Kristi E. Swartz, E&E reporter

Regulators in the Southeast are known for deferring to the interests of the major utilities, but U.S. EPA's proposed rules to stem carbon pollution could force utility commissioners to make unpopular decisions around rates, fuel choice, generation mix and efficiency.

The EPA rules and emissions targets are tailored for each state (Greenwire, June 2). Some Southern states like Georgia and Tennessee already have made the transition away from coal to natural gas and have adopted renewables more willingly than their neighbors in Alabama, for example. Mississippi has strong energy efficiency programs, and North Carolina has had a renewable portfolio standard in place for several years.

The region is also the only one where several states are building or plan to build new nuclear reactors, which are emission free.

But coal was the dominant method for keeping the lights on in the South for decades, and regulators argue that moving away from the fuel even more means utilities will have less diversity, and consumers will face higher prices.

"You've got President Obama and his EPA receiving a fair amount of accolades for coming up with this rule, and I'm stuck here in Georgia handing out the bill," said Georgia Public Service Commission Chairman Chuck Eaton.

Georgia is one of the few states in the Southeast with a diverse electricity mix that includes nuclear power and doesn't draw more than half of its fuel from any one source. The state also will get a greater source of power from solar over the next couple of years (EnergyWire, May 27).

More than a dozen of Georgia's coal- and oil-fired plants already are slated to be closed as part of parent Southern Co.'s plan to take 20,000 megawatts of coal off the grid to comply with previous environmental regulations.

Even with those efforts, yesterday's proposed rule will make it harder for utility regulators to control the price of what customers pay if coal continues to be less of an option, another commissioner said.

"Even if we have made significant gains (to cut back on coal use), the problem is that it determines what economic dispatch will be made by the utility," Georgia utility regulator Stan Wise toldEnergyWire. "Instead of burning coal on a hot summer day, they are going to be forced to use other resources that may not be the least-cost option."

Some regulators in other states deferred comment to their environmental protection agencies but agreed that it was the PSC that would have to sign off on any plant closures, changes to a utility's generation mix and whether customers would pay for those costs.

Electric companies said they are continuing to evaluate the proposal, which requires them to meet targets that would result in a 30 percent CO2 reduction nationwide compared with 2005 levels by 2030.

Big actors

The South is the home to two of the nation's largest utilities, Duke Energy Corp. and Southern Co., which have taken steps to cut carbon emissions. Duke has reduced its emissions 20 percent based on 2005 levels, the company said. Southern has cut its carbon emission levels by 26 percent based on that level, CEO Tom Fanning said at the company's annual meeting last week.

The 2005 baseline "is going to really ease the pain in the South," said Marilyn Brown, a professor at Georgia Tech's school of public policy and a board member of the Tennessee Valley Authority.

Southern is now the nation's third-largest consumer of natural gas, but shaking its historic image as a coal utility will take a while, despite the company's efforts to promote its uses of gas, nuclear and renewables (EnergyWire, May 29).

Southern's smaller utility subsidiaries, Gulf Power and Mississippi Power, now get more than 60 percent of their electricity from natural gas. Alabama Power still gets slightly more than half of its electricity from coal, however.

"We think this is a really important issue," Fanning told shareholders after being questioned about Southern's actions to reduce carbon emissions. Southern's words aren't rhetoric, he said.

At the meeting, Fanning touted Southern's involvement in the National Carbon Capture Research Center. The company's Mississippi Power subsidiary also is building a next-generation coal plant in Kemper County. The project has made news because of cost overruns, but Southern is hoping to expand the project's coal-gasification technology (EnergyWire, April 11).

But two of Southern's traditional coal-fired plants routinely stand out as well. Georgia Power's Plant Scherer and Alabama Power's Plant Miller rank No. 1 and 2 on the list of CO2-emitting power plants in the United States.

Plant Scherer routinely ranks at the top of the list because of its size.

Efficiency lags

States can use energy efficiency to help meet their targets, but this is one area where the Southeast falls short.

Collectively, the states have spent half of what the others have on energy-efficient programs, said Brown at Georgia Tech. Where some states have strong energy efficient programs, those actions may be only pilot programs in the South, she said.

"The South is one of the most energy inefficient regions in the country," Brown said.

There's been little incentive for utilities to invest in energy-efficiency programs in the Southeast because electricity prices have been so cheap, Brown said. She's hoping that changes now that energy efficiency has more value.

Brown and other environmental advocates point to TVA as a model for cutting emissions.

TVA's carbon emission levels already are more than 17 percent below what they were in 2005, according to the utility's figures. It is on track to reduce CO2 levels to 40 percent of what they were in 2005 by 2020, company officials say (EnergyWire, April 29).

TVA is in the middle of hashing out a long-term energy plan, which includes additional carbon reductions. As a federally owned utility, TVA must follow a mission -- energy, environment and economic development -- which includes taking care of the natural resources and communities in the seven states it serves.

In a conference call with reporters, TVA CEO Bill Johnson said the utility has been lucky to find a "sweet spot" in lower-emitting fuels that are also less expensive. It will be a challenge to continue to do that going forward.

"We're going to have to work harder and be smarter," he said. "Over the last five years, we've done a lot of work in this space, we still have very competitive rates, still attract business and industry to this region. We know what that sweet spot is, and we're going to have to work harder to get there."

Copyright 2014, Environment and Energy Publishing LLC. Reprinted with permission.