### From: King.Melanie@epamail.epa.gov Sent: Friday, January 04, 2013 9:25 PM To: Cortney Higgins Cc: VanLare.Paula@epamail.epa.gov; Balserak.Paul@epamail.epa.gov Subject: Fw: FW:

Attachments: NRECA RICE recommendations.docx

Hi Cortney,I wanted to pass this along in response to the comments from SBA today that the rural coops have indicated that reporting of hours of operation would be an unreasonable burden. Below is the feedback we got from NRECA on whether their members were amenable to filing information electronically.

-----Forwarded by Melanie King/RTP/USEPA/US on 01/04/2013 09:21PM ----- To: Melanie King/RTP/USEPA/US@EPA, RobertJ Wayland/RTP/USEPA/US@EPA, Joseph Goffman/DC/USEPA/US@EPA, Peter Tsirigotis/RTP/USEPA/US@EPA From: "Cronmiller, Rae E." <rae.cronmiller@nreca.coop>

Date: 10/31/2012 03:44PM Cc: "Cromwell, Ted T." <ted.cromwell@nreca.coop> Subject: FW:

(See attached file: NRECA RICE recommendations.docx)

Greetings. NRECA has conferred with our membership regarding the issues raised in connection with the RICE June 7, 2012 proposal. This e-mail and attachment represents our summary recommendations and answers to several questions posed by EPA over the several months.

Regarding the following questions. Would your members be willing to file electronically with EPA on annual basis, hours and time durations of RICE dispatch for emergency demand response to begin in several years? Yes. We have to note that the utility knows when and why their dispatch of emergency RICE was ordered. However the utility has no way of knowing if the owner ran the unit for more or less than the time requested, although the total annual operated hours of each RICE would be recorded at the RICE site by a non resettable hours meter as required by the existing regulations. We also note that if the owner “takes the unit offline” without being dispatched by the utility, we would not know those hours of operation, but again, they would be recorded by the no resettable

hours meter.

Would you members be willing to use ultra low sulfur diesel fuel for RICE dispatched for emergency purposes? Yes, for emergency dispatch to maintain reliability at the sub-bulk power (non RTO/ ISO) level. We assume your question was directed at our efforts to broaden RICE emergency use at the local level to maintain local reliability. We have no position on whether those RICE responding to EE2 regional power alerts (capacity markets) for example would agree to an ultra low sulfur fuel mandate.

The attachment provides text recommendations addressing the following areas: 1. Suggested Language in red identifying entity responsibility for ordering RICE dispatch following protocols necessary for maintaining local reliability as a follow up to Melanie’s question late last week. This language is an amendment to what was submitted earlier as 63.6640(f)(ii)(b) in effort to further define appropriate RICE emergency dispatch at the local level. We have included the background materials

submitted earlier as well.

### 2. For economic demand response beyond the 2017 sunset, we suggested in an earlier meeting with EPA to allow RICE operation beyond the sunset if the RICE was equipped with crankcase ventilation (CCV) and utilized ultra low sulfur diesel fuel along with the requirements included in Table 2d for emergency RICE (this could be defined as GACT). We have attached language pursuant to this earlier suggestion.

3. For annual hours of operation, as we noted in our earlier written comments, the penalties for exceeding the annual cap are severe and not justified for accidental noncompliance. We believe defining compliance on a three your annual rolling average is equitably justified here. We have included language to allow compliance with both the 100 hour cap and the 50 hour economic demand response cap based on the three year rolling average concept. After all whether emergency or economic demand response, all RICE use here is unplanned and cannot be predicted months or even days ahead of time.

Lastly we do appreciate all your efforts to understand our concerns that reliable and affordable and electric power be maintained throughout rural America. The last few days here in Washington D.C. area and the northeast corridor are vivid reminders of how important RICE generation can be in times of distress. Our members pride themselves in providing excellent power quality and reliability even

in rural and remote areas. We endeavor to assist them in this RICE effort.

Please feel free to contact us should you have any questions.

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=1 Adding a more practical definiti on of emergency demand response

§63.6640(f)

(ii) – Emergency stationary RICE may be opera ted for emergency demand response for periods

in which: (a) the regional transmission authority, or equivalent balancing authority and transmission operator has declared an Energ y Emergency Alert Level 2 (EEA Level 2) as defined in the North American El ectric Reliability Co rporation Reliability Standard (NERC) EOP-002-3 Capacity and Energy Emergencies, or

(b) the dispatch follows reliability, emergency operation or similar protocols that either directly or indirectly follow NERC, regional, state, p ublic utility commission or local standards or guidelines 1 when called upon by a reliability coordinator, balancing authority, transmission operator or one of their designees; or a local municipal authority to mitigate local transmission and/or distribution limitations so as to avert potential voltage collapse or line overloads that could lead to the interruption of power supply in a local area or region.

(iii) Emergency stationary RICE may be operated fo r periods where this is a deviation of voltage or frequency of 5 percent or greater below standard voltage or frequency 2

.

