I participated in a Power Magazine legal issues conference on December 7th in Las Vegas entitled, “Navigating Legal Implications of Power Industry Regulations.”  My presentation focused on the “nuts and bolts” of  preparing a State Plan under section 111(d) of the CAA and on what utilities should be doing with respect to State Plans while the litigation is pending.

In an opening keynote address, Avi Grabow, EPA’s General Counsel, gave an agency perspective on many of the EPA rules the utility industry is facing, including the CWA section 316(b) rule, the coal combustion rule, and the Clean Power Plan (“CPP”).  Robert Meyers, of Crowell and Moring, gave a very interesting luncheon keynote address about what to expect in 2016 and beyond when a new administration is in place.  Allison Wood, of Hunton and Williams, gave a nice review of the status of the CPP litigation.  As noted, my presentation focused on the “nuts and bolts” of  preparing a State Plan under section 111(d) of the CAA and on what utilities should be doing with respect to State Plans while the litigation is pending.  As a CAA regulation, the State Plan is expected to be developed by the state’s environmental regulators.

Because the CPP affects the way states regulate energy, however, other agency stakeholders (such as legislators, utility commissioners, and public counsels) and other policy issues (such as fuel diversity, consumer costs, and cost recovery mechanisms) will play significant roles in final decision-making.  To show the potential impact of these different constituencies and issues on how State Plans might be affected, I contrasted two states, Florida, which is traditionally regulated state that is mostly on its own grid, and Maryland, which is a restructured state that is part of the PJM Regional Transmission Organization and is a member of the Regional Greenhouse Gas Initiative, and discussed some of the difficulties and issues each state faced in deciding how to approach the CPP.   Florida, for example, currently generates about 65% of its energy using natural gas.  Fuel diversity and cost and reliability impacts, therefore, are significant concerns for Florida, whereas Maryland, as part of a large RTO and member of RGGI, might be more readily positioned to conform to the CPP requirements.

Regardless of any utility’s views of the CPP, it is important to become involved now in attempting to influence whatever a state is planning to do (or not to do).  Litigation of the rule is pretty  certain to go all the way to the U.S. Supreme Court, so it will take a long time to reach a conclusion.  The U.S. Court of Appeals for the D.C. Circuit, which is reviewing the rule challenges now, might issue a stay, but that is far from certain, especially in light of changes EPA made in the final rule that set a later initial compliance deadline and gave the states the ability to extend their deadlines until 2018 to submit a State Plan.  Some states have adopted or are considering the adoption of legislation that would preclude a state agency from developing a plan.  And the EPA’s related proposed rulemaking to craft a Federal Implementation Plan also includes proposals for model State Plans on which utilities should consider filing comments by the January 21, 2016, filing deadline.  State plans that are based on the EPA model will be presumptively approvable and those that deviate will face headwinds.  So this rulemaking is creating the framework for the state plans.

Hence, utilities should be focused now on the potential issues in each state in which they operate.  While the litigation might bring changes, utilities should be preparing to influence the outcomes of State Plans now.