Pepco Higher-sulfur Coal Proposal
Jack C. Leighty/Susan J. Noble (jleighty@chesapeake.net)
Fri, 13 Feb 1998 15:22:26 -0500 (EST)
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Friends:
I received this information from DNR.
Jack Leighty
Huntingtown
jleighty@chesapeake.net
From: "Sherwell-John" <jsherwell@dnr.state.md.us>
Date: 2/12/98 1:24:57PM
To: "Jack C. Leighty/Susan J. Noble" <jleighty@chesapeake.net>
Subject: Electric Power Industry Deregulation -Reply
There are several issues at play here. In the Clean Air Amendments
of 1990, acid rain precursors - oxides of sulfur and nitrogen are
regulated under Title IV. The sulfur component is regulated under a
nation-wide "cap-and-trade" program and the nitrogen is regulated by
the traditional command-and-control of a unit-by-unit prescriptive
emission rate.
The "cap-and-trade" program for SO2 set a nation-wide cap for
sulfur emissions
(that was about a 50% reduction from the base) and then shared this
cap out to each listed facility. Thus every facility was to ensure
that the reductions it was liable for, did indeed occur, however the
cap-and-trade process allows the regulated facility to get these
reductions anywhere. If facility A is overcontrolled relative to
their allowance, facility B can purchase those "emission credits" in
lieu of controls at their own facility.
The nature of the atmospheric chemistry of SO2 - i.e., it is well
mixed and relatively long lived in the atmosphere - means that
reductions anywhere are beneficial everywhere. This process has
been in operation since 1995 so that there is as yet insufficient
data to prove this idea, although it is backed up with model
predictions. 1996 did show a significant decrease in sulfuric acid
in rainfall, and 1997 data is still
being processed. In addition to trading emission credits, and as
they are a fungible items, they may be banked. Hence if I under
emit from one years allocation, I can use or sell them in a future
year.
Restructuring the electricity industry will have no effect on a
power plant operator’s responsibility to comply with Title IV of the
Clean Air Act. I’ve not seen all the details of the PEPCO proposal,
but if they are planning to burn a higher sulfur fuel, it will have
to be within the limitations of the cap-and-trade program and they
will have to show no net
increase in their overall emissions (though they will be able to use
banked emissions as long as they last). It may be cheaper for them
to buy SO2 reductions elsewhere than to burn low sulfur coal, or put
on controls, at Chalk Point itself.
We (the Power Plant Research Program at DNR) are following the
change in distribution of deposition associated with the Clean Air
Act - as are all the "downwind"states in the Northeast, but it will
take several years to recognize a real trend.
PEPCO’s motivation (as I read it from Sunday=27s Post) is from the
recognition that under restructuring, electricity prices will no
longer be negotiated with the Public Service Commission, but will be
set in the normal supply and demand process of a free market. You,
and all other users, will be able shop for power from any vendor and
by and large cost will be the determining factor (there being no
quality associated with the
power available from a kilowatt. The mode of generation may
influence some consumers, but that is another issue.)
Historically, fuel costs were included (bundled, in industry terms)
into the overall cost - along with transmission, distribution and so
on. If a higher fuel cost could be
negotiated on environmental, or other grounds, the PSC would allow
the utility to pass it on to the customers on the assumption that
all users would benefit and all would equally share the cost. In
the restructured industry, fuel cost is not protected by a captive
market and paying a premium for an environmental or other benefit
would simply mean that the consumer would switch to a lower cost
supplier, who may not be offer the benefit. - a lose situation for
the generator and a lose situation for the consumer.
I"m not sure if this makes it any clearer, but one may rationalize
the PEPCO action as them protecting their market share at no
recognized increase in environmental impact. The jury, however is
still out on the theoretical determination that a reduction anywhere
is a benefit everywhere.
Please contact me again if you have any other questions.
John Sherwell
Administrator, Atmospheric Sciences
Power Plant Research Program
Department of Natural Resources
Tawes Building B-3
Annapolis, MD 21401