Utility wary of new EPA guidelines
HUNTINGTON -- Appalachian Power Co. President and Chief Operating Officer Charles Patton isn't hitting the panic button yet.
Two weeks ago, the Environmental Protection Agency released new guidelines aimed at curbing global warming, including cutting carbon dioxide emissions from coal-fired plants 30 percent by 2030.
That certainly sounds like bad news for Appalachian Power, which provides electricity in West Virginia -- a state that derives 95 percent of its electricity from coal -- and Virginia.
But Patton said there is a lot to be determined between now and when the new rules might go into effect, making predictions on industry and customer impact hard to read.
"The first thing it is imperative to get across here is that this is a proposed rule," Patton said. "Then we're going to have next year for comments and rules to be finalized. After that, each state is going to have a year to two years to finalize their state implementation plan and get it approved.
"This thing is so complicated, so complex, especially with the challenges of sorting it out state by state."
Under the new plan, states are given custom levels of carbon emissions allowed and different dates to meet those limits, based on each state's particular makeup.
The plan also factors in keeping coal involved, providing 30 percent of the nation's electricity by 2030. Right now coal accounts for roughly 40 percent.
Cutting carbon pollution from coal-fired plants, according to the EPA, will help stabilize rapid climate change, and lead to climate and health benefits estimated between $55 and $93 billion. The initiative is expected to prevent 2,700 to 6,000 premature deaths and 140,000 to 150,000 asthma attacks in children.
The EPA also touts that the policy will create new jobs in growing energy sectors, and reduce energy costs by 8 percent.
Patton said he can't estimate what rates will be by the time everything is said and done, but isn't sold on a cost reduction.
"I can tell you it will be more, and I think it will be significantly more," he said.
Under West Virginia's guidelines laid out by the EPA, the state would have to raise renewable energy to the level of providing 14 percent of the state's power by 2030.
Patton said that's a 600 percent increase.
The plan also calls for a 10.7 percent reduction in electricity use. Patton said at present the state has reduced electricity use through energy efficient plans and devices by about half a percentage point.
"That is where the cost comes in," he said. "I think a lot of environmentalists are going to be happy with this, but for those of us in the energy industry, we have a lot of questions."
Kevin Craig, of Huntington, is very familiar with energy policy and economics.
Since 2005, he has worked with Natural Resource Partners in Huntington, which leases oil, gas, coal and other energy resources across the country for power providers. At present, Craig is vice president of business development for NRP's coal resources. Before that, he worked for CSX Transportation, where he managed the rail company's West Virginia Coalfields terminal. He's also in his last term in the state House of Delegates, where he has represented the 16th District for 14 years, and is currently chairman of the House Energy Committee.
Craig said low electricity cost is one of the things the economically-depressed Mountain State has going for it in attracting industry or expanding existing large-scale employers.
"If we forego low electricity rates, it will kill economic development in West Virginia," he said.
Beyond that, he believes it threatens the health and well-being of West Virginia's residents.
"In my opinion, you've already put the electric grid in jeopardy with (current regulations)," he said. "When you further limit electricity through this CO2 rule, you've really damaged the value of the electric grid, and you might not have power when you need it."
Craig said much of the power provided to heat homes during the brutal winter the region experienced this year is scheduled to go off-line as plants are idled.
"Ninety-two percent of the increase in demand was supplied by coal. It comes down to will the lights come on when we flip the switch?" he said. "I think there is a general lack of awareness as to how close we came to blackouts and brownouts this past winter.
"I'm concerned down to the level of medical devices in people's homes that run on electricity."
Patton agreed, saying three of the coal-fired plants that were called upon to provide additional energy during the polar vortex will be shut down by summer 2015 because they don't meet EPA regulations already scheduled to go into effect.
"I can't say the system is going to collapse, but as a utility operator who saw those plants operating at 80 percent during that time period, knowing they're not going to be there after June 1, 2015, is troubling," he said.
Natural gas is expected to take up much of the slack for coal use reduction, but Patton said that produces further problems when it comes to cost and efficiency.
"The issue around gas isn't availability, it's infrastructure for delivery," he said. "There is insignificant infrastructure for the increase in demand to have natural gas heating in a home. You have to get it to market."
There are no gas plants in West Virginia, and building a new plant isn't economically feasible while coal is still cheaper than gas, Patton said. At the same time, building a new coal-fired plant is off the table.
"We need to be using everything," he said of available energy sources. "Energy efficiency, I think it's great. I praise it. But people may be looking at $4,000 in improvements to their home for that. Now, we have some programs, and maybe we can give you $2,000 toward that, but, if you don't have the other $2,000, it might as well be a million."
Craig also acknowledged that the country needs to have a balanced energy portfolio that includes natural gas and renewable energy sources.
"It can't be all coal," he said. "We need an 'all-of-the-above' energy plan, but coal needs to continue to play a major role."
Follow reporter Ben Fields on Twitter @BenFieldsHD.
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