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EPA PROPOSED RULES REGARDING POWER PLANT EMISSIONS

Bruce Vitosh--General Manager and CEO

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You may have recently heard that the Environmental Protection Agency (EPA) has proposed new rules regarding the emissions from existing electric utility power plants. If you are not aware of the EPA rules, I encourage you to become familiar with the EPA's proposal because the proposed rules will impact the electric utility industry and you as a rate paying customer of Norris Public Power District.

This past June 2014, the EPA issued proposed rules under the Clean Air Act, which will require the reduction of carbon dioxide (CO2) emissions from existing power plants across the United States. These rules, known as the Clean Power Plan, follow another set of rules proposed by the EPA last year for new power plants. How will these rules impact the cost and reliability of electricity? At this point, it is difficult to fully project the costs associated with these rules.

The EPA's proposal is extremely complex and includes over 1,600 pages of regulations and documentation. The objective of the rules is to reduce carbon dioxide emissions from 2005 levels by thirty percent (30%). Electric utilities have until 2030 to meet this requirement. There are interim targets that must be met beginning in 2020.

The thirty percent (30%) reduction is a national requirement. Each individual state has been assigned their own reduction percentage, which range from a high of seventy-two percent (72%) in Washington and a low of eleven percent (11%) in North Dakota. The state of Nebraska will be required to reduce its CO2 emissions rate by twenty-six percent (26%) from 2012 levels. It is important to note that the state target is the overall requirement for the state, which means that each individual utility may not be required to realize a reduction of twenty-six percent (26%).

The Nebraska Department of Environmental Quality (NDEQ) is the regulatory body responsible for determining how Nebraska plans to meet the proposed reduction. Electric utilities who generate electricity with coal, include Nebraska Public Power District, Omaha Public Power District, Lincoln Electric System, the municipalities of Grand Island, Hastings, Fremont and the Public Power Generation Agency.

Meeting the proposed new rules is a difficult task as there are no commercially viable carbon capture technologies available to reduce CO2 emissions from coal plants. In order to meet the reduction requirements, coal-fired generation would need to be reduced significantly and be replaced with natural gas, nuclear fueled generation or renewable energy, such as wind and solar. Energy efficiency by end-use customers will also be considered in reaching the reduction requirements.

As previously mentioned, these rules are extremely complex and burdensome which leads to many questions, concerns and issues regarding the proposal. Several key issues have already been identified and the list will continue to grow as this proposal is further analyzed. These issues include the legal authority of EPA to issue the Clean Power Plan as proposed; the treatment of nuclear and hydroelectric generation; the shift from coal to natural gas-fired generation; the feasibility and cost of power plant efficiency improvements; renewable and end-use energy efficiency; interstate issues; infrastructure considerations, such as building new electric transmission and natural gas pipeline facilities and a host of economic assumptions impacting all of these issues.

There are many questions and legal concerns being raised across the country. While there are many opinions regarding the cost of the proposed rules and the impact on the electric industry, there is almost universal agreement that litigation will occur when the rules become final in June 2015. In fact, the state of Nebraska, along with other states, has already filed a lawsuit against the EPA regarding the proposed rules.

Since nearly all of the District's power is supplied by Nebraska Public Power District (NPPD), the District's customers benefit from a diverse generation resource mix. NPPD has thoughtfully been moving to less carbon intense generation as the current generation portfolio is more than forty percent (40%) carbon-free. Over the last decade, Nebraska's public power utilities have added new low or no emission resources as well as supporting the efficient use of electricity by customers and encouraging demand response and load management. These actions were taken by the electric industry, not because of federal or state mandates but due to locally owned utilities being committed to providing cleaner energy from a wide variety of resources.

It is the mission of NPPD and Norris to keep rates as low as possible while providing reliable electricity. In order to achieve this mission, NPPD intends to have coal remain a valuable part of the future resource mix.

Economic Impacts of Coal on the Nebraska Economy

A study performed earlier this year by the University of Nebraska-Lincoln and the Bureau of Business Research reported that Nebraska businesses and households are actively involved in the coal industry as energy producers and as transportation providers.

Nebraska has seven coal-fired electric generation stations, which employ 839 workers at these stations or in positions at other locations which are directly associated with these stations. These employees receive annual wages and benefits of $87 million. The stations benefit the Nebraska economy by providing reliable, low cost energy utilized by Nebraska industries, agricultural producers, commercial businesses and households.

The study reported that the impact of the generation of electricity using coal and the transportation of coal through Nebraska to other states and generation stations in Nebraska generates almost $4.9 billion in economic output throughout Nebraska. These two coal-related industries provide over $1.4 billion in labor income and more than 22,800 jobs. This economic activity generates $142 million in income, sales and property taxes in Nebraska.

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