By Brian E. Clark
For WisBusiness.com
New and pending federal EPA rules aimed at cleaning up the nation’s air could raise electric utility rates nationally by up to 12 percent in coming years.
But that figure could be higher in Wisconsin because of this state’s heavy reliance on coal-fired power plants.
That was the assessment Thursday from PSC member Ellen Nowak, who spoke to a gathering sponsored by the Wisconsin Public Utility Institute at the Fluno Center on the UW-Madison campus.
Nowak, appointed to the PSC in June by Gov. Scott Walker, said the Badger State produces 62 percent of its electricity from coal, while the national figure is 45 percent.
Nowak said the Cross State Air Pollution Rule will have the greatest impact on Wisconsin, requiring a 27 percent reduction of sulfur dioxide and a 9 percent reduction of nitrogen oxides commonly found in smog.
She complained that states were given a very short time to comply with the rule, which is one of the reasons a federal court in the District of Columbia delayed its implementation.
Nowak said the states will have three to four years to comply with separate mercury and air toxin regulations. She said Wisconsin may be in a better position regarding mercury than other states, however, because of state pollution rules already in place here.
She said the combined effect of the air and mercury rules could be approximately $18 billion annually. In Wisconsin, that figure could mean roughly $1.1 billion in capital and $31 million in annual operating and maintenance costs, she said, citing an informal survey of the state’s major investor-owned utilities.
Nowak said it is too early to tell the impacts of some rules, such as those covering coal ash, which is now recycled by using it in cement and other construction materials. If it is deemed a pollutant, it would have to be transported out of state for disposal, which could be costly, she said.
Nowak said the PSC has yet to pass on costs to ratepayers. But she said it’s requiring utilities to submit quarterly reports on their compliance strategies.
As regulators and utilities make decisions, she said they will need to coordinate actions to avoid making “piecemeal” decisions that could result in higher costs to residential consumers and industries.
“We need to consider the long-range cost impacts in light of our fragile economy while we seek to improve the environment,” she said.
For the short term, she said utilities may switch to cleaner fuels such as natural gas, operate cleaner and more expensive plants, purchase power generated outside Wisconsin and retrofit plants to reduce pollutants.
“If the result of this is shrinking the amount of coal used, the challenge will be to fill in the gap with other fuels to produce base-load power,” she said.
Over the long-term, Nowak said utilities may retire older and dirtier coal-fired plants, add more pollution controls and work with businesses and consumers to increase energy efficiency and have them reduce use during critical, high-demand periods.
In response to a question, she said any decision on removing the moratorium on new nuclear power plants in Wisconsin as a way to generate electricity that does produce smog would have to be decided by the Legislature, not the PSC.
In the meantime, she said the PSC will evaluate the cost/benefit ration of high-cost emission control equipment installation and work with utilities to determine treatment of remaining investments in power plants where retrofits are not economical.
Nowak said commissioners will also consider how pollution control costs should be reflected in retail rates and take steps to protect ratepayers against price volatility to keep rates reasonable.
