Conservation Insider Bulletin

Conservation News to Peruse & Use

Editor: Dan Besse, earthvote@ccnccpac.org

June 22, 2007


Utilities Try to Use Energy Bill to Renew Old Scam: The leading environmental legislative item this week is the attempted renewal by the electric utilities of a bad old idea whose time has already come and gone: the "construction work in progress" financing gimmick for new power plants.

After lengthy negotiations on the Senate side's version of HB 77, "Promote Renewable Energy / Energy Efficiency", an unlovely hybrid emerged into the light. The new SB 3, renamed "Promote Renewable Energy / Baseload Generation", represents an ugly merger of some of the best ideas of this legislative session and some of the worst ones.

CCNC's legislative bulletin, HotList, comments as follows on the result:

"SB 3 is a crucial first step toward...innovation and energy efficiency, saving the state's consumers money, and creating a cleaner environment for the future. However, the current version of SB 3 includes provisions creating substantial incentives for major energy providers to construct more coal and nuclear plants, a major step backward for any kind of clean-energy plan."

It goes on to explain: "The current version of the bill subsidizes the construction of new nuclear power plants, along with allowing for construction costs to be included in calculations of new electric rates. In addition to this, SB 3 lets utility companies include the cost of their environmental compliance measures in their rate calculations, with little review from state agencies. This allows the utilities to pass on these costs to their customers, and removes an important obstacle to new construction. These provisions encourage the power industry to build more new coal and nuclear plants, a serious step backward. These outdated technologies harm the environment, put citizens' health at risk, and only further entrench the state's dependence on foreign energy sources. The General Assembly should reward industry for responsible behavior, not for building new coal or nuclear facilities."

Citizen environmental groups gave mixed reactions to this perverted merger of measures promoting construction of more coal and nuclear baseload plants with the original concept of steps to promote energy efficiency and renewable energy production. Some groups, such as Environmental Defense, continued to stress the bill's original positive measures. Others, such as Environment North Carolina and the N.C. Public Interest Research Group, declared that the negative additions were so bad that they would have to oppose the bill altogether so long as those provisions remained in it. Even if the revised bill passes the Senate, there will be vigorous efforts to remove the offensive provisions during review by the House.

[Editor's Note: CIB's editor sides with those who say that the "baseload construction" measures must be deleted from the bill. These measures include a return to the kind of "construction work in progress" (CWIP) financing provisions which essentially guarantee that any dollar spent on building a new plant gets added to our electric bills—even if it is cancelled during construction. In our view, this guarantee would represent an environmental and economic disaster in the making.

The reason is simple: If the utilities are guaranteed that ratepayers/consumers will pay for whatever plants they build, they will build more than we need--regardless of what is invested in renewable energy and energy efficiency. Utility profits are based primarily on the interplay between the size of their rate base and their rate of return. Therefore, the bigger their rate base (the value of their plants and other facilities), the more potential they have for high profits to their stockholders.

Transferring the entire risk of new construction from their stockholders to the public ratepayers, via CWIP financing, skews their entire planning process. New baseload (coal and nuclear) construction becomes a vastly more attractive proposition, with little or no downside risk to the corporation.

This form of extreme CWIP financing was repealed by the N.C. General Assembly in 1982. The final cancellation of several unneeded nuclear units which were clinging to life via the artificial life support of guaranteed subsidies followed suit. Today is not the time to return to the bad old policy of total assumption of construction risks by the ratepaying public.]

Hog Warriors Occupy the Mall: As noted in last week's CIB, environmental advocates and other concerned parties converged on the mall area adjacent to the legislative building in Raleigh this week, for a 51-hour "Hog Vigil". Participants kicked off the vigil on Wednesday morning with a news conference and unveiling of a model of a hog farm, complete with miniature sprayfield and waste lagoon. Cleanup advocates got an unexpected and ironic PR boost from officials who warned them that if any of their (real) sample hog waste spilled on the ground, it would be considered hazardous waste and they would be fined. Some of the vigil participants live near working farms and sprayfield mist which crosses onto their properties and homes on a daily basis. They just wish that the state would be as aggressive in protecting them as in protecting the sensitivities of our legislators.

Budget Notes: Final budget negotiations continued all week between House and Senate conferees, aimed at resolving the many and wide differences between the chambers' versions of the budget. Treatment of the State Energy Office remains the most important environmental difference. Advocates continue to press House leaders to stand firm in support of their version of the budget on this item. The Senate version dissolves the State Energy Office altogether. That's no way to treat an agency that has saved state taxpayers tens of millions of dollars through its effective leadership in support of implementing energy efficiencies.

On the positive side, both House and Senate budgets this year contain a provision which conservationists have unsuccessfully sought for years: extra inspector positions for the state Sedimentation Control program. (Not enough new positions, but some—which in this case would represent a noteworthy step forward.)

Washington Watch: EPA Proposes Tougher Ozone Standard

Beyond the General Assembly, the other major news we were following this week came from the EPA in the air quality arena. After months of delay, the agency has proposed a tougher standard for ground-level ozone, the major ingredient of urban smog.

Maybe.

The EPA's proposal actually recommended a standard somewhere within a range from 0.070 to 0.075 parts per million (ppm). However, it said at the same time that it would continue taking comments on "alternative standards" from as low as 0.060 ppm to as high as the current standard, 0.080 ppm.

Non-technicians may well be excused for reacting, "Huh?" And, "Whatever it means, why should I care?"

On these questions, we offer our analysis as follows. EPA's scientists think that a tougher standard is appropriate in order to better protect human health from the harmful effects of ozone. It's an irritant which can harm lungs and bronchial passages, trigger asthma attacks, and place additional stress on people with heart conditions and other cardiovascular ailments. On high ozone days, such health complications and emergency room visits for these problems typically go up in impacted areas.

However, pollution-emitting industries strongly oppose the stronger standards. Many local governments, still working on meeting the existing standards, also find the prospect of a new and higher bar to be frustrating. As a result, the ever-timid Bush EPA is keeping its options open. (Stall long enough, and the clock ticks over to a new president.)

By the way, ground-level ozone is formed through a chemical reaction in the atmosphere. Take "precursor" pollutants like nitrogen oxides from power plants and vehicle tailpipes, mix in volatile organic compounds from human and natural sources, and heat well with the summer sunshine. Soon, it produces an unpleasant soup including that unhealthy ozone. That's why ozone pollution tends to be a seasonal problem, associated with weather conditions in addition to pollution levels.

EPA will take comments on its proposal and alternatives for the next three months. For full details, check out its website: http://epa.gov/groundlevelozone/ .