Regulatory Update: What's Going on in Your State?

All States: Janet McCabe, Acting Assistant Administrator for the Office of Air and Radiation, announced in late January 2015, that states that do not submit their own implementation plans would be required to comply with a federal “model rule” to cut their carbon emissions developed by EPA. This increases the pressure on states to develop their State Implementation Plans (SIPs) and take those steps as early as possible in anticipation of finalization of the CPP rule, which is expected in the summer of 2015. SIPs are due from single states in 2016 and in 2017 if states partner with one another to submit regional plans.

California: California is an example of a state that is on track to meet its proposed CPP target, but might nonetheless be inhibited by the new layer of regulation that comes along with the rule. California is already ahead of most other states when it comes to developing aggressive vehicle emission standards, renewable energy goals, and the nation's most ambitious economy-wide cap-and-trade program. California, the first state with a comprehensive cap-and-trade system, started its program two years ago. In California, regulators capped allowed emissions for industries covered in 2014, at 160 million metric tons. In 2015, that goal jumps to 395 million metric tons, when it is expanded to include gasoline wholesalers. The program will cap emissions at 334 million metric tons by 2020 to help satisfy a mandate by the state legislature that emissions in the state in that year equal 1990 levels. An anticipated progress report is expected to confirm a 2% reduction in greenhouse gases from 2012, based on the state having sold $2.27 billion of CO2 allowances—$1.4 billion from the utility-controlled pool and the balance from the state pool.

For California, the issue with CPP is not its ability to comply, but how the federal government asserted authority on greenhouse gas emissions could obstruct or interfere with the state’s own initiatives. Comments filed by California officials with the EPA have stressed that the new federal rules must minimize disruption to existing state programs and avoid creating cumbersome administrative hurdles for states that wish to create or extend programs that help decarbonize their power sectors. In other words, California’s fear is that its current state-regulated program is working fine and producing results; adding another layer of federal regulation could be a distraction and obstacle to the state’s momentum.

Pennsylvania: Pennsylvania is heavily dependent on coal for power generation, yet not all State government officials are opposed to CPP. Typically, coal-centric states have been opposed to CPP, due to the potentially large economic impacts that the closing of coal-fired generation facilities could have on the states’ economy. Not so with State Treasurer Rob McCord who in recent interviews (Public News Service, Jan. 12, 2015), stated a position that there is much to gain by embracing the goals of the plan. "We have families who depend on the income from working in the coal industry," he says. "But what we need to take a look at is that, in the last decade, we've generated hundreds of thousands of jobs now in green technology industries related to energy, as opposed to the 7,500 jobs in coal." McCord says the Pennsylvania State Legislature should adopt its own approach with wind and solar power, and other innovations. "Net metering is a big opportunity for families; generating green technology is a big opportunity for businesses," he says. "Incentives for conservation, we get a $3 return for every dollar spent on any kind of conservation. All of those things could be put into a customized bill." McCord believes the savings that result from moving to a clean energy economy can create new opportunities for those families and businesses that have depended on coal for their livelihood. "Provide special incentives to transition away from a dependence on coal," says McCord. About 40 percent of Pennsylvania's electricity comes from coal, and the Clean Power Plan calls for the state to reduce carbon emissions from coal power plants 32 percent by the year 2030.

Texas: Texas remains a state voicing strong opposition to the CPP, and given its size that voice is resonating with some. The primary points on which the Lone Star State opposes the CPP are based on legalities: the inherent need for the rule, its legality and violations of state autonomy. State officials say Texas is being punished for its good deeds – asked by EPA to contribute more than any other state in greenhouse gas reductions after demonstrating its ability to use more natural gas and ramp-up renewable energy generation quickly. The proposed CPP calls for Texas to slash its emissions rate 38 percent by 2030, which Texas says ends up being about 19 percent of the entire country's reductions. "The proposed rule will have a severe and disproportionate impact on Texas," say comments from the state's three regulatory agencies to EPA on the proposed rule. "Texas has made significant efforts in developing a diversified and balanced energy generation mix. ... The EPA is using those efforts to impose a more stringent standard on Texas than other states that are predominantly coal or have implemented little renewable energy."

Wisconsin: In his recent State of the State address, Gov. Scott Walker announced his intention to challenge the legality of the CPP. Additionally, the Wisconsin Public Service Commission has approved several rate filings from Wisconsin utilities which would make it more costly for households and businesses to install their own solar panels. (For example, Wisconsin Energy, based in Milwaukee, received preliminary permission this month to impose new fees on customers with rooftop solar panels, saying the utility needs to recover its costs to maintain the electricity grid. The fees will be about $30 to $40 a month per customer, depending on the size of the system.) Both of these developments put the state in a position that some may see as being counter, if not outright oppositional, to CPP. Gov. Walker called on the federal government to work with Wisconsin to find reasonable alternatives to the CPP. Rather than file suit, Gov. Walker expressed interest in having Wisconsin work with Congress to develop a comprehensive greenhouse gas mitigation policy. While the merits of that approach may be real, it seems unlikely to go anywhere given the EPA’s established momentum to finalize CPP by the summer.

West Monroe Insights
Code42
View More