The utility industry is rapidly transforming itself, closing down coal-fired units and converting to natural gas to meet tough new environmental regulations and save costs. But regional price spikes or power shortages could be on the horizon.
Federal agencies aren't doing enough to make sure regional electricity supplies can be sustained as utilities grapple with meeting new environmental regulations imposed by the Obama administration, government auditors warn.
The Government Accountability Office, the auditing arm of Congress, also predicted that electricity prices are likely to rise in some coal-dependent regions as utilities shutter or retrofit coal plants or convert to gas.
The GAO reported Thursday that the Environmental Protection Agency, the Energy Department and the Federal Energy Regulatory Commission have taken some steps to monitor industry response and that widespread power outages were unlikely during the industry's historic shift away from coal to cheaper, cleaner burning natural gas.
But the three agencies have failed to develop a formal process for ensuring that likely challenges and regional shortages are resolved, it cautioned.
The report said between 2 and 12 percent of the coal-fired power fleet could be retired in the coming years, partly in response to the EPA's new mercury and toxics emissions rule and its Cross State Air Pollution Rule, which is on hold pending a federal appellate court decision.
GAO also considered the impact of proposed rules on the disposal of coal plant ash and power plant cooling water intake structures.
Republicans and some industry critics have called the EPA regulations a "train wreck" that could cause shortages in coal-dependent areas in the Midwest and Southeast. House Republicans have passed bills delaying the rules, though they are not expected to get through the Democratic-controlled Senate.
Tools exist at the federal and regional levels to mitigate possible shortages, GAO acknowledged. The Energy Department can order units to run to meet critical demand, for instance.
Still, GAO said the tools "may not fully address all challenges where generating units needed for reliability are not in compliance by the deadlines."
GAO also said that without a joint monitoring effort, the government many not know if those tools are adequate.
EPA spokeswoman Alisha Johnson said the agency is coordinating with the Energy Department and FERC on "sensible standards" under the Clean Air Act. She noted that GAO's conclusion that regulations are not likely to cause widespread reliability challenges matches Energy Department and EPA analyses.
Officials at FERC and the Energy Department did respond to requests for comment.
In comments to GAO, EPA and the Energy Department agreed on the need for a formal monitoring process, but FERC challenged the recommendation. It said it has taken a number of actions already and has pledged to work closely with other agencies, states and utilities. FERC also stressed that as an independent agency it is limited in its ability to dictate information sharing from other parts of the government.
FERC also challenged a GAO recommendation that it assess the adequacy regional transmission market rules to cope with EPA regulations, saying it has already asked for that information and continues to do so.
Beyond regional challenges, GAO said electricity prices would likely rise in some regions as coal-fired power plants are retired and retrofitted. But it cautioned that some units would be taken out of service because of other aside from EPA regulations, such as lower priced natural gas.
Sen. Jay Rockefeller, D-W.V., who requested the report, said the report confirmed EPA's contention that the regulations can be met with without affecting reliability.
"This report also makes clear that if federal agencies, such as the Department of Energy, EPA, and FERC, coordinate their efforts, it could help ease the process of implementing the standards on states and communities," Rockefeller said.
He said the GAO backs up his contention that the coal industry must become cleaner and reduce health and environmental impacts.
The cost savings from fewer illnesses and higher work productivity will make EPA regulations cost-effective in the long run, he added. EPA estimated the cost benefits of the mercury rule and the cross state pollution rule at a combined $160 billion to $405 billion annually, GAO said.
The report can be seen here.
The Government Accountability Office is the audting and investigating arm of Congress charged with reviewing federal agencies' performance and the impact government policies for lawmakers.
The Federal Energy Regulatory Commission is an independent federal agency charged with regulating the nation's power transmission system and ensuring electric reliability.
