6.1a. ERMUSR 09-08-2015 - Laserfiche WebLink

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The CPP identifies trading as a preferred method of achieving the substantial CO2 emissions reductions required by the rule. In the case of CO2 intensity,or rate-based State Implementation Plans(SIPs),the commodity traded would be something EPA is calling emissions rate credits(ERCs). In the case of mass-based SIPs that regulate total CO2 emissions,CO2 allowances would be traded. Because Great River Energy's plants are among the most CO2 efficient, we will have to purchase fewer ERCs or CO2 allowances,thus giving our plants a cost advantage in the market.Great River Energy has long believed an approach to CO2 regulation that relies on markets, rather than a command and control structure, is the most economically efficient way to implement CO2 regulation. The CPP also promotes renewable energy as a way to reduce CO2 intensity or to replace some power from coal plants.The Upper Midwest has some of the best wind resource opportunities in the country.We will study the impact of taking advantage of wind opportunities as a potential CPP compliance mechanism. Great River Energy has been preparing for CO2 regulation,and the CPP did not catch us by surprise.The Great River Energy board adopted a resolution in 2013 that called for: • Acceleration of depreciation on Coal Creek and Stanton Stations to keep our options open • Substantial reduction in our reliance on coal • Meeting our growth requirements with conservation,energy efficiency, renewables, natural gas and the energy market. We have made progress on all three objectives, including reducing the use of coal-based energy in our portfolio. Litigation The CPP will be challenged in court by a host of parties. It is very likely the U.S.Supreme Court will ultimately determine the validity of the CPP. EPA's authority to regulate CO2 emitted by existing power plants is derived from Section 111(d)of the Clean Air Act.Section 111(d)is a poor vehicle for CO2 regulation.The question of whether EPA exceeded the legislative authority granted in the Clean Air Act is a legitimate one for the courts to answer. Nevertheless, until and unless the CPP is stayed or overturned by the courts, our primary effort will be devoted to complying with the CPP and working with North Dakota officials and others to shape the state's SIP in a way that promotes reliability and affordability for our members. Great River Energy's plan going forward We continue to digest the 1,560 pages of the CPP and analyze its impact on Great River Energy.We are also learning more about the CPP through the National Rural Electric Cooperative Association,the Coalition for Innovative Climate Solutions(an electric utility industry group of which we are a member),the Midwestern Power Sector Collaborative (a group facilitated by Great Plains Institute that includes utilities,government officials and non-governmental organizations),the Lignite Energy Council and others. We will continue our work with North Dakota and Minnesota government officials and utilities on the states'SIPs. The structure of the Clean Air Act states that EPA creates a guideline(the CPP),each state proposes a SIP to implement the CPP,and EPA reviews the SIP and replaces it with a Federal Implementation Plan (FIP) if EPA determines the SIP does not satisfactorily implement the CPP.As a result,the states will be focusing on their SIPs. It is extremely important to be at the table as that occurs to help shape the SIP,especially in North Dakota,where our resources covered by the CPP are located. In Minnesota,where we have no power plants covered by the CPP,our focus will be to encourage the state to participate in multi-state trading to implement the CPP. Conclusion Our members are the sole focus of our engagement in the CO2 regulation debate.We believe the approach we have laid out is the best way to ensure Great River Energy continues to provide reliable,affordable wholesale power to our members in an environmentally sound manner. August 24,2015 184 A Touchstone Energy'Cooperative K.