The Edison Electric Institute (EEI) is trying to strike a deal with the White House on EPA's pending air toxics rule for utilities under which EEI's members would agree not to sue over the rule if it reflects major changes the group is seeking, but internal divisions among members may frustrate EEI's ability to reach a deal, sources say.
Power company members of EEI -- which represents investor-owned utilities -- that are more reliant on coal-fired electricity generation are drawing suspicion from other utility companies within EEI that are better positioned to meet the rule's mercury and other air toxics limits, such as those with a large number of natural gas plants.
The Obama administration is keen to avoid major industry opposition to its final maximum achievable control technology (MACT) air toxics rule for coal- and oil-fired power plants, due Dec. 16 under a consent decree deadline. The White House has been reaching out to try and secure industry buy-in before the rule's release.
Sources have said the administration wants to strike a “grand bargain” with the power sector, making changes to the rule to address industry concerns in exchange for winning utility backing upon its release -- much like the deals EPA inked with automakers over the agency's first-time greenhouse gas and fuel economy limits for vehicles.
Sources tell Inside EPA that the week of Nov. 28 will be “mission critical” as to whether EEI can resolve differences among its members and take a package to the White House that has the support not only of the administration but also of all of the group's members. The White House did not respond to several requests for comment, but sources say the administration has set Nov. 30 as the final deadline for meetings with outside groups over the rule.
The overarching issue EEI is seeking is an extension of the Clean Air Act's three-year compliance deadline for the rule.
Brian Wolff, EEI's senior vice president of external affairs, confirmed to Inside EPA in a Nov. 23 interview that the institute is working diligently to strike a deal echoing its Aug. 3 comments on the proposed version of the MACT. The comments represent the “consensus view” of member companies, while EEI also recognizes that members that signed onto the comments have staked out more strident individual positions that better protect their interests, he said.
The individual comments “are all over the place,” Wolff said. But EEI is “working toward a goal that everyone is in agreement” and that its members not litigate over the rule following its release next month.
Wolff cautioned nothing is certain until the final rule is out. “It's impossible right now to think that we could project whether that is on or off the table. . . . Is that a goal? Yes, that's a goal and we hope we can get there.”
EEI has met with the White House several times in recent weeks. Wolff said EEI has been “very transparent” about its effort, which he calls “typical” of the type of work the organization strives to do. Most important to EEI is to preserve electric reliability, he says, and notes the major asks in the comments reflect this goal.
EEI's Aug. 3 comments urged EPA to grant a categorical one-year extension from the rule's compliance deadlines for units that upgrade to comply with the MACT. EEI also asked President Obama to use Clean Air Act authority to exempt sources from compliance for up to two years for national security purposes.
Further, EEI in its comments sought a recalculation of the proposed rule's mercury limit over concerns that the level in the proposal was not the average of the best performing 12 percent of sources but based on “an unrepresentative sample group.” And it wants eased compliance, testing and monitoring requirements.
Wolff in the interview said EEI is not opposing the rule but is seeking changes it believes are authorized under the air law and necessary to preserve electricity supply. Republicans and other critics of the MACT warn it will be so costly that coal plants will shut down rather than comply, with the lost generation causing adverse grid reliability impacts.
Wolff added that EEI has not only met with EPA and the White House Office of Management and Budget (OMB), but also other power industry trade groups, environmentalists and labor unions to discuss its effort.
EEI Member Divisions
Sources with EEI member companies tell Inside EPA that utility CEOs reached an informal agreement about a month ago that they would not litigate over the final utility MACT if it incorporates crucial changes suggested in the EEI comments. CEOs are expected to meet again late next week for an update on the situation.
But distrust appears to be building between the group's members that find themselves on opposite sites of the rule. Members less reliant on coal are expressing concerns that they could agree to some of the concessions, which they do not necessarily support, and then have their coal-heavy competitors file a lawsuit over the rule anyway.
Some companies better positioned to meet the rule's expected requirements oppose the categorical fourth year compliance extension and warn that EPA may have already determined it cannot legally do so under the air law. They say instead that individual consent decrees should be negotiated with companies that need more time and that “special mechanisms,” such as blanket extensions and presidential exemptions, are not necessary.
But other companies oppose consent decrees because they imply that a power company has committed a violation of Clean Air Act requirements, and the decrees can be subject to litigation from outside groups.
Sources with coal-reliant companies confirm that there are “discussions going on” but stop short of backing any agreement. “Until people could see what the final language will be, there is not going to be some kind of deal, and no one has the final rule yet. I can't see any utility committing to anything until they see final language,” one source says.
Sources on all sides of the debate note that next week will be a critical time for whether EEI can bring a solid deal to the table for the White House and get sign-off from all necessary parties, a challenge that many sources are already saying is unlikely to be successful given longstanding divisions within the utility group.
One source from a non-coal reliant company says there is “skepticism” that the coal-reliant EEI members “would ever stand down” from litigation, so “until we get the signal that that's exactly the case, we are pushing very hard to counter the arguments of the coal-based interests.”
OMB has slated Nov. 30 as the final deadline to meet with outside groups, and has already scheduled meetings with environmentalists and the pro-coal Electric Reliability Coordinating Council early in the week.
OMB has held a flurry of utility MACT meetings over the last month, including separately meeting with EEI and some of its member companies pursuing their own views in the event that a deal is elusive.
Doubts Over Deal
The source from the non-coal reliant company says the Obama administration has not yet sent any kind of a signal as to its position on any EEI agreement. “I don't know how they would either. Certainly OMB couldn't because until the rule is published there are such strict rules about disclosure. . . . So [the outcome] may not be known by the industry until the rule is promulgated,” he said.
Also unclear is whether the White House would have to incorporate 100 percent of the EEI comments in order for the group's members to consider it a deal and vow now to file suit over the final MACT. “If they get a good portion would they stand down in litigation? That's the issue to all of us as a matter of degrees,” the source adds. “It is always a matter of companies looking at a specific rule and then making a determination.”
Other industry sources following the MACT rule that are not EEI members are also skeptical of any such deal. “There is no way that EEI is going to be the broker for any final deal here,” one industry consultant says, because the economic divide between EEI's member companies is too vast.
“The truth of the matter is . . . . member companies have asked for separate [OMB] meetings and . . . don't trust EEI to represent both the coal guys and the other guys. There is a certain amount they can all agree on but a bunch of stuff they will never agree on, and that's where we are,” the source adds.
An industry attorney calls any broad deal “pretty formidable to pull off” given the divergent views of EEI's members, who represent companies with widely ranging energy portfolios.
Another industry consultant says EEI's deal is not “close to being on the table. There are legal problems with what they want. . . . But they are working it very hard. . . . And we are in a period of time where the companies most exposed are feeling pretty desperate, so we will be seeing a lot of crazy things happening.”
But a pro-coal power industry source, while declining to discuss the EEI effort, says there is “potential” to reach agreement on extending deadlines. “There is more common ground” on that issue than there seems. “But it will require the EPA to actually negotiate in good faith.” -- Dawn Reeves (This e-mail address is being protected from spambots. You need JavaScript enabled to view it )
