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EPSA Comments On EPA Settlement With Demand Response Providers

WASHINGTON, D.C. - Electric Power Supply Association (EPSA) President and CEO John E. Shelk issued the following statement in response to the Federal Register (January 4, 2012) notice of a proposed settlement between the U.S. Environmental Protection Agency (EPA) and certain demand response providers. The settlement concerns EPA rulemakings revising National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines. Under the proposed settlement agreement now open for public comment, EPA will issue a Notice of Proposed Rulemaking to substantially increase the hours during which certain smaller internal combustion engines could qualify as "emergency engines," participate in demand response programs, and receive an exemption from EPA emission standards:

"The proposed settlement underscores in bold strokes the factual basis for the significant concerns EPSA brought to the attention of the Federal Energy Regulatory Commission (FERC) during its recent consideration of the controversial final rule on demand response compensation in organized markets for which EPSA has sought federal court review.

One of the many issues EPSA raised before FERC relates to the potentially large amount of "demand response" that is actually supported by behind-the-meter generation instead of representing true demand reduction. Cranking up diesel engines is not demand response as it has been advertised. FERC did not adequately address this issue in either the final demand response rule or in its order denying EPSA's rehearing request.

Among other legal and policy issues, EPSA has stressed the likely adverse environmental consequences from smaller inefficient engines displacing electricity from more efficient new or existing on-grid power plants that must meet increasingly stringent Clean Air Act rules. By quadrupling the hours per year during which off-grid diesel engines can operate, the proposed settlement validates these concerns.

FERC and EPA must now do what EPSA has long requested, which is to develop a thorough factual record to understand the full real world consequences of the interaction between EPA’s rules for on-site engines and FERC's demand response compensation scheme, before each agency implements either of them. This analysis may well show that even more off-the-grid "emergency engines" will be installed under the guise of "demand response" programs, further displacing opportunities to construct and operate the cleaner, more reliable on-grid power plants the country needs for economic growth and to meet environmental policy goals."

CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660

EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.