Grid Managers Seek Compliance Cushion for Coal-Fired Generators

The State Journal
25 November 2011
By Pam Kasey

As the Environmental Protection Agency begins to enforce broad new air pollution regulations over the coming several years, some coal-fired power plants will be retired and others will power down for retrofit.

PJM Interconnection and regional electric grid managers across the nation are making a proposal to help ensure electric reliability through the period.

Although PJM so far believes that transmission upgrades will address any reliability impacts, "we know better than to simply gamble on this outcome without providing an appropriate safety valve for changed circumstances," reads a written statement from Michael Kormos, PJM senior vice president of operations.

Kormos will argue for a "Reliability Safety Valve" at a Nov. 29-30 Federal Energy Regulatory Commission Reliability Technical Conference in Washington, D.C.

Coal-fired power plants provided half of the electricity in 2010 in PJM's region, which encompasses all or parts of 13 states and Washington D.C., including West Virginia.

Many coal-fired power plants will be affected by the coming Cross State Air Pollution Rule and National Emission Standards for Hazardous Air Pollutants, also known as the Mercury and Air Toxics Standards.

The problem for the regional grid managers is this: While they are tasked with maintaining grid reliability, they cannot order a generating unit to stay in operation if an operator chooses to retire it. Electric reliability could be severely compromised as operators come into compliance with the new rules.

PJM and other grid managers have some tools available to them, according to Kormos' testimony. These include arranging compensation for generators that otherwise would retire, coordinating and approving the schedule of generator outages resulting from retrofitting, and ordering transmission owners to upgrade their systems for reliability purposes.

But while PJM has not yet foreseen problems, delays in transmission upgrades or a bottleneck of vendor orders for generator retrofits are unpredictable risks.

"The number of potential retirements and retrofits, and the tight timeframe associated with same, could be unprecedented in scope, thus ‘stress testing' these tools to a degree to which they have not been utilized before," Kormos will testify.

The grid managers' "Reliability Safety Valve" proposal seeks EPA flexibility, under certain conditions, on compliance timing and penalties.

The proposal provides incentives for owners of generating units deemed critical for reliability to give two years' notice of their intentions so PJM can plan and order needed transmission reliability solutions.

Such notice would make owners eligible for relief from penalty if PJM requires a unit to run beyond the compliance date, while unit owners who fail to provide notice would not be guaranteed relief from penalties.

"In short, the two years' notice that we proposed avoids unit owners potentially profiting from their own failure to provide notice by leaving PJM little time to order the necessary transmission reliability upgrades that would allow for the timely and reliable retirement of the unit in question," Kormos' testimony reads.

EPA needs to provide up-front guidance in its final rule as to how it will exercise its penalty authority, he will testify.

"This would ensure that a unit owner doesn't find itself faced with the Hobson's choice of being asked by the (grid manager) to operate for reliability while, at the same time, facing potential penalties for doing so by the EPA or, more likely, the implementing state environmental regulatory authority," he will say.

For more information about the Nov. 29-30 FERC reliability conference or to view a webcast, visit FERC's calendar page on the conference.