Why the Group Most Affected by Obama Power Plan Doesn’t Hate It

(Bloomberg) — Opponents of President Barack Obama’s plan
to cut emissions blamed for climate change say utilities will be
among the casualties of the new regulations.

You wouldn’t know it to hear from the power producers
themselves.

For a group that must dramatically alter the way it does
business to comply with proposal, utilities don’t sound very
annoyed. In fact, the industry’s main trade group said the Obama
administration “seems to have responded to some of our key
concerns.” The new rules will even boost profits for some.

“The final guidelines appear to contain a range of tools
to maintain reliability and better reflect how the
interconnected power system operates,” said Tom Kuhn, president
of the Edison Electric Institute, which represents U.S.
investor-owned electric companies.

And while the coal industry is the undisputed loser in the
U.S. Environmental Protection Agency’s plan, utilities walked
away with some nice concessions.

The EPA, for example, delayed the first compliance date by
two years to 2022, included a “safety valve” provision that
allows the rules to be lifted if reliability issues emerge, and
instituted a carbon trading system that provides an option to
comply with the mandates.

The agency also adjusted the way it calculates reductions
each state must achieve, backing off an earlier formula that
would have required massive changes for states such as Arizona
and Florida.

The final rule “appears less onerous for the U.S. power
sector,” Fitch Ratings said Tuesday.

‘Flawed and Illegal’

West Virginia Attorney General Patrick Morrisey is among
those with a different view. The regulations are “fundamentally
flawed and illegal,” and will lead to fewer jobs, higher
electricity rates and a less reliable power grid, Morrisey said
in a statement Monday. He is part of a group of state attorneys
general preparing a legal challenge to Obama’s proposal on
behalf of a coalition Morrisey said includes utilities.

The rules unveiled Monday aim for a 32 percent reduction in
carbon emissions from the nation’s power plants by 2030,
compared with 2005 levels. To meet the target, it gives states
credit for solar or wind projects that break ground in the next
few years. It will also force utilities to run natural-gas
plants more or encourage customers to use less electricity.

Utility owners including Dominion Resources Inc. and
NextEra Energy Inc. may profit from building gas pipelines,
solar plants and other infrastructure upgrades needed to comply
with the rules in states that allow them to recoup the costs,
UBS AG said in a research note on Monday.

Coal Suffers

“It appears the EPA was quite responsive to concerns
raised by NRG, among others,” NRG Energy Inc., the largest U.S.
independent power producer, said on Tuesday. “We appreciate
that.”

Still, not everyone is happy. Southern Co., one of the
nation’s biggest coal-burning utilities, said the proposal
amounted to an overreach that “impede states’ authority to act
in the best interest of customers.” Companies that own coal
plants in competitive markets where costs can’t be recovered may
also suffer.

And the final version of the rule doesn’t give credit for
existing nuclear plants that are threatened with extinction from
cheaper natural gas and renewables, a negative for big reactor
owners such as Exelon Corp.

“Even in the face of damning analyses and scathing
opposition from across the country, EPA’s final carbon rule
reveals what we’ve said for months – this agency is pursuing an
illegal plan that will drive up electricity costs and put people
out of work,” Mike Duncan, president of the
American Coalition for Clean Coal Electricity, a industry
lobbying group, said in a statement.

To contact the reporters on this story:
Mark Chediak in San Francisco at
mchediak@bloomberg.net;
Mark Drajem in Washington at
mdrajem@bloomberg.net

To contact the editors responsible for this story:
Lynn Doan at
ldoan6@bloomberg.net
Jim Efstathiou Jr., Charlotte Porter

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