EDF Praises Wolens' Electric Restructuring Bill

Today the Environmental Defense Fund (EDF) praised a draft of new legislation that calls for electric utilities to reduce emissions from grandfathered power plants by 50% for nitrogen oxides and 25% for sulfur dioxides by May 1, 2003. Representative Steve Wolens, Chairman of the Texas House Committee studying electric utility restructuring, released the latest version of the electricity legislation today. The proposal uses market mechanisms designed to reduce pollution levels in the most cost-effective manner possible.

“Chairman Wolens has shown real leadership and innovation in addressing the thorny issue of grandfathered power plants,” said Mark MacLeod, EDF’s director of state energy programs. Currently, over 75% of Texans live in or next to regions with unhealthy air. “Chairman Wolens understands that the electric utility restructuring legislation provides an opportunity to decrease air pollution and protect public health. It is provisions such as this that allow all of the citizens of Texas to benefit from electric competition legislation. This bill will help reduce unhealthy air pollution all over Texas, but particularly in Dallas-Fort Worth.”

Often called cap-and-trade, the proposal would limit smog-forming nitrogen oxide emissions from grandfathered facilities to 50% of their 1997 levels and limit sulfur dioxide emissions to 75% of their 1997 levels. Placing a cap on emissions is a better method to clean up pollution than merely cutting emission rates because under a cap the total amount of pollution remains limited while an uncapped reduction plan would allow pollution to increase over time.

The proposal also allows utilities to minimize the costs of achieving the required emission reductions, giving utilities the flexibility to determine at which plants, and with which technology, they will achieve the emissions reductions. Utilities can look to the market for innovative ways to reduce pollution and lower compliance costs. If the costs of cleaning up a particular power plant are very high, rather than incur large costs, a utility can purchase an emissions allowance from another plant that has made extra reductions, as long as the additional allowance does not violate any air quality standards.

Grandfathered facilities are the result of an exemption dating back to 1971 that said facilities that were in existence or under construction would not be subject to State emissions limits. In 1985, a State panel recommended that the exemption expire in 1995 but the Texas Legislature failed to adopt the recommendation. The approximately 130 grandfathered power plants account for almost 35% of all grandfathered emissions in Texas. The remainder come from oil refineries, industry, and other sources.

Wolens’ bill requires utilities to make specific and substantial emissions reductions at grandfathered plants by a date certain. In contrast, the widely criticized Senate Bill 766 relies on industries’ volunteering to make emissions reductions without any time limit or sanctions for companies that refuse to clean up their old plants.