased Power Rate 57.6 64.6 61.3 65.0 71.9 73.4 71.7

Fuel, CAIR, & Purchased Power Rate 52.5 49.7 51.6 50.9 54.3 55.3 55.0

Change, Mills/KWh (2.7) 1.8 (0.6) 3.3 1.0 (0.3)

MPCo MRA/MB Rate, Mills/KWh 67.7 72.0 79.8 85.1 102.1 102.1 102.1

Chan g e

, Mills / KWh 2.4 4.3 7.9 5.3 17.0

- -

($ Million)

Environmental (CAIR) 2 $ 1$ 1$ 1$ 2$ 2$ 3$

Fuel 107 $ 165$ 197$ 192$ 193$ 186$ 190$

Purchased Power 426 $ 370$ 439$ 480$ 521$ 525$ 509$

Fuel & Purchased Power, $ Million 534 $ 536$ 637$ 673$ 715$ 713$ 701$

Gas Fuel, $ /MMBTU (A) 4.80 $ 4.33 $ 5.18$ 4.63$ 4.59 $ 4.74 $ 4.90 $

Coal, $/Ton 109 $ 110$ 111$ 109$ 109$ 117$ 118$

Coal, $/MMBTU 4.36 $ 4.47 $ 4.62$ 4.55$ 4.56 $ 4.99 $ 5.00 $

Members Peak MW 2,122 1,998 2,254 2,290 2,324 2,362 2,530

(Est. CP) Cha nge, MW (202) (124) 256 36 34 38 168

Debt Outstanding (Long-Term), $ Million 1,398 $ 1,360$ 1,433$ 1,816$ 1,786$ 1,711$ 1,639 $

Net Assets, $ Million 1,933 $ 1,949$ 2,062$ 2,456$ 2,458$ 2,415$ 2,376 $

Net Worth, $ Million 280 $ 313$ 344$ 375$ 413$ 452$ 473$

Net Worth as % Net Assets 14.5% 16.0% 16.7% 15.3% 16.8% 18.7% 19.9%

(A) All-in cost of natural gas includes transportation and hedging costs Forecast

Page 1 Attachment No. 1

FINANCIAL FORECAST

Years 2014 - 2018AttachmentNo.22012SoutheastRenewableEnergyData(inthousandsofMWh)MSALKYGAFLNCSCTNSoutheastTotalsTotalElectricityNetGeneration54,584152,87989,950122,306221,096116,68296,75677,724931,977TotalRenewableNetGeneration1,50910,2122,6945,5144,6736,4313,5639,13343,729Geothermal‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐  ‐Hydro‐7,4352,3622,2361503,7281,4208,29625,627Solar‐  ‐  ‐3193139‐12347Wind‐  ‐  ‐  ‐  ‐  ‐  ‐4848Wood/Woodwaste1,4932,7692363,1072,0572,2621,94171514,580OtherBiomass168961682,273302202623,127%RenwableofStateTotal2.86.734.52.15.53.711.74.7%Renewablew/oHydro2.81.80.42.722.32.21.11.9%Renewablew/oHydro&Biomass00000.090.100.080.04

### Attachment No. 3



## Coast Electric Power Association Energy Efficiency Program

Overview

Residential New and Existing Home Programs

Since 1998, Coast Electric’s residential incentive rebates through the

Comfort Advantage program were over $4,080,100 with 12,926 homes

certified.

RESIDENTIAL NEW HOME

 Comfort Advantage New Home

 Comfort Advantage Plus New Home

Key Features:

 Homes must meet minimum criteria for HVAC, insulation and infiltration

 Homes must have ARI

‐ verified heat pump

 Homes must meet certain standards for windows and doors

 Homes must be certified by energy efficiency experts

 Comfort Advantage Plus homes require Energy Star

‐ certified products

2012

‐ 2103 data

Estimated 1,306 mmbtu’s /382,769 kWh saved annually



### RESIDENTIAL EXISTING HOME

 Comfort Advantage Existing Home

Key Features:

 Incentive

‐ based program to encourage consumers to upgrade HVAC systems

to energy

‐ efficient heat pumps.

2012

‐ 2013 data

Estimated 4,285 mmbtu’s /1,255,663 kWh saved

### ENERGY AUDITS

 Online

 Phone

 On

‐ site/walkthrough

Description:

Energy Audits are available to all consumers FREE OF CHARGE based on their

individual needs. The purpose of our energy audits is three

‐ fold: 1) to ensure that

account and billing information is correct in respect to the consumer; 2) to educate

consumers on the efficient operation of equipment in order to establish a safe and

effective energy management plan; 3) to identify potential equipment faults that

effect energy use.

Key Features:

 Three ways to conduct an audit, based on the consumer’s preferences

 Electronic

‐ Self conducted online by member with Home Energy Suite

online audit on Coast Electric website

 Phone

‐ Residential Energy Management Representative talking member

through home energy checks and tests.

 Walk

‐ through

‐ Residential Energy Representative conducts on

‐ site

walkthrough of member’s home with a written post report mailed to

member.

 Audits conducted by certified energy efficiency experts

 All audits are offered at no charge to consumers

Data 2012

‐ 2013

Residential Audits

 802

‐ electronic audits

 20,440

‐ energy efficient page views

‐ Web

‐ site

 481

‐ consumer phone audits

 210

‐ on

‐ site walkthrough audits

Commercial On

‐ site Audits

 32

‐ on

‐ site commercial audits

### Small Commercial Prescriptive Incentive Programs

Description:

Coast Electric’s small commercial prescriptive incentive programs are designed to

encourage the installation of energy efficient heat pump systems and electric cooking

equipment, thereby reducing the total annual energy consumption

Key Features:

 $100 cash incentive available to installing HVAC dealer to fortify Coast

Electric’s efforts to promote heat pump system installations over inefficient,

electric resistance and LP gas heating systems

 $10 per kilowatt (kW) incentive to members on each piece of electric cooking

equipment rated at 6kW or greater



### Time of Use (TOU) Rate Plan

Description:

TOU rates provide consumers with a choice to lower their electricity costs without

reducing the total amount of electricity used. By shifting electricity use off

‐ peak,

Coast Electric can avoid the need to build new generation plants. In addition, off

‐

peak use will allow current facilities to operate more efficiently, reducing consumers’

electricity costs even more.

Target Audience:

 Residential Consumers

 Commercial Consumers

 Church Consumers

 Industrial Consumers

Key Features:

 Coast Electric’s TOU rate gives the consumer control of their energy use and

encourages them to be more accountable and educated about their

consumption

 Rates are customized for each class: residential, small commercial, large

commercial, industrial and church classes

 Ninety

‐ two percent of all hours, year

‐ round, are off

‐ peak (residential) Annual use divided into two periods, winter (November

– March) and

summer (April

– October)

 Winter period peak hours (two hours per day) from 6 a.m.

– 8 a.m.

(residential)

 Summer period peak hours (three hours per day) from 3 p.m.

– 6 p.m.

(residential)

 Peak hours apply to Monday thru Friday only, excluding the holidays of

Thanksgiving Day, Christmas Day and New Year’s Day (residential)

 After six months, if a consumer determines that the amount paid using TOU

rates is greater than the amount they would have paid with the standard rate,

the consumer may cancel the TOU agreement and request a credit for the

difference.

Data

Time of Use residential accounts

2014

‐ 10,794 (as of September 30, 2014)

2013

‐ 7,357 (Jan

‐ Dec)

Time of Use commercial accounts

2014

‐ 95 (as of September 30, 2014)

2013

‐ 73 (Jan

‐ Dec)

Time of Use load factor improvement

Load factor has improved due in part to the utilization of the time

‐ of

‐ use program

 January 2010

‐ 59.21 percent

 September 2013

‐ 62.93 percent

 Each 1 percent reduction in load factor saves over $500,000



### Automated Metering Infrastructure (AMI)

Description:

Automated Metering Infrastructure (AMI) refers to systems that measure, collect and

analyze energy use, and interact with advanced devices such as electricity meters,

through various communication media.

Key Features:

 Allows consumer to access their energy use data 24/7 through a portal

 Consumers can monitor use on their smartphones 24/7 through Coast

Electric’s mobile app

 Saves money for the cooperative and consumers Reduces the potential for misreads and data entry errors

 Reduces estimated bills because of locked gates, bad dogs, etc.

 Enables data gathering on energy use to help spot high bill causes and to

discuss high bill concerns

 Enhances accuracy of electric bills



### Energy Star Program Sponsor

Description:

As an Energy Star Efficiency Program Sponsor, Coast Electric supports energy

efficiency program information available to residential and commercial consumers.

