Federal Court Ruling On Mercury Revives Gas-Electric Worries

June 2014, Vol. 69, No. 6

A federal court decision allowing the Environmental Protection Agency (EPA) to move forward with a rule limiting mercury emissions from power plants has heightened concerns in some quarters about interstate pipeline infrastructure inadequacy.

In mid-April, the U.S. Court of Appeals for the District of Columbia said 1,400 coal and oil-fired electric generating units (EGUs) at 600 power plants would have to meet air emissions standards finalized in 2011. The plants have up to four years to comply with necessary reductions in emissions of mercury and other air toxics, but the 2011 final rule had been held in abeyance because of a legal challenge.

In September 2013, the EPA issued a proposed rule which, if finalized, forces newly-built power plants to meet stricter standards on emissions of carbon dioxide, a leading greenhouse gas.

Taken together, these two EPA actions have persuaded some electric utilities to close coal- and oil-fired power plants, leading some officials at agencies such as the Federal Energy Regulatory Commission to worry that natural gas pipelines will have a hard time supplying replacement power plants using natural gas, especially in tough weather, such as last winter.

American Electric Power has said it will retire almost a quarter of its coal-fueled generating units in the next 14 months or about ¼ of its capacity. For PJM, 13,000 megawatts of additional capacity will be retiring by mid-2015. "Unless the market structure changes, the capacity replacements for these assets may not provide the same level of reliability we have experienced historically," says Nicholas Akins, chairman/president/CEO of AEP. PJM is the Regional Transmission Organization (RTO) serving all or parts of the states of Illinois, Indiana, Michigan, Ohio, Kentucky, Tennessee, West Virginia, North Carolina, Virginia, Maryland, Delaware, Pennsylvania, New Jersey and the District of Columbia. AEP, Dominion and Exelon, among others, serve electricity customers within PJM, just to name a few.

To the extent that EPA regulations drive some coal-fired generation plants out of business, pressure will be ramped up on natural gas pipelines to serve the gas-fired plants that take their place, if in fact gas-fired plants do indeed replace the coal-fired plants. "Natural gas has proven to be the fuel of choice for a new generation developing in our region," states Michael Kormos, executive vice president of operations for PJM Interconnection. "Over 64 percent of new resources in our queue are proposed gas-fired generation."