Energy Crunch Puts Strain on Smog Controls

California’s power plants are spewing large quantities of extra air pollution during the state’s energy crunch--setting the stage for a high-stakes conflict between power producers and air quality regulators as the energy shortage continues.

Earlier this month, regulators received a taste of problems to come when energy company AES Pacific Inc., ordered to clean up some of Southern California’s dirtiest plants, turned off its power, wiping out precious megawatts while the state was under power-shortage alerts.

The company and regulators eventually compromised on a record $17-million fine, plus an agreement that will keep the plant working--and polluting--for now, but will clean it up before next summer’s smog season.

Officials at the regional Air Quality Management District and the state Air Resources Board are preparing for more such fights in the weeks to come. They are clearly feeling the pressure to avoid cutting into electricity supplies.

“Air pollution is a problem, but no lights is a problem as well. We need to find ways to make sure these plants are not shut down,” said Jerry Martin, a spokesman for the state air board.

But Barry Wallerstein, executive officer at the South Coast Air Quality Management District, which regulates air quality in Los Angeles, Orange, Riverside and San Bernardino counties, said it is unfair to blame clean-air rules for power outages. Some power companies are using air quality agencies as scapegoats, he said.

“These power producers have had years to put controls on the plants. They should have been put on a long time ago. This is clearly a problem of their own making,” Wallerstein said.

Using Free Market to Cut Pollution

In fact, the utility companies that owned the state’s power plants until deregulation was instituted spent much of the 1980s resisting demands to clean up power plants.

At the time, the AQMD was proposing regulations that would have slashed power plant emissions by about 90%. Instead the regulators adopted an industry-backed plan to use the free market to reduce pollution. But much as the state’s energy shortages have caused chaos in the market for electricity, they also have badly disrupted the pollution-control market.

Most of California’s electricity comes from hydropower dams in the Northwest, coal-fired plants in the Great Basin and nuclear reactors. But the state has about 900 fossil fuel generating stations that operate as intermediate or peak electricity producers in periods of heavy demand.

Until deregulation, those plants--many of which are aging and dirty--were used only sporadically. But with this year’s electricity shortages, they have been running at full tilt. That has helped keep the lights on, but has led to increases of at least 25% and possibly much more in smog-forming emissions, according to estimates being prepared by the Air Resources Board.

“Basically, we have an electric power system with a 1950s infrastructure to power a 21st century technological economy,” said V. John White, an energy expert and lobbyist for the Sierra Club.

Power plants typically emit 70 tons per day of gases that contribute to ozone, urban haze and airborne acids in California. Many of the state’s boilers and turbines are as much as 45 years old. Older plants consume about 50% more fuel per megawatt produced than newer models, and some lack any pollution controls at all, according to officials.

Of the 93 boilers and turbines operating in the Los Angeles region, for example, 40 have no pollution controls. The plants are fired with natural gas, which is a far cleaner fuel than coal or oil, but even so, the older plants are too dirty to run year-round without exceeding pollution limits.

Air quality districts across the state are feeling political heat as they try to balance the need to protect public health from noxious smog with the need to avert rolling blackouts.

When Houston-based Reliant Energy Co. was faced with a potential shutdown of two big power plants in Ventura County last summer because of air pollution violations, the local air district cobbled together an agreement that allowed the plants to keep operating with added pollution in exchange for a promise of greater reductions later.

Similarly, in September, the Los Angeles Department of Water and Power agreed to pay a $14-million penalty and slash power plant emissions for violating clean-air regulations. The city-run utility relied on old power plants in Long Beach, Inglewood and the San Fernando Valley to supply electricity. Those units had been mothballed for five years, and their use resulted in the release into the air of an additional 100 tons of pollution.

AES Pacific reduced power production by 2,000 megawatts, half its capacity, by idling some of its dirtiest units at plants in Redondo Beach, Huntington Beach and Long Beach when the company was threatened in November with a cleanup order from the AQMD. Those boilers and turbines were offline for three weeks, a period during which the governor switched off Christmas tree lights at the Capitol to save energy. Before being shuttered, the three AES Pacific power plants had released an extra 1 million pounds of pollution this year.

In the Bay Area, a power plant operated by Southern Energy Co. appears on the threshold of exceeding its emissions quota for the year. If it reaches its pollution limit, which could happen any day now, the local air district plans to restrict use of six so-called “peak units” generating 125 megawatts, except in cases of extreme power shortage, according to air quality officials.

Industry and air quality officials acknowledge that the state’s generating stations need to be cleaned up but have debated on and off for nearly two decades over how best to do it.

Smokestack controls are expensive and plant owners have strongly resisted efforts to require them. But the state as a whole--and Southern California in particular--is under federal mandate to keep making steady progress toward cleaner air. That means any increased emissions from power plants must be offset somewhere else--putting even greater pressure on other industries to clean up.

At the same time, the current energy shortages have strengthened the hand of energy companies, even as their generating stations pollute more.

Aides to Gov. Gray Davis have urged regulators to keep the power situation in mind as they enforce clean-air rules. The energy shortage is the biggest problem so far in Davis’ administration, prompting the governor to attempt to control the damage as major utilities face the prospect of bankruptcy and consumers face rate hikes.

“I don’t want to breathe dirty air, but a combination of the existing regulations and the [power] capacity shortage are certainly making it difficult for us to get needed megawatts,” said Kellan Fluckiger, chief operations officer for the California Independent System Operator, which manages three-fourths of California’s power grid.

Cost of Emission Credits Soars

The free-market pollution-reduction strategy that the AQMD adopted in 1993 was a smog-credit trading program called Reclaim.

The program, which was supported by the industry to reduce costs and add flexibility, gave each factory and plant in Southern California a set amount of pollution that it could emit each year. Those companies that did not fully use their pollution allotments were allowed to sell credits to companies that were going over their limits.

Each year, the total amount of allowable pollution was reduced. The idea was that, as the overall limit tightened, the free market would lead companies to find the least costly ways of reducing pollution.

But this year, as power companies gobbled up credits to cover excess emissions, the cost of credits soared. The trading market was thrown into chaos, and many companies found credits unaffordable.

That has forced manufacturers and power companies to search for new, cheaper ways to control pollution, which was the original intent of the program. But it also has meant that some power plant operators have decided that paying fines to the AQMD is cheaper than trying to buy pollution credits.

Industry groups would like to change the program by bringing new sources of credits into the market. For example, some have proposed letting industries receive credits for scrapping old, polluting cars--an approach that has been plagued with problems in the past.

If the trading system cannot be fixed, regulators could move to impose detailed pollution-control rules--as they planned to do more than a decade ago. In the short term, they also have the option of issuing legal directives, known as abatement orders, which direct the owners of polluting plants to shut down. But mindful of the enormous economic stakes, air quality officials have been reluctant to take that step.

As dirty as the old power plants are, they are difficult to clean up right now. Installing pollution control equipment requires taking a plant offline--something state officials do not wish to have happen at a time when supplies are already short.

This time of year California’s homes and businesses require about 38,000 megawatts of power. But power plants, after running hard much of the year, are starting to break down, and maintenance has idled equipment that would normally produce about 5,000 megawatts. A like amount is typically unavailable because of plant failures or accidents, Fluckiger said.

“It’s like running a ’57 Chevy at 85 mph on the freeway. It just breaks down more,” said Aaron Thomas, spokesman for AES Pacific.