Xcel Energy believes in an environmental policy approach that balances costs and environmental benefits while maintaining a reliable utility system. We pursue proactive emission reduction and clean energy strategies that improve the environment, control costs and meet the interests of our communities. It is a sensible approach to providing clean energy for our customers.
Our efforts have already reduced considerable future environmental costs to our customers and risk to shareholders. In 2013, we advanced environmental initiatives and also opposed some regulations when necessary to protect the interests of our customers, communities and shareholders. We regularly engage in discussions with policymakers, regulators, energy providers, the environmental community and customers regarding environmental issues, with the following principles in mind:
- Xcel Energy strives to comply with all environmental regulations. We have developed and are continuously improving our environmental management system to meet the compliance challenges of the next decade, including the growing complexity of environmental regulation.
- On behalf of our customers, we have made substantial investments in environmental improvement and clean energy leadership. We will continue to look for ways to proactively reduce environmental risk. Proactive efforts can offer significant value in the form of lower long-term cost to customers. Xcel Energy’s proactive emissions reduction projects, such as Clean Air-Clean Jobs and the Minnesota Metro Emissions Reduction Project, have allowed us to avoid the cost and disruption seen in other parts of the industry.
- We believe that environmental and climate policy should appropriately recognize the environmental benefits of our proactive efforts.
- Though a legislated national policy to address climate change is not currently under federal debate, EPA is regulating greenhouse gases and plans to expand its greenhouse gas regulation. Climate legislation also remains a long-term possibility. Accordingly, we are monitoring and managing the risk of climate policy in all its potential forms.
- Environmental and climate policy should drive forward, not hinder, the development of new, cost-effective clean energy technologies, and Xcel Energy is committed to supporting these efforts. As the nation’s No. 1 wind provider and a leader in solar and energy efficiency programs, we are optimistic about the future opportunities that clean energy technologies present.
- Cascading environmental mandates, such as stack-by-stack or emission-specific compliance requirements, should be coordinated on a system-wide basis to maximize cost-effectiveness and environmental benefits.
- Regulators should not lose sight of the tremendous value of flexibility, such as alternative compliance options and market-based environmental programs, in implementation of rules. Flexibility yields real cost benefits to customers while maintaining the environmental benefits.
Policy and Regulatory Developments for 2013
In 2013, the EPA and state environmental regulators continued to develop a broad set of environmental rules covering climate, air quality, water quality and coal ash that will likely require owners of many U.S. power plants to modify operations and/or install new environmental controls in the coming years. Meanwhile continued low natural gas prices have provided utilities with more cost-effective, low-emission generation options. Many utilities are considering retiring some of their aging coal plants and replacing them with gas-fueled generation rather than adding controls to meet new regulations. Key policy, regulatory and legal developments in 2013 include:
- Just as in 2012, no major federal environmental or climate legislation passed during 2013.
- Presidential directive on GHGs. In a June 25, 2013, address President Obama identified climate policy as a second-term priority, released a national climate action plan and repeated an earlier stated goal to reduce greenhouse gas (GHG) emissions 17 percent below 2005 levels by 2020. In a simultaneous Presidential Memorandum, Obama directed the EPA to use its authority under the Clean Air Act to issue GHG regulations for new power plants by September 2013, and set a schedule for regulations for existing power plants: a draft rule by June 2014, final rule by June 2015 and state implementation plans by June 2016.
- GHGs from new power plants. The EPA in January 2014 released a proposed rule setting maximum emission rates for new coal and natural gas power plants, replacing an earlier (April 2012) version of the same rule. The rule effectively bans the construction of new coal power plants unless they capture and sequester around half their CO2 emissions. While Xcel Energy is not planning any new coal plants, fuel diversity in our generation portfolio has been key to our three-prong strategy of environmental leadership, reliable electricity and competitive rates, so we oppose the requirement for expensive and unproven carbon capture and storage for new coal plants.
- GHGs from existing power plants. The EPA began a series of meetings with state agencies, utilities and other stakeholders regarding GHG rules for existing power plants, and many of our states engaged their power sector and environmental stakeholders to develop input to the EPA. Xcel Energy has been actively engaged with the EPA and our states to communicate our view on key elements of the expected rule, focusing on legal defensibility, flexibility to demonstrate compliance through state clean energy programs including renewable energy, energy efficiency and targeted fleet modernization initiatives, and credit for GHG reductions achieved over the last 10 years.
- Legal challenge on GHG permitting. The U.S. Supreme Court agreed to review whether the EPA permissibly determined that its vehicle efficiency standards triggered the requirement to regulate GHG emissions from stationary sources through the Clean Air Act's permitting provisions. A court decision is expected by June 2014 but may not significantly affect EPA’s adoption of GHG performance standards for new and existing power plants.
