FINAL EPA CLEAN POWER PLAN RELAXES CARBON LIMITS, EXTENDS TIMELINE FOR COMPLIANCE

Electric Cooperative Member-Consumers Face Higher Costs, Reliability Concerns

(Benson) – Almost half a million rural electric cooperative member-consumers in Arizona, California, and New Mexico will be affected by the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan (CPP) final rule, and the impacts could include everything from rate hikes to issues of reliability.

The final rule announced this week differs substantially from the EPA’s original proposal made in June 2014. The final rule relaxes both the interim and final carbon emissions goals and provides an additional two years to move toward compliance of the interim goal.

The CPP final rule requires Arizona’s coal plants to reduce CO2 emissions to an average of 1,173 lbs/MWh between 2022 and 2030 – the interim goal. The previous interim goal of 735 lbs/MWh was much stricter and would have been required to start in 2020. The CPP also requires a final limit of 1,031 lbs/MWh by 2030, a reduction of 29 percent. The previous final goal of 702 lbs/MWh was a 52 percent reduction, and Arizona’s electric utilities have been unanimous in saying it couldn’t be met.

“The revised goals are substantial revisions from the original plan that show the EPA took into account our assertion that the original goals were simply unachievable,” said Patrick Ledger, Arizona’s G&T Cooperatives (AzGT) CEO.

“We have already made substantial investments in reducing emissions and will be investing more than $32 million to meet the EPA’s regional haze requirements by converting one of our two coal units to natural gas – a major step that in itself shows our commitment to reducing our reliance on coal generation,” Ledger said.

The extension of the timeline for compliance with the interim goal from 2020 to 2022 not only provides utilities with more time to achieve compliance, it gives the Arizona Department of Environmental Quality (ADEQ) more flexibility in how it implements reductions in the interim period before 2030. But the final rule also establishes prescriptive requirements that ADEQ must meet in its part of the process, called the State Implementation Plan (SIP).

Ledger said it still remains to be seen how the new goals can be met and that a detailed analysis of the new plan and its complicated verification provisions is being conducted. He cautioned there are still challenges, including:

 Higher rates for consumers as the CO2 emissions requirements are met or more costly renewable energy resources are brought on-line

 Lack of good regulatory fit with the multi-layer cooperative model

 Concerns about electric reliability

 The possibility of AzGT seeking bankruptcy protection from $255 million in stranded debt – debt still owed on the Apache Generating Station and other facilities. Most of that debt is owed to the Rural Utilities Service (RUS), itself a government agency funded by the taxpayers.

 

Ledger said the cooperatives want to express appreciation to members of the Arizona Congressional delegation and state legislators who supported them, as well as member-consumers, employees, community leaders and others who generated postcards, emails and phone calls backing AzGT’s alternative plan.

“We are humbled and heartened by the tens of thousands of people who are supporting us,” Ledger said.

NEXT STEPS

The cooperatives will be meeting with local officials, key stakeholders, other utilities, lawmakers, and ADEQ officials to discuss the SIP process as ADEQ analyzes the final rule and how it will be integrated into the SIP.

About Arizona’s G&T Cooperatives

 Arizona Electric Power Cooperative (AEPCO), Southwest Transmission Cooperative (SWTC) and Sierra Southwest Cooperative Services collectively make up AzGT.

 AEPCO owns and operates the 605 (combined gross) megawatt Apache Generating Station in Cochise, Arizona, east of Benson.

 SWTC owns and maintains more than 622 miles of transmission lines and 27 substations that transmit wholesale power from the Apache Generating Station to six Member Distribution Cooperatives in southern Arizona, northwestern Arizona, and California.

 Combined, the Distribution Cooperatives that receive AEPCO’s wholesale power serve more than 150,000 meters representing more than 350,000 individual residential, commercial, agricultural and industrial customers.

 

 The Class A Member Cooperatives that receive wholesale power from AEPCO include:

o Sulphur Springs Valley Electric Cooperative in Willcox,

o Duncan Valley Electric Cooperative in Duncan,

o Graham County Electric Cooperative in Pima,

o Trico Electric Cooperative in Marana,

o Mohave Electric Cooperative in Bullhead City,

o And the California member, Anza Electric Cooperative in Anza.

 These member cooperatives own the AzGT and by extension, the G&T Cooperatives are owned by their members, the people at the end of the line who use the power.

 These cooperatives also borrow from RUS, a federal agency.

 

About Arizona’s electric cooperative member-consumers

 The G&Ts and their member cooperatives are not-for-profit utilities that are owned by the people they serve, most of whom live in rural areas.

 These cooperatives depend on fewer consumer-members to share their costs than for-profit utilities.

 On average, one third of these consumer-members live at or below the federal poverty level.

 Cooperative consumer-members spend a higher percentage of their income on electricity than customers of for-profit utilities.

 Electric cooperatives provide much-needed, highly-skilled jobs for their communities.