Annual updating of programs and services to DOE and DSIRE websites.

Target Audience:

 Existing home owners

 New home buyers /builders

 All consumer classes

Key Features:

 Website and brochure branding through a nationally recognized program

 Industry information



### CEEDR Cabinet

Description:

The C oordinated E nergy E fficiency and D emand R esponse, or CEEDR was formed in

2009 to study and implement ways to produce more efficient use of electric energy

and help avoid increased capacity requirements.

Target Audience:

 Residential consumers

 Commercial consumers

 Industrial consumers

Key Features:

 Potential Study

 Initial Pilot Programs

 Residential Pilot Program As of September 2014 there are 13 Coast Electric member homes in

the study. Energy data will be collected for one year and will be used

to create energy efficient programs throughout the SMEPA territory.

 Commercial and Industrial (C&I) prescriptive lighting replacement

 C&I custom energy efficiency projects (C&I Pilot Program)



### Employee Energy

‐ Efficiency Education

 MSR program training

– Time of Use, Comfort Advantage,

commercial/industrial, energy audits, consumer service, Prepay Metering

 Monthly safety meetings

– Presentations are used to educate employees on

the latest energy efficiency programming and safety concerns. Time of Use,

energy fair promotion, etc.

 Electronic communication stations

– Energy efficiency tips, Prepay Metering,

Time of Use

 Hotlines

– A publication used to inform employees of energy efficiency

trainings and also highlight specific community outreach relating to energy

use and savings.

 Online rate calculators

– Employees use the calculators to help consumers

manage their monthly bill and also to suggest ways to save.

 Online energy library

– Tools for employees and consumers to lower their

energy use.

 Job aid reference guides

– Provides employees with energy efficiency talking

points to assist consumers with questions regarding lowering their energy

use.

 Cooperative.com

– An online resource to aid employees in helping consumers

save.

 Together We Save resources

– Resources that Coast Electric employees can

reference to gain energy efficiency knowledge.



### Consumer Energy

‐ Efficiency Education for all consumer classes



## Programs and Services

Civic and community energy efficiency presentations

 Habitat for Humanity

 Church groups Community Groups

 Rotary

 Kiwanis

 Exchange clubs

 Home Builders monthly meetings

 Picayune’s Senior fairs

 Biloxi’s Green Bus Tour

 Stennis Space Center’s Energy Day

 Home Builders Home Show

 Gulfport’s back to school event

 Home Depot’s hurricane preparedness day

 Gulfport’s children’s’ safety and wellness Day

Consumer energy fairs

Coast Electric provides annual energy fairs in each of the five (5) district offices.

Annual meeting energy fair

Coast Electric uses many different avenues to communicate energy efficiency with

consumers. The company’s annual meeting takes place once a year and updates a

crowd of around 250

‐ 300 consumers.

Kill

‐ A

‐ Watt meter library program

Coast Electric supplies each area public library with one or two Kill

‐ A

‐ Watt meters

and an easy

‐ to

‐ use guide, all packaged in a plastic carry container. The package can

be checked out just as a book can be by any consumer so they can be educated on

energy use in their homes.

Co

‐ op Connections Card Program

Coast Electric’s nationally recognized program that offers money

‐ savings discounts

on products and services and efforts of this program include energy efficiency

messages and provides one

‐ stop

‐ shopping for our consumers to find local vendors

and contractors for energy efficient products.

Trade allies education and programs

Coast Electric provides training and education on our energy efficient programs to

our local professionals in the housing industry.

Filter Change program

This service is a web

‐ based program that allows consumers to order filters for HVAC

units in bulk and ships the filters straight to the consumer’s door. Having clean filters

in HVAC units can save consumers up to 15 percent on heating and cooling costs. Theprogram will also send consumers emails once a month to remind them it’s time to

change their filters.

Earth Day program

For the past two years, Coast Electric has celebrated Earth Day in all district offices by

offering fun and educational materials for energy consumers of all ages.



## Resources

Coast Electric invests significantly each year to provide the most up

‐ to

‐ date resources

that provide electric consumers of all classes and demographics the necessary tools

to educate, teach, understand, calculate, budget and keep track of their energy use.

CEPA website

Provides a one

‐ stop

‐ shop for information about Coast Electric’s programs, services,

resources and news that impacts consumers.

Electric use history

Delivers real

‐ time account information regarding billing, payment and energy use

history, and trends based on weather data.

Online rate calculators

Showcases Coast Electric rates schedules and detailed breakdowns of how bills are

calculated for all classes. The comparison calculator allows consumers to evaluate

the best available rate plan for their service application.

Online energy savings calculators and solutions

Calculators are designed for residential, commercial and industrial consumers, and

provide a wide

‐ range of energy efficiency information, technologies, and practices

and savings scenarios. These tools empower consumers to be accountable for their

energy consumption and positions Coast Electric as an advocate for proper energy

management and savings.

Energy Calculators :

Home Energy Calculator

This calculator provides consumers with estimates of energy use costs based on

information they input and allows them to perform energy saving scenarios to

pinpoint opportunities for savings.

Commercial Energy Calc

This calculator enables commercial building operators, energy managers, and utility

account representatives to identify energy savings opportunities for more than 60

buildings and business types.

Energy References:Home Energy Library

The Home Energy Library provides hundreds of pages of graphically

‐ rich and

interactive resources for consumers who want to know more about specific topics.

Kids Korner

Kids Korner is a great tool for kids and adults! This area of the website contains

everything from energy

‐ themed games to teacher lesson plans. Kids Korner creates a

rich, kid

‐ friendly environment for energy education.

Interactive Energy Home

A graphically

‐ rich and interactive extensive library for exploring electricity issues of

interest to a broad selection of consumers.

Commercial Library

Contains easy

‐ to

‐ understand explanations and examples for commercial and

industrial energy technologies.

Understanding Demand

Review how and when most commercial facilities typically use energy, as well as how

those facilities can save money on their energy bills.

Special Purpose Calculators:

Thermostat Calculator

Estimates the savings to be gained by installing and setting a programmable

thermostat

Appliance Calculator

How much does it really cost to use the appliances in your home? Here's a quick way

to get a feel for what your home's appliances cost to operate.

Lighting Calculator

Compares the purchase price and cost to operate compact fluorescent lamps vs.

incandescent lights.

Television Calculator

Compares the energy use and cost of LCD, DLP, Plasma, and traditional tube

televisions.

Heat Pump Calculator

Demonstrates the savings potential of replacing older inefficient heat pumps with

newer, high efficiency units

Heating Calculator

Compares the estimated annual costs of consumers’ current heating types to other

heating options.Setback Cooling Calculator

Estimates the savings to be gained by installing and setting a programmable

thermostat.

Questline

Energy

‐ related content in the form of eNewsletter articles, energy calculators, social

media feeds, Webinars, eLibrary articles, Ask an Expert answers, industry

‐ segmented

benchmark data, and more.

Business Energy Advisor

An online clearing house of energy management tools and resources for our business

consumers to: find out where energy dollars are going; get money

‐ saving advice;

select the equipment that makes the most sense for their organization; i dentify key

purchasing criteria.

Commercial Energy Systems

The content of this comprehensive library of energy systems applications is designed

for use by our commercial consumers and our C & I Key Account Representatives

who serve them. It is divided into three sections: facility types; technologies; building

design. The purpose of the library is to provide our commercial consumers an

extensive and relevant look at lighting, commercial equipment, heating and cooling,

cooking, and water heating systems that impact energy use in their businesses.

CEPA “CE On The Go” App

This smart phone application enables Coast Electric consumers to view their account

information, current energy consumption and bills, and offers bill pay and outage

reporting functions.

TSE Together We Save App

This smart phone app provides a “tip of the day” reminder of ways to save energy

and money around the home. The app educates consumers on how much energy

their appliances use, and provides energy

‐ related alerts from Coast Electric.



## Communications

Description:

Energy efficiency has been and continues to be the primary focus of Coast Electric’s

external communications efforts. Various tools are used to communicate with

consumers.

