The proposal uses market mechanisms designed to reduce pollution levels in the most cost-effective manner possible. Chairman Wolens understands that the electric utility restructuring legislation provides an opportunity to decrease air pollution and protect public health. It is provisions such as this that allow all of the citizens of Texas to benefit from electric competition legislation. Placing a cap on emissions is a better method to clean up pollution than merely cutting emission rates because under a cap the total amount of pollution remains limited while an uncapped reduction plan would allow pollution to increase over time. The proposal also allows utilities to minimize the costs of achieving the required emission reductions, giving utilities the flexibility to determine at which plants, and with which technology, they will achieve the emissions reductions.
Utilities can look to the market for innovative ways to reduce pollution and lower compliance costs.
If the costs of cleaning up a particular power plant are very high, rather than incur large costs, a utility can purchase an emissions allowance from another plant that has made extra reductions, as long as the additional allowance does not violate any air quality standards. Grandfathered facilities are the result of an exemption dating back to 1971 that said facilities that were in existence or under construction would not be subject to State emissions limits. In 1985, a State panel recommended that the exemption expire in 1995 but the Texas Legislature failed to adopt the recommendation. The remainder come from oil refineries, industry, and other sources. Wolens' bill requires utilities to make specific and substantial emissions reductions at grandfathered plants by a date certain.