June 26, 2015

Are Utility Companies Changing Their Strategy To Fight Obama Power Plan?

Duke Energy’s Gibson Station, located in Gibson County, Ind.
Duke Energy’s Gibson Station, located in Gibson County, Ind.

In a letter sent to President Obama this week, Indiana Governor Mike Pence said that the State of Indiana “will not comply” with the Environmental Protection Agency’s Clean Power Plan unless the plan is “demonstrably and significantly improved.”

Gov. Pence also stated that Indiana will “reserve the right to use any legal means available to block the rule from being implemented.” According to Utility Dive, Oklahoma is so far the only state to have outright stated that it will not comply with the EPA.

Indiana had joined Oklahoma and 12 other states, Peabody Energy, and the Utility Air Regulatory Group in the Murray Energy/West Virginia v. E.P.A. lawsuit, which challenged the agency’s proposed rule this past year. The lawsuit Indiana joined was unprecedented for a court to review because the rules had yet to be finalized. The U.S. Court of Appeals for the District of Columbia Circuit therefore dismissed it earlier this month.  But West Virginia and Murray Energy said they look forward to challenging the rule again when it is finalized. Other states have also made similar comments.

The utility industry’s strategy to contest the Clean Power Plan has been to work with Hunton & Williams’ Utility Air Regulatory Group (UARG) to sue the EPA claiming the Clean Power Plan is illegal. Yet this is in addition to utilities working with state agencies so that the State Implementation Plan (SIP) submitted to the EPA is to their liking – just in case their lawsuit fails. This reasoning is rooted in the belief that adhering to a Federal Implementation Plan (FIP) will perhaps be less accommodating and even more costly to comply than the submitted SIP.

But Gov. Pence’s letter, along with the actions taken by Oklahoma Governor Fallin, sheds light on what may be another part of the utility industry’s plan: sue the EPA again when it begins to enforce the FIP for states that do not comply with the Clean Power Plan.

Mario Loyola, a senior fellow at the Texas Public Policy Foundation, wrote in The Atlantic last month about the constitutional problem with a federal plan imposed on a state, specifically the Tenth Amendment. It’s important to note that TPPF is a member of the State Policy Network and is in the American Legislative Exchange Council (ALEC), which includes many utility companies as members along with their trade association – the Edison Electric Institute.

Loyola writes,

Normally, when the EPA threatens to impose a federal plan, it actually has the statutory authority to do what it’s asking the states to do. The coercion (or “encouragement” as the Supreme Court prefers to call it) occurs within a field of concurrent federal-state jurisdiction. But the Clean Power Plan is missing that essential ingredient… And the implied coercive threat of leaving states unable to meet their needs for electricity might well lead federal courts to find “a gun to the head” of state governments in the EPA’s proposal.

I reached out to the electric utility companies operating in Indiana to get their reactions to Gov. Pence’s letter to the president, and to possibly discuss whether or not they are indeed considering suing the EPA if a FIP is imposed on Indiana.

Duke Energy directed me to the Indiana Energy Association (IEA), whose president, Mark Maassel, said, “It’s hard to predict the form of the legal challenges as to its whether it is one issue or two issues. But as the governor wisely indicated, he will aggressively pursue all those issue. We just wont know what those issues are until the plan is promulgated.”

Maassel also said that at this time they have not had any conversation with the state’s attorney general or Gov. Pence about how any legal pursuits will proceed.

Brian Bergsma, Director of Communications & Government Affairs at Indiana Michigan Power – an American Electric Power subsidiary, said in an email, “I&M supports the State of Indiana taking all appropriate legal actions to challenge the rule to protect the economy of our state, our customers and the reliability of the electric grid.”

Bergsma did not respond to further questions.

These comments might not be surprising to some, but it does suggest that the utility industry is preparing to do everything it can to prevent the Clean Power Plan from being enforced in the states.

And this strategy could begin to spread. The Edison Electric Institute just made AEP’s President and CEO Nicholas Akins its new chairman. It might not be a coincidence that in addition to Indiana, AEP also operates in Oklahoma and West Virginia.

AES Corporation’s Indianapolis Power & Light, Northern Indiana Power Service Company, and Vectren did not respond to my questions.