Target Audience:

 All classes of consumers11001000195411856929911116111305001000150020002500NSPSCoal(Proposed111b)NSPSGas(Proposed111b)Mississippi2005 EPAProposedMississippi2012MississippiGoal NationalAverageGoalRevised2020GoalRevised2029Goal

lb CO2 /MWhAttachmentNo.4MississippiGoalComparisonMississippi111(d)StateGoalEmissionRateComparisonSouth Mississippi Electric Power Association

White Paper on

Proposed Carbon Pollution Emission Guidelines for Existing Stationary Sources:

Electric Utility Generation Units

White House and EPA Meetings

October 9, 20141 Attachment No. 5

Introduction

South Mississippi Electric Power Association (SMEPA) appreciates the

opportunity to comment on the Environmental Protection Agency’s (EPA’s) proposal

for Carbon Pollution Emission Guidelines for Existing Stationary Sources in the

Electric Generating Units category, 79 Fed. Reg. 34,830 (June 18, 2014) (hereinafter

the “Proposed Rule”).

SMEPA is a Member

‐ owned, not for profit rural electric generation and

transmission cooperative that supplies all

‐ requirements wholesale electric power to

its 11 member distribution cooperative systems (Member Systems). These Member

Systems own and maintain approximately 54,500 miles of distribution lines and serve

more than 415,000 meters (representing approximately one million people) spanning

32,000 square miles in 55 counties of Mississippi covering 52% of the state’s land

area. SMEPA and its Member Systems serve the rural and formerly rural areas of the

coastal and southern part of the state of Mississippi and the rural areas bordering the

Mississippi River northward to the Tennessee border. SMEPA’s Member Systems

include: Coahoma EPA, Coast EPA, Delta EPA, Dixie EPA, Magnolia EPA, Pearl River

Valley EPA, Singing River EPA, Southern Pine EPA, Southwest Mississippi EPA, Twin

County EPA, and Yazoo Valley EPA.

The load served by SMEPA and the Member Systems is predominately

residential, and the commercial and industrial loads are primarily related to energy,

agriculture, and forestry. The Mississippi Delta is known worldwide for its fertile soil2 and agricultural production (cotton, rice, corn, soybeans, etc.), and the southern part

of the state, known as the Pine Belt, is a major timber growing and processing area

and a center of the poultry industry. Commercial catfish farms; oil and gas drilling

and enhanced oil recovery, storage, pumping and transporting; casino gaming and

other forms of recreation are also major economic forces in the state. About 60% of

SMEPA’s MWh sales are to residential consumers. The single largest industrial

customer utilizes less than 3% of SMEPA’s total sales.

SMEPA has full responsibility for planning, construction and operation of

generation and transmission for the 11 Member Systems served. SMEPA owns,

operates, and maintains approximately 1,750 miles of high voltage transmission lines.

SMEPA maintains transmission interconnections with Mississippi Power Company,

Entergy Mississippi, Inc., PowerSouth Energy Cooperative, and the Tennessee Valley

Authority. These interconnections enable SMEPA to deliver and accept delivery of

power across several southeastern states.

SMEPA currently provides wholesale power to its Member Systems through

the following ownership arrangements and agreements:

 Ownership of a 143 MW (10% undivided interest) in the Grand Gulf

Nuclear Station.

 Two 200 MW Bituminous Coal units at the R.D. Morrow, Sr. Generating

Station.

 Three 279 MW Natural Gas Combined Cycle Units at the Batesville

Generating Station.3  Two 138 MW Natural Gas Combined Cycle units, one 59 MW Natural

Gas/Fuel Oil Steam unit, and two 83.5 MW Natural Gas Combustion

Turbines at the J.T. Dudley, Sr. Generating Complex.

 Three 83.5 MW Natural Gas Combustion Turbines at the George B.

Taylor, Sr. Generating Station.

 Three 47 MW Natural Gas Combustion Turbines at the Sylvarena

Generating Station.

 One 20.6 MW Diesel Fuel Combustion Turbine at the Paulding Station.

 One 16.2 MW Natural Gas Combustion Turbine at the Benndale Station.

 A 149 MW Power Purchase Agreement with Mississippi Power Company

(Coal/Gas)

 A 180 MW Power Purchase Agreement with Southeastern Power

Association (Hydro).

 A 202 MW (30.08% of facility) Power Purchase Agreement with Plum

Point Energy Associates (Coal).

 A 75 MW Power Purchase Agreement with Louisiana Generating (Coal).

SMEPA’s mission is to deliver to our Members reliable and affordable energy

in a safe and environmentally responsible manner. One of the ways this is

accomplished is by having a diverse generating mix that for SMEPA includes natural

gas, coal, nuclear, and hydro. Excluding power purchases, fuel is SMEPA’s most costly

expenditure. Having a broad mix of options allows flexibility in order to minimize the4 impact of any significant increases in the cost or lack of availability of a single fuel

source. With the ever increasing environmental mandates, SMEPA’s ability to fulfill

its mission is becoming increasingly challenging and the existing fuel diversity status

is being adversely impacted.

A significant portion of SMEPA’s generation and purchase power originates

from coal

‐ fired generation. In recent times, a greater portion of Member System

power needs has come from natural gas resources due to low natural gas prices.

However, history has shown natural gas prices to be cyclical, thus maintaining fuel

diversity is important to SMEPA in providing stability to the cost of energy for our

Members. Additionally, SMEPA’s owned coal fired generation has been equipped

with flue gas desulphurization (FGD) systems to control sulfur dioxide emissions;

retrofitted with Selective Non

‐ Catalytic Reduction (SNCR) systems to control nitrogen

oxides (NOx); and is currently conducting testing on equipment and systems to meet

the EPA’s Mercury Air Toxic Standards (MATS). Under this proposed rule, SMEPA’s

owned coal fired generation would be forced to shut down, resulting in significant

stranded investments, many of which resulted from compliance with prior EPA rule

making. These stranded investments will impose additional costs for SMEPA’s

members and significantly cripple SMEPA’s ability to stabilize the cost of energy for

our members going forward.

EPA’s Proposed Rule requires electric consumers to implement additional

energy efficiency (EE) measures thus placing an undue burden on consumers. The

rural members served by SMEPA are hit especially hard by these additional standards5 and costs. SMEPA has a much higher proportion of residential consumers compared

to that of Investor Owned Utilities (IOUs). As stated previously, over 60% of MWh

sales for SMEPA are for residential consumers. In the Proposed Rule, the EPA fails to

consider the characteristics of electric consumers served by rural electric

cooperatives and instead makes broad EE assumptions across all states. This fails to

account for the fact that EE measures are generally less effective for residential

consumers as compared to industrial and commercial consumers.

EPA’s proposal sets a target for Renewable Energy (RE) that is unreasonable

and unsubstantiated for the state of Mississippi. The EPA presumption that

renewable options can provide any appreciable amount of energy does not reflect

the realities of state meteorology. Mississippi averages 52 inches of rainfall annually

and wind is intermittent during most of SMEPA’s peak load season. To build enough

RE to reach the targets as proposed by the EPA, would require SMEPA to construct

inefficient RE generation thus again resulting in increased cost for Mississippians.

EPA also does not take into consideration that Mississippi ranks dead last in

median household income in the United States at $39,295, well below the US

average of $51,058. Furthermore, the 2010 Hunger in America report showed that

47% of Mississippians reported having to choose between paying for food and paying

for utilities. As a rural electric cooperative, SMEPA serves the poorest Mississippians

and therefore serves the poorest Americans, who can ill afford increases in their

electric bills due to a rule that requires new, major investments.6 SMEPA Member Systems’ certificated service territories are found in 55 of the

82 counties in Mississippi and cover 52% of the land area in the state. Most of the

counties served by the Member Systems are the poorest and most rural in the state.

The following table compiled from the US Census Bureau Quick facts, the Mississippi

Department of Human Services June 2013 annual report and the Mississippi

Development Authority shows the poverty levels in the 55 counties served by

Member Systems.