Demand Response Background

A key component 3 in ensuring electric reliability at bulk power electric system level includes measures taken to prevent system failures, includi ng those at the sub-regional or local distribution levels. Appropriate actions do avoid cascading effects that otherwise result in bulk power or region-wide disruptions or even blackouts 4 . In many cases potential reliability issues at the sub regional levels are not detectable at the bulk electric system level because reliability planning activities are not always conducted at voltages below transmission levels 5 . Even so, electric systems having sub-transmission or distribution networks necessarily falling outside of FERC or federal jurisdiction has very significant incentives to take measures as necessary to prevent these system failures and ensure local sub-transmission and distribution reliability. Further, there are potentially heavy penalties associated with the failure to adhere to NERC reliability standards. In some areas of the US, there are also requirement s imposed by regional, state or local entities, even those which occur at lower voltages.

Reliability or emergency action protocols guidi ng these sub-regional electric system operations might be administered by any one of several entiti es, but they are similar in purpose to those at the bulk electric system levels, which is to provide guidance for operation to avoid system failures and preserve reliability at the local level.

Limiting emergency RICE operation to situations when EEA level 2 is incurred might prohibit or at the very least strongly discourage necessary RICE operation at local second-contingency

1 http://www.nerc.com/page.php?cid=2|20

2 Modern generating equipment may not be ope rated at frequencies below 5% of 60Hz.

3 Elements of electric system reliability planning include the assurance of adequate installed capacity, available energy producing resources, and sufficien t transmission infrastructure to meet antici pated customer loads at design voltage and frequency conditions.

4 This second condition leading to the interruption of service is commonly called a second contingency, that is, an event that by itself would not lead to an interruption of servic e (line interruption due to weather-related events), but which following on the heels of an earlier event (the unplanned gene rating unit outage) has the combined effect of causing the

loss of load.

5 Bulk electric system (BES) transmissi on voltage level is that which is greate r than 100Kv. Voltage levels below those are simply called “sub-transm ission” or distribution.2 conditions that would otherwise ensure electri c reliability and power quality, and would more broadly ensure the integrity of the nation’s bulk power systems. Extending allowed emergency RICE use that follows or mirrors protocols established by NERC or other organizations having responsibilities for bulk electric system reliab ility or emergency operation, (such as that referenced under EEA Level 2), w ill ensure that RICE regulations do not jeopardize the local or sub-regional grid reliability which is also necessary to protect human health.

In practice, the use of RICE generators should be allowed when called upon by the balancing area authority to mitigate local transmission and/or distribution limitations so as to avert potential (pre-contingency) voltage collapse or line overloads that, if no mitigation was to occur, could lead to the interruption of power supply in a local area 6 . These steps are more akin to meeting EEA Alert Level 1 where actions are taken in anticipation of an energy deficiency to prevent an

escalation. These events can occur even when a balancing area or region has more than adequate energy resources to meet their load, but deliverability into a local area is constrained due to transmission or sub-transmission outages that are either planned or unplanned or areas with inadequate transmission available to import power. While these types of interruptions can result in power loss to thousands of consumers, they do not rise to the EEA level 2 because they are not energy related and they may not materially impact Bulk Electric System reliability (i.e., cascading transmission outages or instability) or they are w ithin a Transmission Operator footprint in nonRTO / ISO areas. Today, these types of interrup tions are routinely identified by Transmission Operators who, anticipating low-voltage situ ations, take appropriate steps which may include the operation of RICE generators as a pre-contingency m easure to mitigate the loss of load due to the occurrence of a second-contingency event.

These events can be and are documented on a local le vel. Operation of RICE generators for such

circumstances should be allowed when the r esponsible Transmission Owner/Operator has a documented mitigation plan approved by the appropriate regional coordinating group that provides for RICE generators to operate. The mitigation plan may specify procedures and alternatives for mitigating the interruption; such alternatives could include measures such as the implementation of demand-side ma nagement, reduction in supply to interruptible customers, and load shedding on a pre-contingency basis in additi on to the use of RICE generators. The use of emergency generation including RICE generation is preferred to any preventable black out.

Under an approved mitigation plan, the Transmission Operator would direct load-serving entities and distribution providers in the local affected area to reduce load on a pre-contingency basis to avert localized voltage collapse or line overloads. Use of RICE generators, which are within the local area, can accomplish all, or part of the required load reduction and thus support voltage stabilization to mitigate the interruption before it can impact the bulk electric system. RICE generator use should be permissible anytime they meet the requirements of a mitigation plan facilitating pre-contingency load interruption as documented in a regional, or Reliability

Coordinator wide, transmission advance assessment . Distribution Providers and Load Serving Entities should also be permitted to use RICE gene rators in response to a Transmission Operators (Transmission Service Provider) directive to redu ce load and to support voltage requirements on a pre-contingency basis to avert a blackout of the local area. In those instances when mitigation plans have not been developed and approved in ad vance of the event, ev idence (voice recordings of directives or emails) can be retained to de monstrate that operation was for reliability purposes and in response to a NERC Transmission Operator directive.

