Regulation

Belting Utilities

Cracking down on clean air.

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A White House initiative to eliminate one of the perverse incentives created by the Clean Air Act has been halted by a federal appeals court. The Bush administration had planned to relax enforcement of "new source review" (NSR) regulations at the end of December, but 12 state attorneys general and various city officials sued to stop the change. The U.S. Court of Appeals in Washington, D.C., has blocked the reform pending resolution of the suit.

NSR involves changes to pre-1977 power plants that were grandfathered under the Clean Air Act. Such plants did not have to meet all the equipment requirements for a new plant immediately. The newer, more onerous requirements were supposed to kick in only when the plants went through "major modification," as opposed to "routine maintenance, repair, and replacement."

In the late 1990s, the Environmental Protection Agency (EPA) began tightening NSR rules and suing utilities, including the government's own Tennessee Valley Authority, in ways that the industry saw as violating the meaning of those phrases. Charles McCrary, head of Southern Company Generation, complained in Senate testimony in 2000 that the new regulations were being "triggered by many common routine maintenance operations, including operations that improve plant efficiency." Applications for minor upgrades were taking one to three years to process.

Utilities were thus discouraged from doing any useful upgrades for fear of triggering stricter regulation. When then-EPA Administrator Christine Whitman announced the NSR relaxation in November 2002, she said "some aspects of the NSR program have deterred companies from implementing projects that would increase energy efficiency and decrease air pollution."

The new rules that were stopped by the appeals court would have allowed utilities flexibility in making upgrades as long as they stayed within site-wide emission caps. The lawsuit's effect may well be to prevent emissions-reducing upgrades in old plants.