Counties in Mississippi Served by SMEPA Members

Member Service

Areas

(55 Counties)

County 2008

‐ 2012

% Below

Poverty Level

(%) 2008

‐ 2012

Per Capita

Income

($/yr) 2008

‐ 2012

Median

Household

Income ($/yr) Jun

‐ 13

% Receiving

SNAP

(%) Growth

And

Prosperity

(GAP)

1 Adams 28.6 17,585 27,486 23.7 Yes*

2 Amite 28.4 17,036 30,471 20.1 Yes*

3 Attala 28.1 17,955 31,102 21.8 Yes*

4 Bolivar 34.2 16,716 27,768 38.0 Yes

5 Carroll 25.4 16,508 30,568 15.9

6 Choctaw 21.9 17,256 30,180 23.9

7 Claiborne 35.8 12,788 24,078 41.6 Yes

8 Clarke 24.7 18,559 31,831 23.0 Yes

9 Coahoma 37.4 15,848 25,574 42.9

10 Copiah 24.4 18,327 36,645 27.4

11 Covington 28.5 16,947 32,345 22.1

12 Desoto 10.2 25,073 58,851 12.4

13 Forrest 27.5 20,182 35,459 22.5

14 Franklin 25.4 20,527 31,819 19.6 Yes*

15 George 17.6 20,080 46,263 22.3

16 Greene 17.0 13,820 38,836 16.5

17 Grenada 22.4 20,594 35,912 23.0

18 Hancock 19.7 22,898 43,727 20.2

19 Harrison 18.2 23,378 43,593 23.3

20 Hinds 24.2 20,589 38,152 27.3

21 Holmes 42.6 12,278 22,335 41.9 Yes

22 Humphreys 41.2 12,573 24,783 50.7 Yes

23 Issaquena 30.1 15,241 24,474 24.2 Yes7 24 Jackson 15.4 24,158 49,750 17.0

25 Jasper 21.1 19,119 30,998 22.5

26 Jefferson 41.1 11,771 20,281 33.4 Yes

27 Jefferson Davis 26.5 16,780 27,201 27.4

28 Jones 24.0 20,227 38,233 19.7

29 Lamar 17.6 26,958 50,743 15.7

30 Lawrence 18.7 19,953 38,364 21.0

31 Leflore 39.3 12,972 23,659 40.7 Yes

32 Lincoln 21.6 19,964 37,176 21.1

33 Marion 25.7 17,927 31,865 23.5 Yes

34 Montgomery 32.5 15,880 30,440 21.3

35 Newton 19.3 18,237 35,907 21.3

36 Pearl River 21.8 20,244 41,490 21.7

37 Perry 20.5 17,366 35,942 22.7

38 Pike 26.2 19,797 35,212 27.9

39 Quitman 37.8 13,740 23,115 40.0 Yes

40 Rankin 11.4 27,051 57,593 11.4

41 Scott 22.3 16,774 35,074 24.0

42 Sharkey 35.8 14,472 32,340 45.6 Yes

43 Simpson 22.3 18,361 37,977 23.2

44 Smith 22.6 20,964 36,519 17.1

45 Stone 18.2 21,806 42,862 18.3

46 Sunflower 34.7 12,823 26,611 37.2 Yes

47 Tallahatchie 32.2 13,036 27,689 26.4 Yes

48 Tunica 30.3 15,051 30,463 43.5 Yes

49 Walthall 26.9 16,727 32,260 22.1

50 Warren 23.0 22,413 40,876 25.0

51 Washington 37.5 16,157 27,610 43.4 Yes

52 Wayne 22.3 20,670 38,882 28.0

53 Webster 24.6 19,755 35,391 23.2

54 Wilkinson 23.3 18,608 35,960 29.1

55 Yazoo 34.3 14,432 26,769 33.4 Yes8 Member Service

Areas (55

Counties) % Below Poverty

(%) Per Capita Income

($/yr) Median Household

Income

($/yr) Jun

‐ 13

% Receiving

SNAP

(%)

Range 10.6%

‐ 42.6% $11,771

‐ $27,051 $20,281

‐ $58,851 11.4

‐ 50.7

Average 26.3 18,126 34,318 26.4

#> US Average 53 0 2 n/a

US Average 14.9 28,051 53,046 n/a

Miss. Average 22.3 20,670 38,882 22.5

Developed Area Tiers No. In Member

Areas

Tier One

‐ Developed Areas 17

Tier Two

‐ Moderately Developed Areas 21

Tier Three

‐ Less Developed Areas 17

Total 55

SNAP

– Supplemental Nutrition Assistance Program

*

‐ GAP area limited to one or more districts in county

The above table shows the percentages of individuals within the counties

receiving SNAP (Supplement Nutrition Assistance Program) assistance and the

counties delineated in whole or in part in the Growth and Prosperity (GAP) program.

The GAP program includes whole counties, or in some cases, areas within counties

that have unemployment rates that are 200% of the state’s annual unemployment

rate or have 30% or more of their citizens below the federal poverty rate. The table

also shows each county’s TIER ranking as established by the Mississippi Department

of Revenue. Each year the Department of Revenue compiles TIER rankings for each

county using a combination of the highest unemployment rate and lowest per capita

income for the most recent 36 month period. TIER 3 counties are the less developed

and the poorest in the state. Of the 23 counties that qualify in whole or in part for

GAP, 20 are located within the Member Systems certificated service areas. The9 counties listed for GAP and Tier 3 designation are some of the poorest counties from

the aspect of SNAP recipients, percentage below poverty level, per capita income and

household income. SMEPA Member Systems have service territories in 9 counties

that are listed for both GAP and Tier 3 designation.

The EPA’s proposed rule is flawed, specifically as it impacts Mississippi,

requiring its substantial revision. Alternatively, EPA should work with its fellow

federal agency, RUS, to develop a debt forgiveness policy to free up the hundreds of

millions of dollars needed to meet the rule’s requirements.

Building Blocks

Building Block 1

– Improve the heat rate of coal

– fired power plants.

The EPA’s proposed rule adjusts the CO 2 emission rate for coal

‐ fired power

plants to reflect a 6% heat rate improvement. EPA defines these improvements to

include both changes to operating practices and upgrades to equipment.

As a rural electric generation and transmission cooperative, SMEPA is

constantly investigating, evaluating, and implementing efficiencies at all facilities, as

well as updating all processes and practices in order to provide the most reliable and

economical energy to our Member Systems. At Plant Morrow, SMEPA’s coal fired

generating facility, SMEPA has invested over $10.5 million over the last several years

on numerous efficiency improvement projects achieving a conservatively estimated

3% efficiency improvement. EPA does not consider these past improvements when

adjusting the state’s CO 2 emission rate nor considers whether an additional 6% on10 top of the previous achievements is even possible. It is reasonable to assume that if

there was economical heat rate improvement potential in a given coal unit, whether

by equipment upgrades or by adjustments to operating practices, that such

improvement would have previously been made.

EPA’s proposed rule also does not consider the negative impact that the EPA’s

prior rule making has had on the overall heat rate of coal fired generation. In

response to prior rules, SMEPA has performed upgrades to the flue gas

desulphurization units and installed selective non

‐ catalytic reduction systems to its

coal fired generating units. These two items required a $60.5 million investment by

SMEPA’s Members and resulted in a 2.5% increase in plant auxiliary load thereby

negatively impacting the efficiency of the facility. This 2.5% increase in plant auxiliary

load equates to 13 MWh per day. In fact, SMEPA is currently investigating technology

to meet the MATS rule that will further negatively impact the heat rate efficiency of

the facility.

After all these costs, borne by our Members, to meet the standards set forth

by prior EPA rule making, the EPA simply ignores the negative impact on the

efficiency of the facilities and uses an unreasonable heat rate improvement target in

setting the state’s CO 2 emission goal.

By including these heat rate improvement targets in the determination of the

state’s CO 2 goal, the EPA’s Proposed Rule assumes significant future efficiency

improvement projects but provides no relief from potential New Source Review

(NSR) enforcement action by the EPA. The risk of a heat rate improvement project11 triggering NSR and the subsequent imposed cost of Best Available Control

Technology and other permitting requirements, can result in costs amounting to

hundreds of millions dollars. This risk alone renders the heat rate improvement

target of 6%, or any level for that matter, an unreasonable strategy for SMEPA for

reducing CO 2 emissions.

Building Block 2

– Increase capacity factor of combined cycle natural gas facilities to

70%.

In the second building block, the EPA re

‐ dispatched most of the existing

combined cycle plants to operate at a 70% capacity factor, which decreased

utilization of coal and oil fired units. For Mississippi, this single building block resulted

in coal fired generation being moved to zero in the calculation of the state’s CO 2

emission goal. The assumption that Natural Gas Combined Cycle (NGCC) units can

consistently achieve a 70% capacity factor requires facts from the EPA that have not

been demonstrated. SMEPA owns a significant amount of NGCC capacity, but has

never economically achieved more than a 32% capacity factor and that was in 2012,

when natural gas prices were at a 10 year low. This is due to forced outages, planned

outages, and economics. To reach a 70% capacity factor in 2012 would have required

SMEPA to dispatch generating units outside of economical dispatch. Most NGCC

units were constructed to serve as intermediate resources without the intention of

these units being used as base load resources.

