Supreme Court ruling may save Westar millions

A Supreme Court decision Monday requiring the Environmental Protection Agency to account for costs of its regulations will allow Westar Energy to delay and possibly avoid millions of dollars worth of clean-air upgrades to its four coal-fired power plants in Kansas, company officials said.

Westar, Kansas’ dominant utility, has already spent $16 million of what was to be a $22 million project to bring its coal plants into compliance with the EPA mercury-reduction rule addressed in the court case, said Brad Loveless, executive director of environmental services.

The court decision, at least for now, will save Westar the remaining $8 million of the project budget, plus about $5 million a year it would have spent on supplies to operate the mercury removal system, Loveless said.

The money already spent went to engineering, design and prep work to install activated carbon units to remove mercury from the plants’ exhaust. The company had requested and received an extension on actually building the project.

In a Michigan case, the High Court struck down the EPA’s Mercury and Air Toxics Standards, also known as MATS, saying the agency’s refusal to consider costs and benefits when making the rules was inappropriate and unreasonable.

Nationwide, the rule would have cost utilities an estimated $9.6 billion to comply.

EPA is concerned about mercury because at high levels it can harm the brain, heart, kidneys, lungs, and immune system, according to the agency’s website. It is particularly dangerous to unborn babies and can harm the developing nervous system.

The Supreme Court ruling does not affect an ongoing rate case before the Kansas Corporation Commission. Westar is currently seeking an additional $125 million a year in rates, which works out to about $13 a month for the average residential customer.

While EPA-required environmental upgrades are a significant part of Westar’s request, those were for a different purpose, reducing emissions of sulfur and nitrous oxide gases, Loveless said. They did, however result in some mercury emission reductions as a side effect, Loveless said.

Niki Christopher, a lawyer for the Citizens’ Utility Ratepayer Board, confirmed that the EPA ruling will have little if any effect on the ongoing rate case. The board represents residential and small business utility customers.

“Whatever’s been done’s been done” and customers will have to repay Westar’s costs, Christopher said.

Loveless said power plants in the United States have significantly reduced their mercury output, but there’s still a lot of it floating in the air worldwide from plants in Asia.

“The challenge for us isn’t so much what we do,” he said. “It’s trying to get Asia to comply with reductions.”

The Supreme Court ruling didn’t say that the EPA couldn’t regulate mercury emissions. Nor did the court require the agency to forgo regulations if the cost is more than the dollar value of environmental and health benefits.

But in a 5-4 split decision, the justices did say regulatory decisions have to be appropriate.

“The phrase ‘appropriate and necessary’ requires at least some attention to cost,” said the court opinion, delivered by Justice Antonin Scalia. “One would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”

The decision sent the MATS rule back to the drawing board, but doesn’t necessarily kill it, Loveless said.

“The EPA may be able to fix the rule, or it may be fatally flawed,” he said.

For now, Westar plans to take no further action until the mercury standards are clarified.

If the rule dies, the company will have spent the initial $16 million – which will eventually pass on to customers through increased rates – but it won’t be on the hook for construction and supplies. If the rule is reinstated, the company will be able to pick up where it left off and finish the project, Loveless said.

U.S. Rep. Mike Pompeo, a Wichita Republican, issued a statement late Monday praising the Supreme Court decision.

“The EPA’s proposed regulation on power plant emissions isn’t about clean air; it’s about adhering to a radical anti-fossil fuel agenda that would place a real and significant economic burden on all consumers and cost American jobs,” Pompeo’s statement said.

This story was originally published June 29, 2015 at 9:39 PM with the headline "Supreme Court ruling may save Westar millions."