6 Mitigating pre-contingency actions that can be undert aken include shifting loads between or among different transmission lines, shifting loads among or between different distribution lines or circuits, the operation of municipal generation, load control by shedding interruptible loads and implementing demand res ponse measures, public appeals to reduce the use of electricity, and finally rotating outages . These are also post-contingency actions when restoring the grid after the loss of load.3 Allowing compliance with emergency demand res ponse using annual hours of allowed operation based on three year rolling average

Compliance with any hours of limitation in §63.6640 shall be based on a calendar year threeyear rolling average with the first annual comp liance period beginning three years after the year in which the June 7, 2012 proposal is finalized.

Rolling Average Background

The very nature of emergency RICE annual ope ration is based on unpredictable circumstances that require use of these units to address reliability 7 and emergency operations 8 . Data on these triggering events demonstrate that the annual lim itation on average is expected to be well below the numerical limitations in the existing and pr oposed RICE regulations. However, as several commenters have noted in the response to the June 7, 2012 proposal certain events such as those that have occurred in the past, while rarely occurring, may necessitate emergency RICE operation that surpasses the proposed annual limitations.

Currently, EPA’s proposal would permanently bar any RICE unit from maintaining its “emergency status” if its operation exceeds an y of the proposed annual hours of limitation thresholds. The requirement is unnecessarily draconian and would severely penalize RICE owners and operators who took actions necessary to ensure reliable power for consumers during rare unanticipated events.

Incorporating a three-year rolling annual aver age would allow RICE owners and operators latitude to operate the RICE units in these inst ances without undue concern of losing emergency status. By determining annual compliance over a three-year averaging period there is a high probability that, even if a unit’s individual year ly operation should surpass an annual threshold, the three-year annual rolling average limitation could most likely be met.

NRECA Recommended Language for Load Management

§63.6640(f)(4) Existing emergency stationary RI CE located at area sources of HAP may be operated for up to 50 hours per calendar year in non-emergency situations. The 50 hours of operation in non-emergency situati ons are counted as part of the 100 hours per calendar year for maintenance and testing and em ergency demand response provided in paragraph (f)(2) of this

section. (i) Prior to April 16, 2017, the 50 hours per year for non-emergency situations can be used for peak shaving or non-emergency demand response to generate income for a facility, or to otherwise supply power as part of a financial arrangement with another entity if (sic) engines is operated as part of a peak shaving (lo ad management program) with the local distribution system operator and the power is provided only to the facility itself or to support the local distribution system. (ii) On or after April 16, 2017, the 50 hours per year for non-emergency situations cannot be used for peak shaving or non- emergency demand response, or to otherwise supply power as part of a financial arrangement with another entity, except this prohibition excludes continental (lower 48 st ates) emergency stationary RICE hours of operation utilized to supply off grid pow er provided that compression ignition emergency RICE utilize ultra-low sulfur diesel fuel (15 ppm) and install either a closed

7 Pre-contingency actions or measures

8 Post-contingency actions or measures4 or open crankcase filtration system as a ppropriate for the engine, and follows management practices as described in Table 2d of Subpart ZZZZ. (iii) Compliance with the hours of limitati on in §63.6640(f)(4) for emergency RICE used in non-emergency situations shall be based on a calendar year three-year rolling average with the total hours not to exceed 100 in any calendar year and with the first annual compliance period beginning three years after the year in which the June 7, 2012 proposal is finalized. The owner/operator must maintain records on the hours of usage according to §63.6655.

Load Management Background

As described in the NRECA comments on EPA ’s June 7, 2012 proposal, EPA provided justification for allowing emergency RICE engi nes limited additional usage as this usage up to 100 hours annually would pose no adverse health or environmental impacts and further, to allow small electric cooperatives and other entities located at area sources that use these engines to maintain voltage and electric reliability. EPA deci ded however to restrict the use of emergency RICE for load management to only 50 hours annua lly with a sunset effective April 17, 2017. The proposal provided no rationale for restricti ng economic demand respon se (load management) resulting in limited economic benefit through reduced rates for cooperative customers while allowing demand response provisions that also provide an economic benefit to unit owners that participate in capacity markets.

The language NRECA has provided above adds control requirements for emergency RICE engines utilized for off-grid load management or demand response activities after the currently proposed April 17, 2017 sunset. Specifically, NRECA recommends that after April 17, 2012, continental emergency RICE units that install CCV controls, use ultra sulfur fuel and follow management practices be allowed to provide off grid power for up to 50 hours annually (or using a rolling average as described above). This combination of technologies and management practices would further reduce fine particulate em issions and metallic hazardous air pollutants. This is a reasonable balance further reducing emissions from these limited use (50 hours or less) area sources, without requiring the costly retrof its that would be necessary to meet the MACT limit that was designed for units operating up to 1000 hours or more.

Recordkeeping and reporting requirements would follow §63.6655 which already requires a) nonresettable hour meters that cannot be tampered with, b) owner/operator documentation of both the hours and types of usage. We think this provision clearly requires documentation and explanation for all hours of RICE utilization. Additionally under NERC requirements, utilities are required to document outages including the reason for the outage, the length of the outage, and steps taken to mitigate the outage and when power was restored. This combination of requirements provides clear documentation for purposes of compliance and enforcement.