SMEPA joined MISO in December 2013. In today’s RTO/ISO environment,

NGCC capacity factors are based on an economic dispatch model. In order for12 combined cycle generation to reach a capacity factor above an economic dispatch,

such as the 70% level EPA proposed, the RTO/ISO would, at times, need to cut lower

cost resources (i.e. coal, wind). As a result of offsetting economic resources,

wholesale power prices could increase due to a decrease in the ability to take

advantage of economic power purchase opportunities. Additionally, NGCC provides

for flexible capacity for balancing and regulation. Dispatching at such a high capacity

factor will eliminate NGCC as a source for providing this flexibility.

To further exacerbate an already tenuous situation, the EPA has set an

unrealistic renewable energy target for Mississippi which will be discussed further

under Building Block 3. Many Renewable Energy options have to be balanced with

quick response generation to account for periods when the renewable energy source

is not available as a result of changing weather patterns. In FERC’s Summer 2014

Energy Market and Reliability Assessment it was stated, “Rapid changes in wind and

solar generation, particularly in the morning and evening, are expected to increase

the need for flexible capacity for balancing and regulation.” Eliminating NGCC units

from balancing and regulation due to the re

‐ dispatching of NGCC units to the

equivalent of base load level capacity factors, forces this flexibility to be provided

from less economical resources, or in some instances where these resources result in

not being able to meet Mississippi’s CO 2 goal, turning power off to Member’s homes

and businesses.

With the re

‐ dispatch of NGCC to a 70% capacity factor combined with the

unobtainable renewable energy and energy efficiency targets included in the13 calculation of Mississippi’s CO 2 goal, it is very likely that under the EPA’s rule as

proposed, the result will be the early retirement of SMEPA’s coal fired generating

facility, Plant Morrow. The financial impact of the early retirement of Plant Morrow

will be discussed later in the document.

Finally, the EPA’s use of 2012 generation and emission data for the calculation

of the state’s goal is unfair. 2012 was a year when the US experienced a record warm

winter and the lowest natural gas prices in ten years, with natural gas generators

displacing coal at record levels in many areas. Just 2 short years later, FERC in the

Summer 2014 Energy Market and Reliability Assessment states, “In 2012, natural gas

was 57 cents cheaper than coal resulting in record natural gas fired generation.

Higher natural gas prices this summer (2014) should make natural gas

‐ fired

generation less competitive with coal, with gas burn projected to be 2.5% lower than

last summer and 17% below the summer of 2012.” The EPA should base calculations

from data collected in 2005 or at the very least take a multiyear approach.

Building Block 3

– Increase renewable generation and keep a portion of “at risk”

nuclear generation on line.

In the third building block, the EPA assumed that each state could begin

phasing in new renewable generation in 2017 and encourages “at risk” nuclear

generation to stay on

‐ line and new nuclear generation to be completed.

For Mississippi, the EPA determined that 3% of 2012 generation was from

Renewable Energy (RE) or 1,509,190 MWh. The EPA then sets a future target of 10%

of 2029 generation to come from RE or 5,458,430 MWh. The EPA’s setting of this14 future RE target for Mississippi and including in the state’s CO 2 goal calculation is

flawed in that it does not reflect the realities of state meteorology. Additionally, the

EPA misinterprets 2012 RE data for Mississippi as well as for the entire Southeast

region.

In the table below, it is clear that all of Mississippi’s RE came from biomass in

2012. EPA does not presently allow biomass to be a part of the state compliance plan

for RE. Furthermore, as the data below demonstrates, the majority of the RE for the

southeastern states came from hydro and biomass; yet the EPA does not factor

existing hydro power when calculating state CO 2 goals and has still yet to render a

decision on biomass. Both of these factors have resulted in the EPA using inflated RE

percentages for 2012 which is the basis for setting the future target.

2012 Southeast Renewable Energy Data (in thousands of MWh)

MS AL KY GA FL NC SC TN Southeast

Totals

Total Electricity

Net Generation 54,584 152,879 89,950 122,306 221,096 116,682 96,756 77,724 931,977

Total Renewable

Net Generation 1,509 10,212 2,694 5,514 4,673 6,431 3,563 9,133 43,729

Geothermal

‐  ‐  ‐ ‐ ‐ ‐ ‐  ‐ ‐

Hydro

‐ 7,435 2,362 2,236 150 3,728 1,420 8,296 25,627

Solar

‐  ‐  ‐ 3 193 139

‐ 12 347

Wind

‐  ‐  ‐ ‐ ‐ ‐ ‐ 48 48

Wood/Woodwaste 1,493 2,769 236 3,107 2,057 2,262 1,941 715 14,580

Other Biomass 16 8 96 168 2,273 302 202 62 3,127

% Renwable of

State Total 2.8 6.7 3 4.5 2.1 5.5 3.7 11.7 4.7

% Renewable w/o

Hydro 2.8 1.8 0.4 2.7 2 2.3 2.2 1.1 1.9

% Renewable w/o

Hydro & Biomass 0 0 0 0 0.09 0.1 0 0.08 0.0415 The above table also demonstrates that solar and wind have not been proven

as viable options in the southeast for significant RE sources. This is not based on

technology or lack of investment, but on weather patterns for the southeast. The two

maps below from the National Renewable Energy Laboratory provide information on

solar and wind speeds for the United States. The Concentrating Solar Resource map

shows that almost all of Mississippi has insolation values less than 4 kWh/m 2 /day.

Concentrating Solar Power technologies require a minimum insolation value of 7

kWh/m 2 /day. Small scale solar projects may have a place in the state’s future

generation resource mix, but certainly not to the scale comptemplated by the EPA’s

RE target.

The United States Average Wind Speed Map below demonstrates that all of

Mississippi is located in a Class 1 wind region, which is not currently viewed as a16 feasible area to develop wind farms as an RE generation resource. This clearly

identifies that wind is not option in Mississippi for meeting the EPA RE target.

Mississippi is nearly solely dependent on biomass or obtaining RE from across

numerous state lines. SMEPA asks that the EPA identify whether biomass will be

allowed to be a part of state compliance plans for RE and evaluate whether states

which are dependent on biomass for meeting compliance have the wood/woodwaste

resources to support the extremely high RE generation targets set by the EPA. SMEPA

also requests that the EPA evaluate the economic impact that competition for

wood/woodwaste resources would have on other industries in states that are

dependent on these wood/woodwaste resources.

In summary, the EPA should consider significantly reducing RE from the

Mississippi CO 2 goal calculation but allow RE to count towards compliance with the

overall goal.17 Also with building block 3, the EPA adds 631,874 MWh to the denominator of

the Mississippi CO 2 goal calculation for “at risk” nuclear generation. The EPA derives

this number by multiplying the nuclear capacity in the relevant state by 6%. Adding

these MWh to the CO 2 emissions rate denominator further exacerbates the already

extremely low emissions rate goal for the state. There is no justification for this

arbitrarily being added to the denominator of the CO 2 goal calculation and the EPA

should eliminate it.

Additionally, the EPA did not give adequate credit to states with nuclear

generation nor take into account recent investments in these facilities. As an

example, SMEPA invested $77.5 million in the Extended Power Uprate project at the

Grand Gulf Nuclear Station thereby achieving additional zero carbon generation. The

EPA’s handling of nuclear generation has in effect penalized SMEPA for early action,

and because of this investment in 0% carbon generation means that SMEPA has less

capital to invest in other generation options.

Building Block No. 4

– Increase demand side energy efficiency.

The EPA assumes that each state could implement additional energy

efficiency measures each year up to a maximum of 1.5% annual incremental savings,

resulting in an 11% decrease in generation in 2030. SMEPA and its Member Systems

have been involved in energy efficiency programs in Mississippi for more than 25

years. During this time, SMEPA in conjunction with its Member Systems has invested

in rebates, advertising, training and personnel toward the goal of reducing peak

demand and providing energy efficiency programs to benefit the residents and18 businesses of Mississippi. In addition to the energy efficiency programs offered by

individual Member Systems, SMEPA administers certain energy efficiency programs

that are available to all Member Systems.

