Wednesday, December 28, 2011

Utility Biz Grudge Match Ahead of EPA Mercury Regs (CEG; CPN; EXC; FPL: PEG)

 As I said in yesterday's "Best Utilities Picks for New EPA Rules" (FE; GEN):
Very quietly one of the biggest changes in the American economic landscape is about to hit the electricity producing sector and by extension every business and consumer in America....
From E&E's Greenwire:
Power companies battle for edge ahead of EPA rule changes
GLEN BURNIE, Md. -- No matter how much electricity the Brandon Shores power plant generates, the air above its hulking brick smokestacks stays crystal clear.

Built at no small expense to dissipate emissions from two coal-burning boilers, the 700-foot stacks were capped with metal plates last year after the plant added $885 million worth of new pollution control equipment.

The smokestacks are now useless.

Paul Allen, the chief environmental officer at Constellation Energy Group, has a joke about the smokestacks: He calls them the plant's "hood ornaments." But to Constellation shareholders, it is no laughing matter.
Some utilities can pass along the cost of an upgrade with a charge on ratepayers' electric bills, but Constellation cannot. The company is a merchant producer, selling electricity to industrial customers and onto the grid serving most homes and businesses.

Having borrowed money to pay for equipment that was not required when the plant opened in 1984, Constellation must now recoup its investment by competing against plants that lack the same pollution controls. Some of those plants are in West Virginia or other parts of Appalachian coal country, and their emissions can travel all the way to this Baltimore suburb.

It is unfair, Allen said, and his company is lobbying for U.S. EPA to come out with strict new air pollution standards later this month.

"Are we urging the rest of the industry to do likewise? Yes, we are," he said.

Constellation's plight is common among power companies and is one of the biggest reasons for a grudge match in the utility industry over a new round of rules meant to carry out the Clean Air Act. Clawing for an advantage in competitive electricity markets, power companies are lobbying heavily to change the regulations, such as the toxic emissions standards that EPA says it will make final next week.

For years to come, how often Brandon Shores gets called upon to produce power, and how much money it makes for doing so, could be decided by what the Obama administration does this month.

Allen met with White House officials last month to make a last-minute pitch for the rules -- one of at least 12 meetings held so far at the Office of Management and Budget. Also in the room with Allen were executives from New Jersey-based PSEG, Chicago-based Exelon Corp., Houston-based Calpine Corp. and Florida NextEra Energy Inc., who pointed out that their power plants would largely comply with EPA's proposed pollution limits.

Constellation did not expect to be in this position....MORE