Accountability Office Finds Limited Coordination, Higher-Than-Projected Plant Retirements

WASHINGTON, D.C. – At the request of U.S. Sen. Lisa Murkowski, R-Alaska, the Government Accountability Office (GAO) today released a report documenting federal agencies’ inadequate response to concerns about the potential electric reliability impacts of multiple federal regulations proposed by the Environmental Protection Agency (EPA).

The report is an update to GAO’s previous work in 2012 on electric reliability. The nonpartisan GAO found that federal agencies have in the last two years taken only “initial steps” to establish interagency interactions and have failed to develop a formal, documented process to track industry compliance efforts, while focusing primarily on just one of several new federal regulations that could impact reliability. GAO also reported that coal plant retirements are now on track to be considerably higher than projected just two years ago.

“GAO’s findings should renew and reinforce our concerns about the impacts that new federal rules could have on electric reliability,” said Murkowski, the top Republican on the Senate Energy and Natural Resources Committee. “Plant retirements are higher than projected. Electricity prices are rising. Even factors beyond our control – such as last winter’s weather – are on a collision course with the shutdowns caused in part by new federal regulations.

“Despite it all, the agencies in charge still have not fully adopted GAO’s recommendation for a formal, documented process to protect reliability. In reading this report, their actions come across as a check-the-box exercise, rather than a robust effort to protect families, consumers, and businesses across the country. What we need, instead, is an even-handed, transparent, and independent expert analysis of the cumulative effects of EPA’s regulations – one that must include the new rules proposed for carbon dioxide emissions,” Murkowski said.

GAO’s analysis is an update to its July 2012 report entitled, “EPA Regulations and Electricity: Better Monitoring by Agencies Could Strengthen Efforts to Address Potential Challenges.” Murkowski requested the update earlier this year, in the wake of last winter’s polar vortex events, ongoing announcements of plant retirements, and the promulgation of additional environmental regulations.

Interagency Coordination

In 2012, GAO concluded that the Department of Energy (DOE), Environmental Protection Agency, and Federal Energy Regulatory Commission (FERC) “have begun taking steps to monitor industry’s progress in responding to [four key EPA] regulations but have not established a formal, documented process for joint and routine monitoring….” GAO described a series of reasons why such a process should be implemented, and a number of consequences that could result from its absence. (For more, see GAO’s 2012 report.)

In its update, GAO found that “… DOE, EPA, and FERC have taken initial steps collectively and individually to monitor industry progress responding to EPA regulations including jointly conducting regular meetings with key industry stakeholders.” However, GAO reported that the agencies’ efforts are primarily focused on just one of at least five rules that could impact electric reliability. GAO accordingly determined that, “Recent and pending actions on the four existing regulations, as well as EPA’s recently proposed regulations to reduce carbon dioxide emissions from existing generating units, may require additional agency effort to monitor industry’s progress in responding to the regulations and any potential impacts on reliability.”

Plant Retirements

In 2012, GAO “reported estimates that 2 to 12 percent of coal-fueled capacity could be retired, and that some regions, particularly the Midwest, could see more significant levels of retirements.” In its update, GAO wrote that, “According to our analysis of SNL data, planned retirements of coal-fueled generating units appear to have increased and are above the high end of the estimates we reported in July 2012. Specifically, power companies retired or plan to retire about 13 percent of coal-fueled net summer generating capacity (42,192 MW from 238 units) from 2012 through 2025.” GAO further noted that, “… in April 2014, EIA projected that retirements from 2012 through 2020 could reach approximately 50,000 MW or about 16 percent of net summer generating capacity available at the end of 2012.”

These estimates stand in stark contrast to EPA’s projection that its Mercury and Air Toxics Standards (MATS) rule would result in the retirement of 4.7 GW (4,700 MW) of generating capacity. And EPA’s proposal to reduce carbon dioxide emissions from existing power plants – which could be its most consequential rule affecting existing generating capacity – does not appear to be factored into any current retirement estimates. GAO did note, however, that EPA has “projected an increase in the national average retail electricity price between 5.9% and 6.5% in 2020 compared with its base case estimate” as a result of that rule.

Murkowski’s Efforts to Protect Electric Reliability

Murkowski is a leading congressional proponent of greater attention to, and awareness of, threats to electric reliability. She began to call attention to potential reliability impacts in 2011, has spoken repeatedly about the need to empower FERC to protect against those impacts in the years ahead, and issued a white paper on the subject (“Powering the Future”) in Feb. 2014. Later this week, she and Sen. Tim Scott, R-S.C., will release a white paper on energy insecurity, which documents the impacts that rising home energy costs have on individuals and families throughout the country.

Read the press release here.