Each Member System is committed to energy efficiency and pursues those

energy efficiency programs that make sense for its members taking into account the

unique characteristics of its system, including but not limited to member

characteristics, varied geography, weather patterns, local economic conditions,

existing and new building construction, system load profiles, and energy use

patterns. A table compiled from Member Systems’ RUS Form 7 showing members

served by class for each Member System follows:

2013 Members

by Class Residential Non

‐ Residential Industrial Total

Consumers

Coahoma 5,890 74% 2,033 26% 10 0.13% 7,933

Coast 71,983 91% 6,826 9% 8 0.01% 78,817

Delta 21,322 84% 4,092 16% 9 0.04% 25,423

Dixie 34,775 91% 3,497 9% 21 0.05% 38,293

Magnolia 28,549 93% 1,984 6% 16 0.05% 30,549

Pearl River Valley 47,028 97% 1,614 3% 26 0.05% 48,668

Singing River 63,332 88% 8,313 12% 11 0.02% 71,656

Southern Pine 60,513 92% 5,154 8% 38 0.06% 65,705

Southwest 23,183 92% 2,082 8% 16 0.06% 25,281

Twin County 9,430 76% 3,022 24% 9 0.07% 12,461

Yazoo Valley 9,403 91% 965 9% 4 0.04% 10,372

Total 375,408 90% 39,582 10% 168 0.04% 415,158

Energy efficiency programs currently in effect include:

 Comfort Advantage Program

SMEPA offers the Comfort Advantage Program that is a recognized19 standard for energy efficient construction and quality products for the

home. This energy efficiency program, the benefits of which are

promoted by SMEPA’s Member Systems, offers incentives for energy

efficiency and energy efficient HVAC systems in new home construction

and energy efficient HVAC equipment upgrades in existing homes. Since

1988, the Comfort Advantage Program (initially known as the Good

Cents Program), that is available to all Member Systems, has added over

25,000 energy efficient homes to the meters that Member Systems

already serve. Comfort Advantage programs and services

offer consumers knowledge, cash incentives, peace of mind and energy

savings. SMEPA estimates that each of these homes saves 3000kWh per

year or cumulatively 77,000,000 kWh per year. The Comfort Advantage

program drives the incorporation of energy efficient building techniques

and features such as building shell sealing, window area limitations,

window thermal and radiant efficiency requirements, robust insulation,

and energy efficient water heaters and heat pumps in non

‐ Comfort

Advantage homes. This program raises the energy efficiency bar for

construction of new homes in the region whether they are Comfort

Advantage homes or not.

 Pre

‐ Pay Programs

Some of SMEPA’s Member Systems have Pre

‐ pay programs that allow

their members to pre

‐ pay for electricity before they use it. Experience20 has shown that Pre

‐ pay customers actually reduce their bills by 10

‐ 15%

simply because they become more aware of their usage.

 Time of Use Rate

SMEPA has a Wholesale Rate Time

‐ Of

‐ Use (TOU) Rider for use by

SMEPA’s Member Systems. The Member Systems offering a retail TOU

rate allow its members to avoid or reduce load during the On

‐ Peak

period and increase load during the Off

‐ Peak to save cost. By shifting

electricity use to Off

‐ peak, SMEPA and the Member Systems avoid the

need to build new generation plants and increased Off

‐ peak use allows

current generating facilities to operate more efficiently.

 Energy Audits

Most of the Member Systems also conduct energy audits available to all

members to help them establish an effective energy management plan

to reduce monthly electricity use.

 Automated Metering Infrastructure

Some of the Member Systems have installed Automated Metering

Infrastructure (AMI). The automated metering structure allows

members to access their energy use data 24/7 through a portal.

 Energy Efficiency Education

All Member Systems provide for all their members energy efficiency

education consisting of a variety of programs and services, brochures,

resources and communications. Member Systems have been educating21 and encouraging their members to purchase energy efficient products

and build energy efficient homes.

 Distributed Generation

In the spring of 2009, SMEPA and the Member Systems developed

common contractual documents addressing distributed generating ( DG )

resources for residential installations up to 10 Kilowatts. SMEPA and the

Member Systems have also developed similar documents for DG

resources greater than 10 kW and up to 10 MW. These documents

include an application, an interconnection and operating agreement,

interconnection requirements for DG resources, a Power Purchase

Agreement (PPA) and a rate schedule for SMEPA purchase of excess

electric energy generated by DG resources and delivered into the

electric grid. A table showing DG connected to SMEPA Member Systems

as of 8

‐ 20

‐ 2014 follows:

Distributed Generation connected to SMEPA Member's systems as of 8

‐ 20

‐ 2014

Number of

DG

Consumers DG Consumers

Receiving

Payment DG Consumers

Not Receiving

Payment Total

Connected kW

Coast 7 6 1 145.64

Dixie 6 5 1 36.28

Magnolia 1 1 0 0.75

PRVEPA 3 3 0 22.26

Southern Pine 2 1 1 11.6

Singing River 1 0 1 16.19

Southwest Miss. 1 1 0 5.23

Totals 21 17 4 237.9522 The current energy efficiency programs and the existing government

mandated energy efficiency standards already in place appear to be working to

reduce average residential kWh. For the years 2006 through 2009 average residential

kWh use decreased even though degree days increased (06

‐ 07) or were virtually flat

(07, 08 & 09). Average residential kWh use from 2011 to 2013 decreased even

though degree days for the two years (2011 and 2013) were almost flat. The trend

from 2006 through 2013 has been for average residential kWh use to decrease. A

chart documenting this trend titled Total Degree Days vs Residential kWH for SME

Total System follows:

Total Degree Days vs Residential kWh for SME Total System

9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000 18,000

4,100 4,300 4,500 4,700 4,900 5,100 5,300 5,500

Avg. Total Degree Days Avg. RkWh23 The decrease is driven by replacement of older less efficient

appliances/equipment with more energy efficient products

– lighting, HVAC,

refrigerators, water heaters, TVs, computers and other electric consuming products.

Improved energy efficient building techniques

– weatherization, insulation, etc.

– due

to improved building codes and technology improvements encouraged by the

Comfort Advantage program also contributes to the decrease. The loss or extensive

damage to homes as a result of Hurricane Katrina accelerated the building of new

homes and replacement of appliances, all with better energy efficiency standards.

SMEPA should be given credit for energy efficiency work that began in 1988

and for this reduced electric energy use in homes using appliances & electric

equipment built to existing government mandated energy efficiency standards. Much

of the benefit from this work has already been achieved as shown by the reduction in

residential energy usage. The usage is now less responsive to changes in degree day

totals. SMEPA estimates the annual system wide reduced energy to be about 249,000

MWh (based on the difference between average residential electric use from 2006 to

2013). Table of Degree days the Annual Average Residential kWh (avg. RkWh) Use

1996

‐ 2013 follows:24 Year Avg. Total

Degree Days Avg. RkWh

1996 4,626 13065.15

1997 4,498 12968.62

1998 4,686 13953.92

1999 4,364 13711.46

2000 4,798 14366.54

2001 4,368 13906.00

2002 4,801 14717.54

2003 4,567 14513.92

2004 4,494 14574.23

2005 4,314 14535.62

2006 4,493 14761.08

2007 4,586 14769.54

2008 4,588 14540.38

2009 4,580 14361.08

2010 5,444 15539.38

2011 4,717 14761.79

2012 4,149 13697.69

2013 4,711 14099.08

SMEPA and its Member Systems agree that energy efficiency measures,

provided they are cost effective and do not result in cross subsidization between

members of the Member Systems, can be beneficial to all members. Benefits may be

provided either directly or indirectly through avoidance of expensive on

‐ peak energy

and reduced need for or complete avoidance of future generating capacity. Energy

efficiency goals must be achieved through programs that make economic sense and

can provide lasting impacts for energy and capacity savings. Energy Efficiency

Programs that must be heavily subsidized in order to make them attractive enough

for rate payer acceptance would most likely result in higher rates for all. Under this25 scenario, few benefit at the expense of many. This would not comply with the

cooperative principles, nor would it be effective.

In 2009 SMEPA’s Board of Directors approved a plan to investigate additional

programs to produce more efficient use of electric energy and help avoid increased

capacity requirements. The intent of this new program was to seek ways of reducing

the need for new generating facilities, or at least delaying the time before new

generation became necessary. The Coordinated Energy Efficiency and Demand

Response (CEEDR) program was launched with the formation of the CEEDR Cabinet

consisting of representatives from each Member System and SMEPA. The CEEDR

Cabinet is a guidance committee that works to identify potential energy efficiency

and demand response programs that can be implemented by SMEPA and/or its

Member Systems.

The CEEDR Cabinet hired a consultant to perform an Energy Efficiency and

Demand Response Potential Study (Potential Study) to determine the potential for

electric energy and demand savings from multiple programs. Residential,

commercial, and industrial customers were surveyed to identify the saturation of

energy

‐ efficient appliances and building practices in customer homes and businesses.

