Impacts to Louisiana’s Energy Supply from EPA Cross-State Air Pollution Rule

1. Impacts to Louisiana’s Energy Supply fromEPA Cross-State Air Pollution Rule Paul Miller Assistant to the Secretary

2. Cross-State Air Pollution Rule (CSAPR) Intended to fix the legal issues surrounding the Clean Air Interstate Rule • Replacement for the Transport Rule (July 6, 2010) which was the replacement for the Clean Air Interstate Rule (March 10, 2005) Signed by the EPA Administrator on July 6, 2011 Applies to 28 States including 26 for Ozone Season NOx Emissions

3. Cross-States Air Pollution Rule (CSAPR) States

4. States Covered by the Original 2005 Clean Air Interstate Rule

5. Electric Generating Units Affected in Louisiana • 92 Generating Units Affected at 32 Locations across the State of Louisiana • Initial Compliance 2012 Ozone Season • Major Allowance Shortfalls at all Solid Fuel Generating Units in Louisiana • Big Cajun NRG/Entergy • Rodemacher Cleco/Lafayette/LEPA • Dolet Hills Cleco/ AEP • Roy S Nelson Entergy

6. Cumulative Impacts • Ozone Season 2010 Total NOx Emissions 22,869 Tons • CSAPR Total La Budget 13,432 Tons (includes new unit set-a-sides) • Required Reduction/Allowance Purchase 9437 Tons NOx (based on 2010 Emissions) • La Utilities Can Only Purchase 2821 Allowances (Variability) without Triggering the Rule’s Allowance Penalties in Subsequent Year (16253 Tons Max Allowable NOx Emissions)

7. Impacts Continued • An Emissions Total Greater Than 16,253 Tons will Require the Surrender of 2 Additional Allowances from the Subsequent Year Available Pool per Excess Ton of NOx Emitted • Using 2010 Emissions 22,869 - 16,253 6616 X 2 = 13,232 allowances would have to be surrendered as a penalty in addition to the required allowances for the year

8. Impacts Continued • La CSAPR Budget 37% < CAIR Budget • La Utilities Penalized for CAIR Emission Reductions • For Example Cleco/AEP/Lafayette/LEPA spent $20 Million installing Low NOx Burner and other Combustion Controls on Dolet Hills and Rodemacher Power Plants in Anticipation of CAIR

9. Other Considerations • Other States have Expressed Concerns over a Lack of Sufficient State Budgets • Other State Shortfalls will Result in Few Allowances to be Available in the Market • No La Utilities have new Control Projects Underway (2-4 year Projects) • EPA Used the IPM Model to determine what Units would Operate utilizing arbitrary factors such as anticipated fuel cost

10. Impacts to NRG Big Cajun 2 • 2012 Allowances 2842 • 2010 Emissions 5265 Shortfall 2423 SCR(s) WILL LIKELY BE REQUIRED COSTS???

11. Impacts to Dolet Hills • 2012 Allowances 1056 • 2010 Emissions 2135 Shortfall 1079 SCR WILL LIKELY BE REQUIRED ESTIMATED COST $150 MILLION

12. Impacts to Brame Energy Center 3Units 2 Solid Fuel / 1 Natural Gas • 2012 Allowances 1266 • 2010 Emissions 1858 * Shortfall 592 * NEW Unit 3 going thru Shakedown Actual shortfall will be larger SCR Will Likely be Required on Unit 2 as well as some Allowance Purchase

13. Impacts to Roy S Nelson • 2012 Allowances 1381 • 2010 Emissions 2021 Shortfall 640 SCR WILL LIKELY BE REQUIRED

14. Louisiana’s Natural Gas Fueled Generation • Generally a Challenge for Older Less Efficient Gas Units • Collectively a Greater Challenge • Some Older Units may be Forced into Early Retirement • Potential Loss of Employment for Louisiana

15. Questions? • Paul Miller paul.miller@la.gov (225) 219-3841