Air pollution mitigation fee proposed for border power plants

By CMTA Staff

Capitol Update, May 11, 2006 Share this on FacebookTweet thisEmail this to a friend

In recent years, the government of Mexico has approved three power plants for construction near the U.S.-Mexico border: the Sempra-owned Termoelectrica de Mexacali, and two plants owned by InterGen, La Rosita and Energia de Baja California.  The Sempra facility will produce electricity for export into the U.S., while half of the electricity generated from the InterGen facilities will be exported into the U.S.

Legislation moving in Sacramento would require any entity that imports electricity into the state to pay up to a $0.001 per kilowatt hour air contaminant emission fee for that electricity.  AB 2388 (Juan Vargas, D-San Diego), which CMTA opposes, would apply to energy coming from any power plant within 100 km of the border that first produced electricity after January 1, 2007 and was not constructed to meet all existing California air pollution regulations and standards, including, but not limited to, best available control technology (BACT) and any offsets that would be required under California law to mitigate any additional pollution.  

While AB 2388 may be well-intentioned, CMTA has serious concerns about its legality as well as its practicality.  

First of all, such a fee, or tax, would likely conflict not only with the North American Free Trade Agreement (NAFTA) treaty, but also the commerce clause of the United States Constitution.  

Second, it is unclear how the bill would be administered.  While load serving entities, such as utilities and energy service providers, may enter into contracts for energy, often these contracts are not unit specific. Energy contracts generally include a mix of generation sources and the amount of energy from those different sources may vary over time of day, time of year, and the length of the contract.  Even if a purchaser acquires from only a single power plant, that purchaser will not necessarily have data on whether the plant meets BACT for each air contaminant, since BACT in California is established on a plant-by-plant, contaminant-by-contaminant basis when an air quality permit is granted. Since an out-of-country plant will not have gone through that process in California, it will not be apparent whether or not the plant would have met BACT had it obtained an air quality permit in California. Accordingly, a purchaser will not necessarily know whether it is subject to the proposed fee.

Third, the actual delivery of the electricity is not tracked by the load-serving entity (LSE) back to the original supplier, so it will be impossible for LSEs to collect the fee. In practice, it is the California Independent System Operator (ISO) which actually dispatches much of the energy used by California.  Because of the way the electricity system is structured in California, it is unclear how the state board would impose such a fee, and upon whom.

The bill will be heard on May 17 in the Assembly Appropriations Committee.  If approved there, it will be voted on by the full Assembly and then, if passed, go to the Senate.
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