A Message From Our President

October 2010

Government Regulation is Threatening Electrical Power Costs, Stability of the Grid, and Jobs in the Power Industry

Since the year 2008 the Environmental Protection Agency (EPA) has accelerated changes to existing rules and proposed new rules for various air emissions, ash disposal, and water-cooling requirements. These new rules will affect automobiles, power plants, and various other industrial facilities over the next few years. Unfortunately, at a time when the U.S. economy is still in the doldrums, we have at least one agency, which is bent on having its way. The agency tends to be very reactionary and seldom shows any real concern for the effects its changes will have on the job market in America.

It is unfortunate power plants that were proactive in adding emission control equipment, would be penalized along with those plants that chose not to install such controls over the last 30 years. The EPA’s newly proposed Clean Air Transport Rule (CATR) will have two substantial effects upon Illinois and other mid-western states: (1) For plants that have been responsible by installing emission controls for sulfur dioxide (SO2), nitrogen oxides (NOx), particulates, and mercury, the EPA wants to tighten the rules beyond the control limits of the installed technology; (2) For those plants who have not installed emission controls ahead of time, they will now be forced to either shut down or install all controls by 2013-2015 (depending upon final rules).

Utility generators who installed the emissions control equipment (such as SIPC); will be forced to buy allowances (if available) since it has already installed all emission controls. Given SIPC is a cooperative (not for profit) this extra cost will be passed on to every member/customer it provides power to. The extra costs to buy allowances will do nothing to remove incremental emissions at SIPC or its share of the Prairie State units being built in Washington County, IL (since it will already have the state-of-the art controls as well).

For the utility generators who chose not to put on controls in the past and now face billions in potential costs for controls, they will likely find it more economical to shut the older coal-fired units down and buy from the market (until it becomes scarce).

The state of Illinois ranks #1 in coal-fired generation with neither SO2 nor NOx controls installed and Missouri ranks #3. What this means is both states will likely see significant increases in power costs in the coming years. As old plants either (1) spend billions in new emission controls or (2) close down and build gas-fired generation, either will create significant increases in power costs. The third (3) option is such generators will go out of business leaving the grid in Illinois and Missouri, at least subject to market price volatility and at the worse loss of reliability leading to potential brownouts and blackouts.

Jobs will be lost when this transition begins to happen from coal to gas or coal to renewables. Consider the following example. A typical medium sized (500 Mega-Watt); coal-fired power plant will employ approximately 125-150 employees. In contrast a 500 mega-watt natural gas combined cycle (NGCC) plant will only employ approximately 25 employees. The lost jobs are normally top paying positions; thus, the loss of these jobs will be detrimental to the tax base and housing values in the communities where they reside. This example does not even address the jobs that would be lost in mining and transportation when the transition begins to take place.