Western State Targets and Key Issues Patrick Cummins, CNEE September 10, 2015

Emission Performance Rate Requirements SubcategoryInterim Rate Final Rate Fossil Fuel-Fired Electric Steam Generating Units 1,5341,305 Stationary Combustion Turbines  Interim Emissions Performance Rates by technology are applicable nationwide and must be achieved in the period between  Final Emissions Performance Rates by technology are applicable nationwide. The final rate must be achieved by 2030

Rate Targets (#/MWHr) 3 1,031 1,174 1,146 1, ,305 1,299 1,305 1,167

Final Mass-Based Goals & % Change from Proposal (existing sources only) 4

Western State 2030 Mass Targets Final Rule vs. Draft Rule  Western states had both the biggest % increases and the biggest % decreases in mass targets for existing sources  The combination of increases and decreases in targets results in a very different picture for CPP implementation in the West.  Fewer allowances for new sources 5

Status after Known/Planned Unit Retirements 6

Western Context  Despite big changes in the final rule, some things remain unchanged in the West  Wide variation in stringency of Western state targets compared to business as usual  Interconnected grid with significant import/export relationships between states  Multi-state utilities that want the opportunity to balance their compliance obligations across their systems and achieve the required reductions at the lowest cost

Western Context  Lots of interest in trading programs that provide flexible compliance options and the ability to lower costs of compliance  Little interest in relinquishing control to EPA and a federal plan  Regional dialogue and coordination is important to help achieve the best outcomes for Western states and utilities

Key Issues and Decisions  Program design choice (Rate or Mass) is key as it determines potential trading partners  Modeling and analysis needed to support decisions  Decision may be influenced by EPA’s final model rule, but no final model rule until Summer 2016  Key design issues for mass are:  Allocation of allowances  New sources  Must be in the budget or state must address “leakage”

Key Issues and Decisions  Key design issue with rate:  Supply of ERCs?  ERC validation and certification process  Tracking system for ERCs or allowances  EPA, state, other?  Regional cooperation  Will trading with California be an option?  Will California continue to regulate emissions from imported electricity

Questions for EPA: Model Rules and Federal Plan  Presumptively approvable v. state flexibility  Allowance allocation methodology  Retirements  Set asides  Need for further documentation  TSDs and final model rule  Tribal sources  2016 submittal -- what’s required