PSC Backs Pollution Proposal: DEQ Will Take Revision to EPA

Sep 14 - Advocate; Baton Rouge, La.

Public Service Commissioners Wednesday recommended a plan to clean polluted air in Louisiana that would be expensive for utility companies but, they predict, not as costly for customers.

"It's going to be a very, very low impact to ratepayers. (I) can't say the same for all of the utilities because they're going to have to install controls," state Department of Environmental Quality secretary Mike McDaniel said.

Buying the technology necessary for cleaner air is expensive, McDaniel said. But the plan minimizes the impact on electricity customers, though he could not say by exactly how much.

McDaniel testified at the monthly meeting of the five-member commission that sets customers' rates for electric bills. The commissioners approved the plan unanimously.

In March 2005, the U.S. Environmental Protection Agency issued the Clean Air Interstate Rule, which limits the amount of pollutants that can be released into the air.

Called CAIR, the federal rule requires units that generate electricity in 28 states to produce 70 percent less sulfur dioxide and 60 percent less nitrogen oxide than they released in 2003.

The PSC recommendation offers a different way of calculating pollution limits. The plan also includes incentives for utility plants to upgrade their pollution control devices.

To meet the air emission mandates, McDaniel said, some industrial plants will have to buy new technology that is very expensive. The industries generally absorbs those costs.

But the privately owned utility companies, such as Entergy Gulf States Inc., which serves the Baton Rouge area, are allowed by law to pass those costs on to their customers. The cost of making and distributing electricity, plus a profit, is divided among a utility's customers.

DEQ, the environmental agency, can draft whatever rules it wants without consideration of electric customers.

However, "I didn't think that would be prudent, particularly after what the hurricanes caused," McDaniel said after the meeting.

States are allowed to make changes to the federal government's mandates. McDaniel said he wanted the Public Service Commission to weigh in on the plan DEQ will present to the federal government.

Increasing costs for cleaner air would hurt consumers already paying more for their electricity and insurance because of last year's hurricanes. The increase in electricity costs also would affect economic development.

"We don't live in a vacuum," McDaniel said. Accepting the federal plan as is "wouldn't have been prudent, because this rule is going to have a lot of costs."

McDaniel said DEQ should finalize its plans in October.

The Public Service Commission staff recommended deviating from the federal model so that electric customers would pay less.

Under the federal rules, if a utility's emissions exceed its pre- set pollution limit, the utility can buy pollution "credits" from another company that has released less than its limit. The credits are subtracted from the offending plant's emissions until it too is considered in compliance.

McDaniel said the plan drafted by the commission and accepted by DEQ fiddles with the way pollution emissions and credits are calculated.

The goal is to minimize the effect on the customers of electric companies that fail to comply with the EPA standards, he said. Buying pollution "credits" likely will be cheaper than installing new equipment that can lower the emissions, he said.

"I think this is a very important step we're taking here," said PSC Chairman Jimmy Field of Baton Rouge.

Field said that in addition to changing the way the credits are allocated, the PSC's suggested rule adds some incentives to tempt utility companies to rid themselves of older, less-efficient power generating plants.

Entergy Corp. views the PSC's plan as a compromise among the players, said T. Michael Twomey of Jefferson, the company's vice president in charge of regulatory affairs in Louisiana.

While the utilities, merchant power plants and other industrial companies don't particularly like the compromise for financial reasons, but "it does minimize that impacts on ratepayers and that's good," Twomey said.