The EPA's Reliability Cover-Up--Why did the agency erase its own doubts about the U.S. electrical grid?

The EPA's Reliability Cover-Up

Why did the agency erase its own doubts about the U.S. electrical grid?

Some 830,000 Connecticut customers are only now having their power restored after a snowstorm knocked out the state's grid last month—but the Environmental Protection Agency continues to claim that its regulatory agenda won't degrade U.S. electric reliability. The reality is that the EPA's own staffers are—or used to be—worried, and their political superiors have erased the warnings.

In recent months, concerns have been growing that the agency's torrent of new air-pollution rules will lead to blackouts or to the rolling outages that crisscrossed California and Arizona in September. Yet the Federal Energy Regulatory Commission has continued its "who's on first" routine to avoid its mandate to protect electric grid reliability, while the EPA is trying to rush out a new utility rule that on paper will reduce mercury and other emissions but is really designed to close coal-fired power plants.

Congressional and industry investigators have combed the EPA's rule-making docket that contains hundreds of thousands pages of electronic documents. Many of these files are for some reason not "smart" PDFs (i.e., they're unsearchable). But lo and behold, they uncovered one 934-page EPA draft that was circulated within the Administration sometime before the utility rule was formally proposed.

In a "What are the energy impacts?" section, the EPA concedes that it "is aware that concerns have been expressed by some, even in advance of this proposed rule, that this regulation may detrimentally impact the reliability of the electric grid." The agency admits that what it calls "sources integral to reliable operation" may be forced to shut down—those would be the coal-fired plants the EPA is targeting—and that these retirements "could result in localized reliability problems." The EPA insists that it knows how to balance "both clean air and electric reliability," but all along in public it has denied that reliability is in any way at risk.

Bloomberg News

The draft document also "strongly encourages" the people who run the grid, like regional transmission operators and state regulators, to start planning "as soon as possible" for "potential retired units." The EPA recommends "transmission upgrades, targeted demand side management strategies, and construction of new generation." This helps to explain why even the EPA admits the utility rule is the most expensive it has ever proposed.

But here's the kicker: This reliability section was gone when the EPA released its utility rule proposal in May 2011. Why did it vanish? Where did it go?

This matters because the draft report contradicts EPA leaders who have publicly portrayed anyone worried about reliability as an industry shill. More importantly, as a technical and legal matter, issues that are excluded from the Federal Register mean that the public is denied the opportunity to meaningfully comment on them.

For more than a year the EPA has claimed that it doesn't need more time to finalize the rule, only to reverse itself and extend the deadline by 30 days to mid-December. But that still leaves barely any time for the White House regulatory office to review the utility rule, even as the EPA continues to rewrite major elements that supposedly resolve the reliability question but that no one outside of EPA has seen.

The rule hasn't been submitted, while White House regulatory flyspecking usually takes 90 days.
We hear the EPA's overreach has created more than a few internal OMB critics while generating an internal Administration debate on whether to cashier or delay the utility rule, like the ozone rule earlier this year. Such adult supervision is long overdue, especially because EPA continues to stonewall.

On Wednesday Senators Lisa Murkowski and James Inhofe sent another letter to EPA chief Lisa Jackson, after Ms. Jackson refused to answer letters of August 3 and 16 and September 7 about reliability. The Senators modestly ask the EPA not to "impair electric reliability and affordability," though they also ask "why and on what legal basis" the agency buried its own reliability announcement.

All of this may lack the allure of Herman Cain's travails, but, with Congress deadlocked, these regulatory battles are the biggest economic story in town. The EPA's campaign risks blackouts and will cause consumer rate increases and a load of pointless new business costs that deter hiring. At least some people are finally starting to notice.

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