Updated on August 1, 2019 

On June 19, 2019, the U.S. Environmental Protection Agency (EPA) issued the Affordable Clean Energy rule (ACE). This action was finalized in conjunction with two related, but separate and distinct rulemakings: 1) the repeal of the Clean Power Plan (CPP) and 2) revised implementing regulations for ACE and all future emission guidelines issued under the authority of Clean Air Act (CAA) section 111(d). Given the repeal of the CPP, this rule serves to provide the electric utility industry with some degree of regulatory certainty. 

EPA further stated that it intends the repeal of the CPP to be independent from the other final actions in the rulemaking. This action is meant to increase the likelihood that the CPP's repeal would be upheld even if the D.C. Circuit overturns the ACE rule. You can be sure that litigation will ensue, as some stakeholders don't feel that the rule does enough to reduce the carbon impact from coal-fired power plants. 

Also of note is what's NOT included in the final rulemaking package. EPA originally proposed certain revisions to the New Source Review (NSR) Program to allow an "hourly" emissions increase test specifically for electric generating units (EGUs). EPA was proposing revisions to the NSR permitting program to give states the option to adopt into their state implementation plans (SIPs) rules establishing a new preliminary applicability test. This was considered in the proposed rule due to the ACE rule's reliance on efficiency improvement projects at power plants and the historic treatment of such projects under the current NSR program. However, EPA has opted to finalize these proposed NSR revisions at a later date, separate and apart from this final action. 

The final ACE rule is limited to certain coal-fired EGUs and each state has the authority and responsibility to establish standards of performance for their existing sources on a unit-by-unit basis, taking into account source-specific factors (e.g., remaining useful life) when appropriate. These guidelines, established under Section 111(d) of the CAA, identify what EPA determines is the “best system of emission reduction” (BSER) for the sources. The BSER for existing coal-fired EGUs remains unchanged from the 2018 ACE rule proposal, and consists of heat rate improvement (HRI) measures or efficiency improvement projects. The finalized list of most impactful “candidate” HRI measures also remains unchanged from the 2018 ACE rule proposal.  EPA has estimated that approximately 600 coal-fired EGUs at 300 facilities could be covered by this rule. 

As part of the Regulatory Impact Analysis (RIA) associated with the final rule, EPA projects that, compared to a no-CPP baseline, the ACE rule will reduce CO2 emissions in 2030 by about 11 million short tons, resulting in domestic climate benefits and ancillary health co-benefits. While the impact of the ACE rule by itself is not significant, the EPA claims that ACE, combined with emission reductions expected from industry trends, will reduce CO2 emissions from the electric sector by as much as 35% below 2005 levels in 2030. In relying on these industry trends, EPA further states that CO2 emissions in the power sector have steadily declined in recent years due to a range of factors including: market forces, technology improvements, and regulatory and other policy changes. As a result, the industry has increased the use of natural gas and renewable energy sources which will result in further reductions in CO2 emissions. 

Finally, it's worth noting the schedule for Section 111(d) implementation:

  • State submissions: In the final rule, EPA is allowing states 3 years to develop state plans. The previous implementing regulations provided 9 months.
  • EPA action: The final rule allows EPA 12 months to act on a complete state plan submittal. The previous implementing regulations provided 4 months. EPA would have six months to determine completeness and would make that determination by comparing the state's submission against the completeness criteria in the guidelines.
  • Federal plan: The final rule allows EPA 2 years to issue a federal plan after a finding of a state's failure to submit an approvable plan. The previous implementing regulations provided 6 months.
  • Compliance Deadline: The final rule allows 2 years from the final plan submittal date to achieve compliance. The previous implementing regulations provided 12 months.

Trinity has engaged other stakeholders as they assess the implications of the rule and how it may affect their future operations. Trinity can assist the power sector with management plans and compliance budgets as each state establishes standards of performance for their existing sources on a unit‑by‑unit basis. For more information, please contact Scott Osbourn at (727) 278-3358 or sosbourn@trinityconsultants.com or Trinity at (800) 229-6655 for additional information on the analysis or on other matters related to this rulemaking.