massive
capital expenditures that can take up to 10 years to design, permit, and construct, a
compliance plan needs to take a long view on how these resources
will be used. For its part, Pepco operates with a
ten-year compliance plan.(A.) Compliance Planning
Today, electric utilities have a host of pollution control options before them and choosing the mix of options that best fits from both an economic and environmental perspective can be a difficult task. A utility's planning process is complex and must factor in demand for power and the emissions associated with generating it. From there, the utility needs to assess its pollution control options, including participation in allowance trades.
These variables are influenced by a large number of factors, which give rise to an astounding range of permutations in compliance planning. However, breaking the decision process down into its core components, applying time-honored economic techniques, and using computer technology can assist in mapping a course for compliance. The experience of a few utilities can be helpful and their perspectives are provided below.
Long-Term Strategy
Because internal compliance planning brings together so many varying disciplines,
many utilities have formed cross-functional teams which span the company in order
to assemble the expertise necessary to make the best decisions on pollution control.
For instance, Potomac Electric Power Company (Pepco) a major utility in the
mid-Atlantic region, pulls individuals from the generation group, engineering and power
marketing, business planning, fuel procurement, and environmental management and
emissions trading operations to assist in compliance planning.
No matter how the compliance planning team is assembled, it is essential that the
team set in place a comprehensive long-term strategy that spans several years, yet is
flexible enough to be fine tuned on a weekly or even daily basis. Aside from making
fundamental infrastructure decisions, emissions control is essentially a function of making changes
to the way a utility generates power. Because power plants represent massive
capital expenditures that can take up to 10 years to design, permit, and construct, a
compliance plan needs to take a long view on how these resources
will be used. For its part, Pepco operates with a
ten-year compliance plan.
The long-range plan is compiled by the entire compliance planning team, including the emissions trading practitioner, who provides insight on market supply and demand for allowances. The trader adds value to the long-term compliance planning process by outlining emissions trading strategies that can assist in managing compliance cost risks.