July 25, 2017

Comments of the Appalachian Power Company on Notice of Intended Regulatory Action (NOIRA) to Reduce and Cap Carbon Dioxide from Fossil Fuel Fired Electric Power Generating Stations

Ms. Karen G. Sabasteanski:

Appalachian Power Company (APCo) appreciates the opportunity to offer comments on the Notice of Intended Regulatory Action (NOIRA) to Reduce and Cap Carbon Dioxide from Fossil Fuel Fired Electric Power Generating Facilities.  Appalachian Power serves about 1 million electric customers in Virginia, West Virginia and Tennessee.  Its headquarters offices are in Charleston, West Virginia, with additional administrative offices in Roanoke, VA and regulatory and external affairs offices in Richmond, Virginia. 

While there is considerable uncertainty over the future of federal carbon regulations and the fate of the Clean Power Plan, APCo has demonstrated considerable leadership in making carbon reductions over the past decade and will continue to deploy clean energy sources over the coming decades.  As such, we feel that it is not in the best interest of the Commonwealth of Virginia to develop incremental carbon policies to intervene in an already ongoing transformation of the electric sector.

APCo has taken numerous actions over the past few years that have resulted in a dramatic reduction in its carbon footprint.  Within Virginia, APCo recently retired three coal units, Glen Lyn Units 5 & 6 and Clinch River Unit 3.  Additionally, APCo recently converted the remaining Clinch River Units 1 and 2 to run on natural gas, which results in approximately 40% less CO2 per megawatt hour than prior operation on coal. 

APCo's other generating and capacity resources located in Virginia are mix of hydroelectric and pumped storage, which generate electricity with zero carbon emissions. As such, APCo's Virginia carbon footprint is only a small fraction of what it was just a few years ago.  In 2016, APCo's Virginia-domiciled CO2 emissions were approximately 200,000 tons, which represented a 96% reduction in CO2 emissions from 2005 levels.  To put APCo's current emissions in appropriate context, the Commonwealth of Virginia has 7.5 million registered vehicles.  APCo's 2016 emissions represented the equivalent annual emissions of only 40,000 passenger vehicles. 

On May 1, APCo filed its annual Integrated Resource Plan (IRP) with the Virginia State Corporation Commission (SCC).  An IRP represents a line-of-sight projection that is intended to inform utility management as to the potential future resource profile necessary to meet the projected capacity (i.e., peak demand) and energy needs of its customers.  In addition to projected load changes, IRPs are updated at regular intervals for changing market conditions as well as other external factors, including achieving potential environmental requirements.  Such long-term plans ---beyond any near-term ‘actionable period’--- can and do shift as such conditions warrant.

APCo is required to provide an IRP that encompasses a 15-year forecast period (in this filing, 2017-2031).  This IRP has been developed using the Company’s current long-term assumptions for:

• Customer load requirements – peak demand and energy;

• commodity prices – coal, natural gas, on-peak and off-peak power prices,

• capacity and emission prices;

• supply-side alternative costs – including fossil fuel and renewable generation resources; and

• demand-side program costs and impacts.

In addition, APCo considered the effect of environmental rules and guidelines, such as the CPP, which could add significant costs and present significant challenges to operations. Litigation of the CPP is on-going, and the US EPA has asked the DC Circuit Court of Appeals to hold the litigation in abeyance while it decides whether to reconsider the entire rule.  Given that uncertainty, individual state plans to implement an uncertain rule may not be finalized –let alone approved - for a number of years. In preparing the IRP, APCo has analyzed multiple scenarios, with differing commodity pricing conditions, as well as multiple internal load conditions.  APCo has also conducted analyses which specifically address certain aspects of compliance with the CPP.

The 2017 APCo IRP suggests that APCo will not be integrating any new fossil resources into its system over the next 15 years.  All incremental load increases are assumed to be met through installation of cost-effective wind and large-scale solar, both of which would provide customers with emissions-free energy, as well as the prospect of additional demand side management measures. Furthermore, the IRP also suggests that APCo may retire its remaining fossil units within Virginia (Clinch River 1-2) by 2026.  At such point that these Clinch River units would be retired APCo would be left with a Virginia-domiciled generating fleet that is 100% carbon emissions free.

In light of the transition that APCo has made and will continue to make in its generating fleet with respect to emission reductions and generation diversification, APCo encourages the Department of Environmental Quality and the Air Pollution Control Board recognize planning practices already in place, such as the IRP process, can be appropriate means to establish a carbon reduction pathway. 

Given that the current Virginia regulatory process is robust and that CO2 emissions have trended significantly downward, we do not feel it is in the Commonwealth’s best interest to take action on a small subset of emissions sources to address a concern that is global in nature.  Additionally, linking Virginia's CO2 action to a broader CO2 trading program, such as the Regional Greenhouse Gas Initiative (RGGI) could ultimately result in Virginia having less control over its emissions trajectory and economic well-being.  Nonetheless, APCo is committed to working with the Department of Environmental Quality and the Air Pollution Control Board to ensure any new regulatory action resulting from Executive Directive 11 will be workable and equitable for APCo customers.

Respectfully,

Scott A. Weaver

Manager - Strategic Policy Analysis