Court faults EPA for brushing off grid concerns

OREANDA-NEWS. A federal court has rebuked the US Environmental Protection Agency (EPA) for not considering the grid reliability effects of a rule that allowed backup generators to run up to 100 hours a year without installing emission controls.

The DC Circuit Court of Appeals in a ruling today faulted EPA for using reliability as the reason for the pollution control exemption, but then arguing it was beyond its authority to address other related concerns over how the rule would affect the functioning of regional power markets.

EPA cannot "simultaneously rely on reliability concerns and then brush off comments about those concerns as beyond its purview," the court said in a ruling that remanded the exemption back to the agency for further review.

Delaware had challenged the exemption over concerns that it would worsen air quality. Power plant owners also sued, arguing the exemption gave backup generators an unfair advantage in power markets. The merchant generator Calpine said backup generators were not actually needed to protect reliability because the capacity markets by design would procure other resources.

The DC Circuit said EPA did not address these concerns and "essentially said it was not its job to worry" about reliability concerns. The ruling also faulted the agency for not better consulting with the Federal Energy Regulatory Commission (FERC) on the reliability effects of its rule. EPA said it is reviewing the ruling.

The ruling could have implications beyond backup generators. Critics of EPA's Clean Power Plan have seized on the court ruling to support arguments that the agency is not sufficiently addressing reliability concerns.

"EPA was chastised in this case by the court for failing to coordinate with real reliability experts. They are up to their old tricks again in the Clean Power Plan," Electric Reliability Coordinating Council director Scott Segal told Argus, referring to concerns that the agency did not sufficiently seek FERC's input in the proposed version of the rule.

But others say the decision marks how much EPA has changed its approach to dealing with reliability concerns and engaging with industry. The agency has received high marks for its outreach effort as it developed the Clean Power Plan and has ramped up efforts to consult with FERC on reliability concerns.

"There was nothing at all remotely like the process that has been going on at EPA with FERC on the Clean Power Plan, and what went or rather did not go on with this 100-hour limit," Ballard Spahr attorney Brendan Collins told Argus.

Spahr said he expects EPA would end up dropping the 100-hour exemption in the backup generator rule, but said that could create issues for demand response resources that have capacity obligations for the next three years. The court told EPA it could ask to delay the effectiveness of the ruling while it develops an interim approach.