Washington (Platts)--5Feb2013/555 pm EST/2255 GMT

States that have already developed and implemented carbon dioxide cap-and-trade systems, energy efficiency rules, renewable portfolio standards and other clean energy programs should be given credit for their efforts when the Obama administration proposes its greenhouse gas rules for existing power plants, an executive with Xcel Energy said Tuesday.

"It's critical that states are allowed to recognize early action credit," Frank Prager, Minnesota-based Xcel's vice president of environmental affairs, said at the winter meeting of the National Association of Regulatory Utility Commissioners in Washington.

"We have invested a lot of money in the last 10 years to reduce our carbon dioxide emissions, and others have done the same," he said. "If that early action is not recognized, and that money is, in essence, wasted, our customers are going to be paying twice, once for the improvements we made in the early part of the decade, and then again going forward."

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Furthermore, he said, EPA's forthcoming GHG regulations for existing power plants should take a more holistic look at each state's electricity generating landscape, instead of issuing rules for each individual power plant.

For example, while one specific power plant in a state may be a large emitter of GHGs, a utility might have adopted energy efficiency technologies or renewable energy generation in other parts of its service area that should be taken into consideration, he said.

"If you only consider what you can achieve inside a [power] plant using source-specific technology today, you're going to be limited to a few percentage reduction in emissions," Prager said. "But when you expand that and look outside the plant, you can find greater reductions in emissions at lower costs."

EPA has not announced when it plans to propose GHG standards for existing power plants, but it is required to do so under the Clean Air Act after determining that GHGs constitute a hazard to public health.

Given President Barack Obama's emphasis in his inaugural address last month on fighting climate change, many expect EPA to propose those rules sometime soon. EPA is in the process of finalizing its GHG standards for new or modified power plants.

Megan Ceronsky, a climate and air attorney with the Environmental Defense Fund, largely agreed with Prager's comments, saying plant-by-plant GHG regulations would be "rigid, expensive and not particularly effective."

She also advocated for a flexible, holistic, systemwide approach to GHG rules, suggesting that EPA could implement an emissions credit trading system similar to one it has for sulfur dioxide.

"That's the broad idea, and there are a number of frameworks to do that," Ceronsky said. "The idea would be, EPA would figure out a best system, but then they would say to states, 'You can use the systems we've identified, or you can come to us with the best systems that makes sense for your own states and show that you're going to get to the same level of emissions reduction.'"

David Littell, a member of the Maine Public Utility Commission, said the EPA will have several thorny issues to sort out when it proposes its GHG rules. For example, it will need to decide on a baseline year to determine emission-reduction goals.

The Regional Greenhouse Gas Initiative, a cap-and-trade system implemented in the Northeast and Mid-Atlantic states, benchmarked its states' reductions by comparing them with the average emissions between 2000 and 2002, he said.

California's cap-and-trade system used 2005 emission levels as a baseline. The international Kyoto Protocol treaty used 1990 emissions as its baseline.

EPA will also have to decide how much of a reduction in GHG emissions it will aim for and how quickly to phase those limits in, Littell said.

"Different states will be in different situations, and there are a lot of [years] to choose from," Littell said. "It makes a big difference."

--Herman Wang, herman_wang@platts.com
--Edited by Jason Lindquist, jason_lindquist@platts.com

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