Dominion Power 2007 Annual Report Download - page 55

R EGULATION OF G REENHOUSE G AS E MISSIONS
We operate two coal/oil-fired generating power stations in Massa-
chusetts that are already subject to the implementation of carbon
dioxide (CO2) emission regulations issued by the Massachusetts
Department of Environmental Protection (MADEP). Addition-
ally, Massachusetts, Rhode Island and Connecticut have joined
the Regional Greenhouse Gas Initiative (RGGI), a multi-state
effort to reduce CO2emissions in the Northeast to be
implemented through state specific regulations which are cur-
rently in development in these states. We own and operate a gas/
oil-fired electric generating facility in Rhode Island that is subject
to RGGI, in addition to the two coal/oil-fired stations in Massa-
chusetts. Implementing regulations for RGGI in Massachusetts
and Rhode Island have yet to be fully developed. While the cost
of complying with the RGGI requirements for the period 2009 to
2011 could adversely affect our results of operations, we cannot
provide a reasonable estimate of such cost until the results of the
first RGGI allowance auction are conducted later in 2008 and an
allowance market develops. Additionally, any such costs of com-
pliance could potentially be mitigated by increases in power prices
impacting our affected power stations in the Northeast.
In April 2007, the U.S. Supreme Court ruled that the EPA
has the authority to regulate greenhouse gas emissions which
could result in future EPA action. In June 2007, the President
announced U.S. support for an effort to develop a new post-2012
framework on climate change involving the top ten to fifteen
greenhouse gas emitting countries that would focus on establish-
ing a long-term global goal to reduce greenhouse gas emissions
with each country establishing its own mid-term targets and pro-
grams. In addition to possible federal action, some states in which
we operate have already or may adopt greenhouse gas emission
reduction programs. For example, Massachusetts has
implemented regulations requiring reductions in CO2emissions.
The Virginia Energy Plan, released by the Governor of Virginia in
September 2007, includes a goal of reducing greenhouse gas
emissions statewide back to 2000 levels by 2025. The Governor
formed a Commission on Climate Change to develop a plan to
achieve this goal. Until this goal results in legislative or regulatory
action, the outcome in terms of specific requirements and timing
is uncertain. The cost of compliance with future greenhouse gas
reduction programs could be significant. Given the highly
uncertain outcome and timing of future action by the U.S. federal
government and states on this issue, we cannot predict the finan-
cial impact of future greenhouse gas reduction programs on our
operations or our customers at this time.
C
LEAN W ATER A CT C OMPLIANCE
In July 2004, the EPA published regulations under the Clean
Water Act Section 316b that govern existing utilities that employ
a cooling water intake structure and that have flow levels exceed-
ing a minimum threshold. The EPA’s rule presents several com-
pliance options. However, in January 2007, the U.S. Court of
Appeals for the Second Circuit issued a decision on an appeal of
the regulations, remanding the rule to the EPA. In July 2007, the
EPA suspended the regulations pending further rulemaking, con-
sistent with the decision issued by the U. S. Court of Appeals for
the Second Circuit. In November 2007, a number of industries
appealed the lower court decision to the U. S. Supreme Court.
We have sixteen facilities that are likely to be subject to these
regulations. We cannot predict the outcome of the judicial or
EPA regulatory processes, nor can we determine with any cer-
tainty what specific controls may be required.
In August 2006, the Connecticut Department of Environ-
mental Protection (CTDEP) issued a notice of a Tentative
Determination to renew our Millstone power station’s National
Pollutant Discharge Elimination System (NPDES) permit, which
included a draft copy of the revised permit. In October 2007,
CTDEP issued a report to the hearing officer for the tentative
determination stating the agency’s intent to further revise the
draft permit. In December 2007, the CTDEP issued a new draft
permit. An administrative hearing will be held on the draft permit
with a Final Determination expected to be issued by the CTDEP
within the next year. Until the final permit is reissued, it is not
possible to predict the financial impact that may result.
In October 2003, the EPA and MADEP each issued new
NPDES permits for the Brayton Point power station (Brayton
Point). The new permits contained identical conditions that in
effect require the installation of cooling towers to address con-
cerns over the withdrawal and discharge of cooling water. Follow-
ing various appeals, in December 2007, the EPA issued an
administrative order to Brayton Point that contained a schedule
for implementing the permit. On the same day, Brayton Point
withdrew its appeal of the permit from the U.S. Court of Appeals.
Brayton Point’s state appeal will be dismissed upon MADEP
finalizing the process for implementing the parallel state permit.
Currently, we estimate the total cost to install these cooling tow-
ers at approximately $500 million, of which $176 million is
included in our planned capital expenditures through 2010.
F UTURE E NVIRONMENTAL R EGULATIONS
We expect that there may be federal legislative or regulatory
action regarding the regulation of greenhouse gas emissions and
regarding compliance with more stringent air emission standards
in the future. With respect to greenhouse gas emissions, the out-
come in terms of specific requirements and timing is uncertain
but may include a greenhouse gas emissions cap-and-trade pro-
gram or a carbon tax for electric generators and natural gas busi-
nesses. With respect to emission reductions, specific requirements
under consideration would be phased in under periods of up to
ten to fifteen years. If any of these new proposals are adopted,
additional significant expenditures may be required.
Dominion 2007 Annual Report 53