Chairman of the Board, President and Chief Executive Officer
Public Service Company of New Mexico
Senate Environment and Public Works Committee
Good morning Chairman Jeffords, Senator Smith, and distinguished members of the Committee on Environment and Public Works. Thank you for inviting me here today. My name is Jeff Sterba, and I am Chairman of the Board, President, and Chief Executive Officer of the Public Service Company of New Mexico. PNM is an investor owned utility primarily engaged in the generation, transmission, distribution, and sale of electricity and in the transmission, distribution, and sale of natural gas within the State of New Mexico. Our electric generation is a mix of natural gas, coal, and nuclear. PNM’s San Juan Generating Station, a coal-fired plant, is an ISO 14001 certified facility and is a charter member of EPA’s Performance Track Program which recognizes a commitment to environmental excellence at the plant.
I appreciate this opportunity to address the Committee on behalf of PNM and the Edison Electric Institute (EEI). Today, I will provide the Committee with PNM’s views on multi-emission reduction proposals, emphasizing the need to consider the differences in air quality issues and power plant emissions in the West. PNM supports a streamlined power plant emission reduction program that improves air quality, provides the industry with regulatory certainty, and eliminates duplicative and ineffective regulatory programs. We believe that multi-emission reduction legislation is an opportunity to address the myriad of duplicative and ineffective environmental regulations that in some instances prevent us from even improving the efficiency of our power plants. Consequently, we support legislation that requires utilities to reduce emissions of SO2, NOx and mercury, and provides the operational certainty we need to meet growing demand for electricity.
There are several reasons, however, why PNM cannot support a uniform, “one size fits all” emission reduction program as proposed in S.556. First, and most importantly, the emission reduction levels mandated in S.556 appear to be a policy response to environmental conditions that simply do not exist in our region of the country. Second, S.556 would reduce fuel diversity and operational flexibility, thereby jeopardizing system reliability and our ability to provide the power needed for continued regional (and national) economic growth. Third, S.556 would impose all of these costly requirements on top of all of the existing Clean Air Act authorities. It would not grant industry any relief from the overlapping, burdensome requirements of the Clean Air Act or provide industry with the flexibility and certainty that are necessary to meet the country’s growing energy demands.
The main air quality challenge in the West related to power plant emissions is visibility impairment in National Parks and Wilderness Areas. There is not a single non-attainment of National Ambient Air Quality Standards for ozone or fine particles (PM-2.5) resulting from power plant emissions. The pollutant of interest for visibility protection is SO2. Western power plants are already well controlled for SO2 with emission rates much lower than the emission rates from power plants in other regions of the country. Figure 1 indicates the SO2 emission rate in the West and the national SO2 emission rate.
Additionally, in response to the recently promulgated regional haze rule, new regional SO2 emission limits have been developed as part of a collaborative, regional, stakeholder-based consensus process known as the Western Regional Air Partnership (WRAP). The WRAP, consisting of state air regulators, environmental groups, federal land managers, EPA, industrial sources and power companies, developed SO2 emission limits that responded to real-time air quality conditions we face in the western U.S. It is PNM’s view that any federal multi-emission reduction proposal should embrace the WRAP’s work with respect to SO2 as opposed to overlaying additional reductions to respond to issues in other regions of the country.
With respect to NOX, again the emissions from Western power plants are much lower than emissions from other power plants. Figure 2 indicates the NOx emission rate in the West and the national NOx emission rates. What is more, according to work done by the Grand Canyon Visibility Transport Committee (GCVTC), NOx emissions from power plants have very little impact on visibility impairment in the western National Parks and Wilderness Areas. Finally, with the exception of California--which does not have a single coal-fired power plant--the western states have very few areas that are in non-attainment status for ozone. Ozone non-attainment areas in the country are shown in Figure 3. In western non-attainment areas, the non-attainment results from transportation sources and not power plant emissions. Simply put, the ozone non-attainment issues in other parts of the country that are a major factor justifying further NOx emission reductions from power plants are not present in the West. PNM strongly believes that electricity consumers in the West should not be required to pay for the installation of expensive retrofit controls to reduce NOX emissions that would result in no meaningful environmental benefit.
