EPA Unveils Power Plant Cleanup Plan : Environment: New rules expected to boost electric utility bills in East and Midwest. Officials say destructive acid rain will be substantially reduced.

Promising dramatic and visible improvement in the nation’s air quality, the Environmental Protection Agency Tuesday unveiled proposed new regulations designed to stem power plants’ emissions of sulfur dioxide, the main ingredient in acid rain.

Besides improving visibility in the eastern United States by 30%, EPA Administrator William K. Reilly said, the long-awaited cleanup of coal-fired power-generating stations would allow damaged forests and ailing lakes and streams to begin recovering and slow the deterioration of historic buildings and monuments.

“The acid rain program,” he said, “could become a model for other EPA programs and, indeed, is causing us to rethink the way we approach environment protection in our country and around the world.”

The regulations have been strongly endorsed by such environmental groups as the Environmental Defense Fund but have been criticized by some industry experts who say that they could increase utility bills by as much as 10% to 15%.

Reilly, however, dismissed those concerns. To the contrary, he said, the EPA estimates that the total cost of the crackdown would be less than $4 billion a year, translating to an increase of 1% to 1.5% in consumer electric bills.

Mandated by the 1990 Clean Air Act, the assault on sulfur dioxide and acid rain will stake its outcome on a financial incentive system designed to encourage cleanup by the heaviest polluters.

The proposed regulations are expected to be made final by next year and implemented in 1995. Initially, they would govern 110 plants in 21 states in the East and Midwest and seek to cut total sulfur dioxide emissions in half by the year 2000. A second phase would then be extended to an estimated 700 plants in nearly every state in the country.

Under a plan written into the Clean Air Act last year, the EPA will set individual power plants’ sulfur dioxide emission limits, using a formula based on their historical output of sulfur dioxide. Accordingly, utilities will be granted a designated number of annual “allowances,” each permitting the emission of one ton of the pollutant.

Plants maintaining emissions below their permitted level would be able to sell their unused allowances, while plants exceeding their limits would have to purchase additional allowances, face stiff federal fines and take steps necessary to reduce their pollution.

The allowances to be issued in 1995 would permit the regulated plants to emit about half as much sulfur dioxide as they did in 1985. The ceiling after the year 2000 would be reduced to about half of the 1995 level, with the EPA capping annual emissions at 9 million tons.

Since the announcement last spring that the government would organize a market in sulfur dioxide allowances, Reilly said, the financial community has expressed “keen interest” in the program. The administrator discussed it recently with representatives of the Chicago Board of Trade and he said that the board “may establish a new futures market based on allowances.”

The board also would act as the central exchange for the trading of the emission allowances.

Acid rain, so named because the pollutants are emitted into the atmosphere only to return to the surface with rain and snow, has been blamed not only for severe damage to lakes, streams and forests in the eastern United States but in Canada as well. Earlier this year, President Bush and Canadian Prime Minister Brian Mulroney signed an agreement calling for joint efforts to address the problem.

Power generating stations are believed to account for fully 70% of the nation’s sulfur dioxide emissions. They also contribute about a third of the nitrogen oxide emissions, which play a role in the development of acid rain.

Regulations designed to control emissions of nitrogen oxides are to be issued later this year.

Without being specific, Reilly suggested that the financial incentives brought to the acid rain problem will get serious consideration at EPA for incorporation in water pollution control programs.

“Three years ago, most people did not believe such a program could be put together,” he said. “But we have done it.”

He lauded “the efforts of many people, including representatives from electric utilities, state regulatory agencies, equipment manufacturers, fuel suppliers, environmental groups and the business community. . . . I believe that the process we used set a benchmark for working together in constructive and productive ways. The child of these labors is born today and it is a healthy baby, full of promise.”