T he Agency wanted to examine policy options for air pollution control in light of the current deregulation of the electric power industry that is underway. Therefore, EPA had ICF set up the model to consider how the electric power sector would operate its generation assets when restructuring has occurred. Deregulation of the electric power industry should lead to more competitive operation of the nation's electric generation assets. Power producers will compete to serve customers outside of their traditional geographic service areas, subject to transmission line constraints. Electric generation unit operators are likely to take several steps to control or even reduce electric generation production costs.
Noneconomic units are much more susceptible to early retirement.
Deregulation of the industry is likely to lead to lower electricity prices for some, if not all end users, and therefore, there will be greater electricity demand that occurs. To account for this, EPA decided to rely primarily on NERC's forecast to develop regional demand estimates through 2010. EPA expects technology to continue to improve for coal and natural gas production so that energy prices for these fuels will not substantially increase over the forecast period. For coal, improvements in both the mining and its transportation to markets will actually lead to declining prices, but not at rates of decline as great as we have seen over the last decade. Both Western and Eastern coal mining productivity are forecasted to improve.