Federal and state air quality requirements impact the operation of existing power plants and the siting of new power plants. For example, new or expanding power plants may be required to offset the new emissions they generate with emission reductions located elsewhere. There are also requirements mandating the installation of particular pollution control technologies. These requirements are constraining generation from peaker power plants in particular. For example, a number of existing peaker plants are running short on available operating hours for the summer due to emission limitations in their permits. In a number of air districts, emission reduction credits available to offset the emissions of new peaker plants are in short supply.

Governor=s EO Addresses Constraints


The Governor=s Executive Order (EO) D-24-01 addresses the above constraints in a number of ways. First, air districts (upon payment of a mitigation fee) are required to modify emission limits in permits to ensure that power plants are not restricted in their ability to operate. Second, the Air Resources Board (ARB) is required to establish an emission reduction credit bank to provide a supply of emission offsets for new peaker plants. The ARB also intends to delay the installation of required pollution controls for new peaker plants.

Issues With EO; Need for Legislative Action


The ARB=s plan to implement the EO raises the following issues:

Federal Approvals Required. Since ARB=s plan would modify a number of federally enforceable requirements, federal approvals are needed. It appears that these approvals are forthcoming.

Potential Citizen Lawsuits. There is always the possibility that ARB=s plan could give rise to citizen lawsuits initiated under federal clean air legislation.

State-Operated Emission Reduction Credit Bank Should Be Established in Legislation. The plan for an emission reduction credit bank to generate emission offsets for peaker power plants raises policy and implementation issues that are best addressed in legislation. Legislation should address the generation and pricing of the emission reduction credits and the use of the funds from the state=s sale of the credits. According to ARB, amendments to AB 46x (Calderon) are being proposed to establish the emission reduction credit bank planned by the administration. Assembly Bill 97x (Canciamilla) would also establish a similar bank for broader purposes. The Legislature will also be evaluating a 2001-02 Governor=s Budget proposal for $100 million to generate emission reductions to offset emissions from new peaker plants.