Concerning mercury, it is important to note first that there are no demonstrated health problems in the West associated with mercury emissions. Western coal-fired power plants burn primarily sub-bituminous coal that has a lower mercury content than coal burned in other regions. In addition, mercury emissions from western sub-bituminous coal are extremely low to begin with, and are primarily elemental mercury as opposed to particle-bound mercury or ionized mercury. Figure 4 shows mercury emissions nationwide and in the West. In considering mercury control requirements, please keep in mind that while scrubbers are effective in controlling some forms of mercury, they are not effective in controlling elemental mercury. Thus, it cannot be assumed that mercury emission reductions achieved by the application of technology to eastern (bituminous) coal also will be achieved by use of the same technology on western (sub-bituminous) coal.
The West does not differ from other parts of the country with respect to carbon dioxide emissions in the same way that it does with respect to SO2, NOx and mercury. However, since 1990, the West has enjoyed substantial growth, most of which has been supported by increased generation of electricity from fossil fuel plants. Similarly high rates of growth in demand for electricity are projected for the west looking out to 2010. Thus, requirements to reduce Western greenhouse gas emissions to levels existing a decade or more ago will be particularly punitive for the West.
PNM generally supports multi-emission legislation that will set a cap and allow trading beneath this cap. Our experience has shown that this type of cap and trade system encourages innovation and allows companies maximum flexibility in achieving environmental goals cost-effectively. In a cap and trade system, allocations of emission allowances are critical. It is not enough to propose caps and let the allocations be determined though the political process. It is our view that multi-emission legislation needs to prospectively define how emission allowances are to be allocated.
Concerning the individual pollutants, western considerations can be taken into account by:
1. Building on the recommendations of the successful WRAP stakeholder process for SO2 reductions. Legislation should respect both the magnitude and the timing of the WRAP SO2 emission reductions. We define this as the West receiving SO2 allocations in the amount of, and timed to correspond with, the WRAP’s SO2 milestones.
2. Insuring the costs associated with NOx emission reduction requirements are reasonably proportional to the potential benefits from those controls. An appropriate NOx emission level should be achievable with aggressive combustion controls, and should not require widespread deployment of expensive SCR technology. The schedule of reductions should be synchronized with the WRAP schedule for NOx reductions when the schedule is developed.
3. Developing a mercury control program that accounts for the difficulty in reducing elemental mercury emissions with presently available control technologies and allows time for the development and demonstration of new technologies.
4. Eliminating the overlapping and burdensome programs of the existing Clean Air Act such as NSR.
With respect to carbon dioxide, PNM supports a voluntary program to minimize greenhouse gas emissions as part of a multi-pollutant bill. This program should build on the successes of the Energy Policy Act section 1605 reporting provisions, but should be strengthened and made even more credible.
In the longer term, more steps may be needed to move the nation toward lower levels of greenhouse gases. The following principles should guide any such future steps :
n all sectors of the economy that produce greenhouse gas emissions, including the utility sector, should be covered;
n reasonable time to make emission reductions should be provided , so as not to disrupt electricity supply and harm our economy, rather than basing emission caps on some arbitrary past date;
n all varieties of flexibility mechanisms (such as trading, offsets, international projects, and the like) should be allowed in order to broaden compliance options and thus reduce costs; and
n broader technology research, development, and deployment that lowers or offsets greenhouse gas emissions must be pursued and factored into efforts to minimize greenhouse gas emissions
In a little more than five years from now, January 1, 2007, S. 556 would require 75% reductions of SO2 and NOx emissions from power plants. Carbon dioxide emissions from power plants could be no higher than levels in 1990. Finally, S. 556 would require a 90 percent reduction in mercury emissions at each power plant, regardless of a plant’s existing level of mercury emissions. These requirements are simply “too much, too soon.” The costs would be extremely high. In some cases, (for example, mercury control requirements) it would be impossible for PNM’s plants to comply with the bill’s requirements given the present and near term state of demonstrated control technology.
S.556 also fails to recognize the fundamental distinctions between the West and the rest of the country with respect to current emission levels in the West and air quality issues in the West.
For these reasons, PNM cannot support S. 556.
As a participant in the WRAP, PNM firmly believes that it is possible, through collaboration and hard work, to develop a plan for emission reductions that meets both air quality and energy needs. PNM pledges to work with this Committee to develop multi-pollutant legislation that also can meet our objectives of a cleaner environment, and reliable, affordable electricity supplies.