Key issues and common characteristics of homes and businesses with high energy

usage were identified and used to develop ways to improve energy efficiency and

lower costs for consumers. The survey results were used to develop a comprehensive

portfolio of potential performance and prescriptive based programs. After the26 Potential Study was completed another consultant developed Pilot Programs to test

and affirm the results from the Potential Study. The results of each pilot project will

then be used by SMEPA and its Member Systems to determine whether to

implement a full scale program utilizing the concepts of the pilot project.

The following Pilot Programs are currently underway:

 The Commercial and Industrial (C&I) prescriptive Lighting replacement

Pilot Program

. The C&I Lighting Pilot measures have been installed. A

consultant is in the process of evaluating the pilot results and a draft full

scale business lighting program would follow the evaluation.

 The C&I eCustom energy efficiency projects Pilot Program

. The C&I

Custom Pilot measures should be completed and a final report received

by SMEPA by the end of 2014. An evaluation of the C&I Custom Pilot

Project will follow, and any development of a full scale program would

follow the evaluation.

 Residential Pilot Program

. The Residential Pilot includes installation of

energy efficiency measures and should be completed by the end of

2014. After meter data is gathered for 12 months following the

installation phase an evaluation of the Residential Pilot will follow and

any development of a full scale program would follow the evaluation.

SMEPA Member Systems’ rural service areas are not densely populated, in

many cases resulting in great distances between meters. This presents an added27 challenge to the implementation and cost of many energy efficiency programs.

SMEPA Member Systems have a low average member density of 7.3 meters per mile

of distribution line (range is 4.8

‐ 11.6 meters/mile compared to investor owned utility

customer densities exceeding 39 customers per mile of distribution line). A table

showing the miles of distribution lines as well as the meters per mile for each

Member System follows:

Member Line Miles Meters Per

Mile

Coahoma 1,650 4.8

Coast 6,783 11.6

Delta 5,837 4.7

Dixie 4,898 7.8

Magnolia 4,607 6.6

Pearl River 6,915 6.8

Singing River 7,116 10.1

Southern Pine 10,171 6.4

Southwest 4,366 5.8

Twin County 2,341 5.3

Yazoo Valley 2,186 4.8

Totals 56,870 7.3

(Information from Statewide Directory 2014.)

SMEPA has learned that the energy savings from the energy efficiency

programs included in the portfolio of programs suggested by the Potential Study may

not be as optimistic as first studied. This is based on direct experience from the

SMEPA Residential, C&I Direct Install Lighting and C&I Custom Pilot Programs. Much

has been learned, as well, from the energy efficiency program experiences of other

utilities.28 SMEPA has learned from another utility that implemented a HVAC Tune

‐ Up

program that it may not be cost effective. The utility found that the program required

an inspector to follow

‐ up behind the HVAC technicians performing the HVAC system

tune

‐ up. The inspector found many instances where the HVAC system was not

operating as efficiently as desired because of incorrect tune

‐ up adjustments/freon

charging made during the HVAC tune

‐ up. As a result, the energy savings expected for

many of the tuned HVAC systems were neutral or negative. The expense of needing

the follow

‐ up inspector and the minimal energy savings would make the program

cost ineffective for SMEPA and its Member Systems, especially given the distance

between homes.

The distance between businesses had an impact on administering the SMEPA

Commercial and Industrial (C&I) Direct Install Lighting Pilot Program. Installing energy

efficient lighting fixtures at commercial and industrial locations separated by many

miles added to the cost and logistic challenges of the Direct Install Lighting Pilot

Program. As a result, it is most likely that the full scale SMEPA C&I lighting program

will be a prescriptive program as opposed to the direct install program tested in the

pilot. In a prescriptive lighting program, incentives are provided for each type of

energy efficient lighting fixture installed (by the business owner) to replace inefficient

lighting fixtures. Achievement of energy savings goals from the prescriptive lighting

program will most likely vary from the anticipated rate of installations from a direct

install lighting program. Until experience is gained, it is not known how quickly29 cumulative energy savings from a prescriptive lighting program will result in energy

savings.

The SMEPA Residential Pilot program is testing two energy savings retrofits:

 Seal air leakage in HVAC ducts in home attics.

 Seal the ceiling between the building shell and the attic and add

insulation to attain an R38 insulating value between the attic and the

building shell.

This concept should work in most cases as HVAC ductwork is typically leaky,

attics are not sufficiently sealed from the building shell and many attics in existing

homes have inadequate insulation. However, installing such energy savings features

may create higher humidity in homes with oversized air conditioning systems. The

oversized air conditioning systems cool the home quickly, but do not run long enough

to adequately remove accumulated moisture from the conditioned air. The increased

humidity impacts comfort. As a result the homeowner may adjust his thermostat

lower, thus making the unit run longer and reducing energy savings.

Two challenging aspects with a full scale residential program is the relatively

high number of members of the Member Systems living in poverty, in mobile homes

and the low number of meters per mile (low member density) in the Member

Systems’ service territories. According to the American Fact Finder; DP04 Selected

Housing Characteristics; 2008

‐ 2012 American Community Survey, mobile homes in

Mississippi make up 15.3% of the total housing stock and the national average is30 6.5%. According to the Census Bureau Quick facts, detached homes in Mississippi

make up 69.7% of the housing stock and the national average is 61.7%. Of the

detached homes located in Member Systems’ service territories identified in the

Potential Study 69,500 are mobile homes and 288,855 are single family homes.

Mobile homes are the least stable of the housing stock (they can be moved at any

time) and are more difficult to make energy efficient. Because 19.3% of the detached

homes are mobile homes in Member Systems’ service territories and miles separate

many of the homes, it makes the residential program harder to administer.

Achieving the energy efficiency goals dictated for Building Block 4 by the

EPA’s Clean Power Plan will be particularly daunting for SMEPA and its Member

Systems. Challenges include:

 Geographic dispersion and poverty rates/average income

 Willingness to participate

 Impact on rates

 Impact of Member issues on measurement and verification

 Enforcement of mandated energy efficiency goals on rate payers

Two of the greatest challenges to a successful energy efficiency program for

SMEPA are geographic dispersion and prevailing poverty throughout the Member

Systems’ territories. Members living at or below the poverty level will have a hard

time investing in energy efficiency measures even if incentives are given. Members

living above the poverty level may be unwilling or unable to spend the money to31 make efficiency improvements to their homes and businesses because of their below

average per capita and median household incomes. Also, renters are unlikely to

invest even if financially able. Low member density presents challenges of distance,

logistics and resulting increased cost to administer an energy efficiency program.

Energy efficiency programs require willing participation by the members.

Willingness to participate in an energy efficiency program will not only be influenced

by member resources but also will be influenced by the availability and cost of

programs and incentives offered by SMEPA and the Member Systems. The cost

impact of energy efficiency programs on retail electric rates will be a roadblock to

willing participation for the members and Member Systems. Since it is the members

who own the Member Systems, the Member Systems realize that these member

‐

owners are struggling to pay their bills. In order to keep electric rates from

increasing, there will be budget constraints as to the number of energy efficiency

programs that can be implemented. The upfront costs of delivering additional

programs including administration, marketing, tracking systems, monitoring and

evaluation, and more personnel may preclude some programs from being

implemented.

There are practical issues with members, measurement and verification

challenges, and logistics. Even in current energy efficiency programs, it is difficult to

measure energy savings. For example, if savings calculators and SEER levels are used,

assumptions are made as to the number of cooling and heating hours for heat pumps32 and run time for appliances. Each member controls their own usage and the

assumptions may be incorrect. Simply monitoring usage before and after energy

efficiency measures are implemented is not totally accurate. The size of the

household may change or the member may lower the thermostat in summer and

raise it in winter to make his house more comfortable and use the same amount of

energy he used prior to the energy efficiency measures. The member may convert

from gas heat to a heat pump and their electricity usage goes up even though his

house is more energy efficient.

The challenges in implementing, administering and paying for an energy

efficiency program when coupled with the geographic dispersion, member

willingness to participate, high poverty rate, low median household income,

measurement and verification realities and potential adverse retail electric rate

impacts will render impossible the enforcement of energy savings targets from

mandated energy efficiency programs.