- Interstate air quality. The 2011 Cross State Air Pollution Rule (CSAPR), vacated in August 2012 by the Washington, DC Circuit Court, would have addressed long-range transport of fine particulate matter and ozone by requiring reductions in sulfur dioxide (SO2) and nitrogen oxides (NOx) from power plants in the eastern United States. The EPA appealed the decision to the U.S. Supreme Court, which reversed and remanded the case back to the D.C. Circuit. Because the D.C. Circuit overturned the CSAPR on two over-arching issues, there are many other issues the D.C. Circuit did not rule on that will now need to be considered on remand. It is not yet known what requirements may be imposed in the future or their timing because it is not yet known how the litigation over the remaining issues will be resolved. Xcel Energy opposed the inclusion of Texas in the particulate matter program under CSPAR because of the potential impact on our Southwestern Public Service customers. The Clean Air Interstate Rule (CAIR) continues to remain in effect, requiring Xcel Energy to hold SO2 and NOx emission allowances for our Texas and Wisconsin plants.
- Regional haze and visibility.
- The Clean Air Act may require power plants to install emission controls to reduce alleged haze and visibility impacts of their SO2, NOx and particulate matter emissions on national parks and wilderness areas. The EPA approved Colorado’s state implementation plan (SIP) in 2012, which utilized changes the company proposed to implement the Clean Air-Clean Jobs Act and emission controls at Comanche. In November 2013 the Colorado Court of Appeals upheld a lower court’s dismissal of the Colorado Mining Association’s challenge to the Colorado SIP. In March 2013, WildEarth Guardians petitioned the U.S. Court of Appeals for the 10th Circuit to review EPA’s approval of the Colorado SIP, challenging Colorado’s best available retrofit technology (BART) determination for Comanche.
- The Minnesota Pollution Control Agency (MPCA) issued Minnesota’s regional haze SIP, which identifies as BART the installation of NOx combustion controls and SO2 scrubber upgrades at our Sherburne County plant (Sherco). The EPA has approved the SIP and accepted its emission limits for Sherco. Several environmental groups sued EPA, asking the agency to require additional NOx emission reductions at Sherco to improve visibility in national parks and wilderness areas of northern Minnesota. Separate litigation under the Reasonably Attributable Visibility Impairment provisions of the Clean Air Act alleges visibility impairment in Voyageurs and Isle Royale National Parks attributable to Sherco Units 1 and 2. The outcome of either lawsuit could oblige NSP-Minnesota to consider selective catalytic reduction (SCR) controls for the units.
- Particulate matter and ozone. The EPA in December 2012 lowered the air quality standards for PM2.5 to 12 micrograms per cubic meter (µg/m3) primary annual, 15 µg/m3 secondary annual, 35 µg/m3 primary and secondary 24-hour, and for PM10 to 150 µg/m3 primary and secondary 24-hour. Current monitored particulate concentrations in our states are below the new annual standard, but if any of our states should fall into non-attainment, additional controls for SO2 and NOx (precursors to fine particulate matter) could be required at our plants. The EPA is also in the process of revising the national air quality standard for ground-level ozone and may select a new 8-hour standard toward the low end of the 60-70 parts per billion range; if so, ozone levels in our states could exceed the new standard, which would increase pressure on power plants and other sources to reduce NOx emissions through SCR or other measures.
- Water quality. The EPA in June 2013 published proposed Effluent Limitations Guidelines for power plants that use coal, natural gas, oil or nuclear materials as fuel and discharge treated effluent to surface waters, as well as utility-owned landfills that receive coal combustion residuals. The proposal includes four potential approaches, differing in the number of waste streams covered, size of the units controlled and stringency of controls. More stringent effluent limitation guidelines may go into effect with the final rule (anticipated September 2015). Under the current proposed rule, facilities would need to comply as soon as possible after July 2017 but no later than July 2022.
- Coal combustion residuals. The EPA is developing new rules for coal ash under the Resource Conservation and Recovery Act (RCRA). A key issue is whether coal ash will be regulated as a hazardous waste or continue to be treated as a non-hazardous waste. If the EPA treats coal ash as a hazardous waste, significant changes to coal ash handling practices and emission control equipment could be required at our power plants. Under a consent decree with environmental groups, the EPA is required to reach a decision by December 2014.
- Cooling water intake. The EPA has been developing rules for cooling water intake structures under section 316(b). Cooling water intake structures that previously were required to comply with a site-specific Best Professional Judgment determination by our states likely now face more stringent regulations requiring additional equipment to protect aquatic biota. The final rule was issued in May 2014 (just prior to publication of this report.)