AEP says costly U.S. greenhouse gas limits unnecessary

Reuters News
Posted: Jul 25, 2013 2:03 PM
AEP says costly U.S. greenhouse gas limits unnecessary

By Scott DiSavino

(Reuters) - American Electric Power Co, one of the biggest coal burners in the United States, said Thursday the power industry is already on track to meet the Obama administration's carbon reduction goals and does not need federal regulators to impose additional costly limits on greenhouse gas emissions.

President Barack Obama wants to reduce carbon dioxide emissions by 17 percent below 2005 levels by 2020 and in June instructed the U.S. Environmental Protection Agency (EPA) to write extra rules to make it happen.

Obama wants the new rules on existing power plants finalized by June 2015.

AEP CEO Nick Akins said in a conference call following the release of the company's second quarter earnings that AEP and the industry were already on track to meet the president's goal due to continuing weak economic growth, coal plant retirements and weak natural gas prices.

"The mercury rules and the natural gas revolution have already achieved the (President's) objectives," Akins said.

"This is not the time to impair the economy even further … by adding a larger burden of onerous greenhouse gas requirements that further jeopardize (economic) recovery and even the (reliability) of the electric grid itself."

AEP expects to reduce carbon dioxide emissions by about 18 percent below 2005 levels by 2015, five years ahead of the president's 2020 goal.

"I believe EPA will be responsible particularly with what is already achieved with the mercury rules. Hopefully, we'll wind up with a reasonable solution we can work forward with particularly as it relates to existing units," Akins said.

Since President Barack Obama took office in 2009, the power industry has closed about 15,000 megawatts of coal-fired power plants as low electricity and natural gas prices have made it uneconomical to upgrade those facilities to keep up with stricter environmental rules the government has imposed.

Generating companies, including AEP, have also announced plans to shut more than 37,000 MW of coal-fired units over the next 10 years or so.

Due in part to those retirements, the power industry as a whole has already reduced carbon emissions in 2012 by 15 percent below 2005 levels, according to the Edison Electric Institute (EEI), a utility trade group.


Akins also said AEP is investing more in transmission projects while it reduces operating, maintenance and other expenses at its generating fleet in part because of weaker prices paid for power capacity in PJM, the biggest electric system in the United States.

PJM operates the power grid serving 61 million people in 13 Mid-Atlantic and Midwest states from New Jersey to Illinois and the District of Columbia.

AEP operates in several PJM states including Ohio, West Virginia, Kentucky, Indiana, Michigan Tennessee and Virginia.

Prices for capacity, which compensates generating and other resources to keep their plants available, fell from about $136 per megawatt-day for the 2015/2016 period to near $60 for the 2016/2017 period in PJM's latest capacity auction in May.

"We are putting a culture of savings in place that will help mitigate the (2016/)2017 capacity results," Akins said.

He said AEP is not happy with the PJM capacity rules and is seeking changes.

"The rules seem to penalize long-term investors ... and hurt reliability. PJM is aware of our concerns and hopefully will act accordingly because change is needed," Akins said.

(Reporting by Scott DiSavino; editing by Andrew Hay)