A mandate under the Clean Power Plan requiring a reduction in MWh as a

result of energy efficiency to achieve a reduction in CO 2 emissions from SMEPA

generating resources is not workable for the above reasons. The energy efficiency

block must be removed or redone to be realistic.33 Financial Impact

Impact of Early Retirement of Coal Facility

With the re

‐ dispatch of NGCC to a 70% capacity factor combined with the

unobtainable renewable energy and energy efficiency targets included in the

calculation of Mississippi’s CO 2 goal, it is very likely that under the EPA’s rule as

proposed, the result will be the early retirement of SMEPA’s coal fired generating

facility, Plant Morrow. Additionally, SMEPA imports power from the Plum Point

Generating Station, a coal fired facility in Arkansas. The EPA’s proposed rule has the

potential to reduce the amount of generation from the Plum Point facility. With the

early retirement of Plant Morrow and a potential 60% reduction in output from Plum

Point, the incremental annual increased cost to SMEPA in 2020 is estimated to be

$48.6 Million. Assuming this $48.6 Million annual cost recurs for a 10 year period,

the present estimated value adverse impact on SMEPA is $366.5 Million. These costs

are attributable to:

 Higher cost of replacement energy for reduced Plum Point output.

 Reduction in Plum Point Capacity revenues due to an effective 81 MW

reduction in capacity.

 Plant Morrow higher amortization cost (stranded asset due to closing.)

 Loss of Plant Morrow capacity revenues.34 Credit Impacts

SMEPA is extremely concerned with the potential harm to its standing as a

creditworthy entity in the utility industry. The Association’s first mortgage bonds are

currently assigned investment grade credit ratings of ‘A

‐ ‘, ‘A3’, ‘A

‐ ‘ by Standard and

Poor’s, Moody’s Investors Service and Fitch Rating, respectively, with stable outlooks

from each of the agencies. Solid investment grade ratings are essential in order for

the Association to have access to bank credit and bond markets on satisfactory

terms. The electric utility business is capital intensive and a utility that is not able to

maintain a strong financial profile will find it difficult to conduct its business in a

stable and reliable manner. SMEPA believes that the effect on its financial position

flowing from implementation of the Clean Power Plan will materially weaken its

credit standing.

The prospective forced retirement of Plant Morrow discussed previously

would weaken the Association’s balance sheet by re

‐ classifying the power plant as a

“stranded asset” and writing it off over a short 10

‐ year period. Furthermore, the

retirement of Plant Morrow is estimated to result in a $243 million reduction in

bondable property available to support existing first mortgage bonds. Under the

terms of SMEPA’s mortgage indenture, for every $100 of first mortgage bonds

outstanding, SMEPA is required to back the bonds by at least $110 of bondable

property as collateral. Hence, the retirement of $243 million of bondable property at35 Plant Morrow would reduce the maximum amount of permitted SMEPA bonds by

approximately $221 million.

A reduction in the Association’s bondable property as outlined above would

substantially eliminate SMEPA’s ability to issue bonds needed to make investments in

system improvements. A weakened balance sheet and reduction in collateral would

be viewed negatively by creditors and stakeholders. Given the large amounts of

capital needed, the confidence and security of creditors and bondholders is critical.

The stress on SMEPA’s financial resources combined with a substantial increase in its

cost of service raise the probability of a downgrade in the Association’s credit rating.

Clearly, the consequences of restricted access to capital markets due to weak credit

ratings would seriously hinder SMEPA’s ability to meet the present and future needs

of its members.

Impact of Prior Investments

During the past six years SMEPA has made substantial investments in

generation to lower our carbon intensity. These investments include the following:

 $82 million in the Grand Gulf Nuclear Station Extended Power Uprate

Project (EPU Project)

– SMEPA’s 10% share of this project resulted in the

addition of zero carbon energy.

 $210 million in the Moselle Repower Project

– this investment improved

the efficiency of Moselle and provided SMEPA approximately 280MW of

natural gas combined cycle generation.36  $58 million in the Morrow Scrubber Upgrade

– this investment

improved the SO2 removal efficiency to 98% at our coal

‐ fired plant.

 $271 million purchase of Batesville Generating Facility

– this acquisition

provided SMEPA with 837 MW of natural gas combined cycle

generation.

The Association’s investments totaling $621 million over the past six years in

clean energy resources and in emission reduction described above demonstrate

SMEPA’s commitment to being responsible environmental stewards.

In 2010, SMEPA and Mississippi Power Company ("MPCo") entered an Asset

Purchase Agreement that sets forth the terms and conditions of SMEPA's purchase of

an undivided ownership interest in the Kemper County Integrated Gasification

Combined Cycle ("IGCC") project. The Kemper project will convert lignite (a low

‐ grade

coal), to synthesis gas that is burned in a combined cycle turbine

‐ generator. The

gasification process at Kemper is expected to remove 65% of the CO 2, making the CO 2

emissions similar to a natural gas plant of comparable size. This innovative

technology permits the use of this country's abundant supply of coal and lignite in an

environmentally responsible way.

Kemper has been widely acclaimed as a "clean" solution to meet the nation's

energy needs and has received strong support from several Federal agencies. The

Federal government was involved very early, along with KBR and Southern Company,37 MPCO's parent, in the development of the TRIGTM technology, the technology being

used at Kemper, at the Power Systems Development Facility in Wilsonville, Alabama.

Kemper has been one of two examples used by the Environmental Protection

Agency ("EPA") to demonstrate the feasibility of carbon capture and sequestration on

coal

‐ fired power plants in order to reduce their CO 2 emissions. Under EPA proposed

guidelines issued on January 8, 2014, future coal plants would need to emit no more

than 1,100 pounds of carbon dioxide per megawatt

‐ hour of power produced. The

Kemper CCS project will emit well below that amount.

The Kemper project was also one of two projects selected in the second

round of the Department of Energy's Clean Coal Power Initiative. It received $270

million in funding to demonstrate advanced power generation systems using IGCC

technology.

MPCo also received $133 million in investment tax credits for Kemper, as

provided in the National Energy Policy Act of 2005. Due to MPCo missing its

projected deadline, it is likely to lose some of those tax benefits.

Finally, the Rural Utilities Service, an agency of the U.S. Department of

Agriculture, has committed to a $480 million guaranteed loan to finance SMEPA's

ownership interest in Kemper. This loan commitment, which was granted despite a

Presidential moratorium on lending for base load generation, was authorized by the

Consolidated and Further Continuing Appropriations Act of 2012.

SMEPA plans to invest $650 million for 15% ownership of the Kemper IGCC

Project which will be the cleanest coal plant in the country. However, in the EPA38 Clean Power Plan, SMEPA does not receive any credit whatsoever for these

investments. In contrast, the investments simply lower the CO2 baseline reference

point and thereby increase the difficulty in meeting reduction targets in 2020 and

2030. The EPA’s evaluation criteria effectively penalize the Association for making

these investments that have substantial environmental benefits. The fact that the

rule is so forward looking that it does not give any consideration for investments to

date has created a rule that SMEPA cannot achieve technically or financially.

Recommendation

SMEPA recommends that the Mississippi CO 2 goal be recalculated based on the

following:

 Remove the 631,874 MWh from the denominator of the Mississippi CO 2

goal calculation for “at risk” nuclear generation as there is no “at risk”

nuclear generation in the state of Mississippi.

 Change the baseline for renewable energy from 3% to 0%. This would

make the 2029 goal 7% rather than 10% and result in the denominator

decreasing from 5,458,430 MWh to 3,820,880 MWh. This difference in

MWh should be replaced with coal generation.

 Remove energy efficiency from the goal calculation but allow

achievements to count towards achievement of the goal. This would

remove 718,276 MWh from the denominator of the 2020 goal and39 4,920,527 MWh from the denominator of the 2029 goal as energy

efficiency and be replaced with coal generation.

 There are two suggestions for the handling of the Kemper IGCC facility:

 First, the EPA attributed 5,836,968 MWh to the Kemper IGCC

facility. This is an apparent mistake as this would require the

facility to have an annual capacity factor of 115%. This should be

corrected.

 Second, in order for SMEPA’s investment in Kemper to count

towards achievement of the CO2 goals, the generation attributed

to Kemper should be removed from the goal calculation and

replaced with coal fired capacity.

The above changes resulted in revised CO 2 goals for the state of Mississippi of

1,116 lbs/MWh in 2020 and 1,113 lbs/MWh in 2029. This request is reasonable as it

raises the state goal slightly above that of the new source standard currently being

considered. It makes absolutely no sense to have an existing standard that is more

stringent than that of new source. This revised goal also puts Mississippi near the

National Average Goal and is a 43% reduction from Mississippi’s 2005 CO 2 emission

rate well in excess of the desired 30% goal stated by EPA.