PA Clean Power Climate Plan Comments: Exelon Corporation

DEP held its first listening session on EPA’s Clean Power Climate Plan requirements Tuesday in Harrisburg and heard from a variety of groups, including these comments from the Exelon Corporation--

Good evening.  My name is Thom Chiomento, Director of State Government Affairs here in Pennsylvania for Exelon Corporation.  Exelon has operations and business activities in 47 states, the District of Columbia and Canada.

Our company is one of the largest competitive U.S. power suppliers, with approximately 35 gigawatts of owned capacity comprising one of the nation’s cleanest and lowest-cost power generation fleets.  

We employ approximately 6,000 Pennsylvanians, and we own and operate three of Pennsylvania’s five nuclear power stations:  Three Mile Island right here in Dauphin County, Peach Bottom Atomic Power Station in York County, and Limerick Generating Station in Montgomery County.  

We also own a significant portfolio of wind, hydropower, solar, gas, and oil-fired generation here in the Commonwealth and nationwide.

Exelon appreciates the Department’s efforts to seek public input concerning Pennsylvania’s implementation of EPA’s Clean Power Plan, and we offer the following comments:  

The Importance of Nuclear Power to a Lower-Carbon Fleet

Nuclear power is an often-overlooked lynchpin of the transition to a lower-carbon electricity generating fleet.  Environmentalists and scientists around the world have concluded that the necessary emission reductions cannot be achieved without the continued operation of nuclear power.  

Pennsylvania’s five nuclear power plants generate 34 percent of Pennsylvania’s electricity, and 93 percent of Pennsylvania’s zero-carbon electricity.  That equates to nearly 35 million tons of carbon emissions avoided through this reliable source of baseload generation.   

Under the CPP, Pennsylvania must reduce CO2 emissions by 10 million tons from 2012 levels by 2022 and by nearly 26 million tons by 2030, so the loss of any nuclear plant here would nearly double the compliance obligation.

Nuclear Power is Exceptionally Reliable

As PJM has noted, nuclear plants provide unrivaled performance during all weather conditions.  

Exelon Nuclear’s 24 units across five states, including Pennsylvania, achieved an average capacity factor of 94.3 percent in 2014.  That means that they are available 94 percent of the time.  

While many plants struggle to run during extreme heat or cold, when their power is needed most, our nuclear plants are virtually always on.  For example, during the peak of the polar vortex in January 2014, the nuclear fleet represented only three percent of the forced outages experienced across PJM.   

System operators need reliable, baseload units to maintain system reliability.  For that reason, PJM’s CEO has stated that it is “critical that the nuclear fleet in our region remains economically viable,” and that retirement of the nuclear fleet in PJM is “unthinkable.”

Economic Threats to the Nuclear Fleet

Despite their environmental, reliability, and economic value, a number of existing plants face premature retirement long before the end of their design life.  Owners of six of the nation’s 104 nuclear units have retired units or announced that they will soon retire units.  

Other owners, including Exelon, have stated that they will continue to watch market developments and evaluate plant economics to inform decisions about the future operations of nuclear stations.  

There are a number of factors causing the economic challenges facing many nuclear plants, but chief among them is the absence of market mechanisms to value the carbon-free nature of nuclear power or to require carbon-emitting generation to internalize that social cost.  

We do not expect the factors driving these economics to change in the near-term absent EPA’s rulemaking.  This was highlighted in the recent failure of TMI to clear in PJM’s 2018/19 capacity auction.

Turning to EPA’s Final Rule

Implementation of the Clean Power Plan implicitly relies on the continuing operation of the existing nuclear fleet in order to achieve CO2 reductions while maintaining reliability and affordability.  

Thus, we encourage PA DEP to implement a mass-based compliance program that includes new and existing fossil units in order to send the needed market signals to preserve existing nuclear and other zero-carbon generation now and once compliance begins in 2022.  

Mass-based compliance programs are superior for a number of reasons.

First, mass-based programs are proven and well understood.  For example, the power sector has utilized a mass-based program to control acid rain pollutants since 1995.  

Since then, many other environmental programs have utilized similar methods to cost-effectively control pollution including the NOx Budget Program, CAIR, and CSAPR.  

Mass-based programs promote reliability through their ease of use and clear price signal – they naturally align with the least-cost dispatch principle of electricity markets, while other approaches may rely on artificial decisions that could impair reliability.  

As you know, the Regional Greenhouse Gas Initiative or RGGI has succeeded in reducing emissions in nine northeast states using a mass-based program since 2009.

Second, mass-based compliance programs will achieve the states’ many objectives and obligations under the Clean Power Plan – they achieve actual, easily verified CO¬2 reductions; they minimize total compliance costs, including ratepayer impacts; they preserve electric reliability; they are technology- and fuel-neutral; and they simplify compliance and reduce administrative burdens.

Third, mass-based programs may be single-state or allow trading between states.  States do not need formal agreements with other states to allow interstate trading; in the final rule, EPA has removed this barrier.  

Thus, state implementation plans can be as simple as requiring the submittal of one allowance for each ton of emissions, with no requirement that the allowance be obtained in-state.  Pennsylvania would still retain control over allowance allocation and/or auction.  

Last but not least, mass-based programs minimize costs to tax- and ratepayers.  Mass-based programs are an efficient way to translate an environmental goal (e.g., level of emissions, usually expressed in tons) into a price signal easily understood by the market (e.g., an allowance price that is easily incorporated into generators’ variable costs just like any other cost of operation).  

As a result, mass-based price signals are simple and clear. Allowances are auctioned or sold in a transparent market, with a single point of cost-purchase of allowance. By contrast, rate-based programs require a multitude of often-opaque costs.  

In conclusion, Exelon strongly encourages Pennsylvania DEP to recognize the important environmental, reliability, and economic benefits of existing nuclear plants and the carbon-free, reliable generation they provide to Pennsylvania businesses and families.  The best way to do this is to implement a mass-based compliance program for compliance with the Clean Power Plan.

Thank you for considering Exelon’s comments on Pennsylvania’s implementation of EPA’s Clean Power Plan.  I would be glad to address any questions that you may have.

A copy of the complete testimony is available online.

For more information and a schedule of the remaining sessions, visit DEP’s Climate Change webpage. Comments on the Clean Power Plan can be submitted online.  Click Here to see comments submitted by others so far.

[Note: Crisci Associates represents Exelon in Pennsylvania.]

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