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EPA Rules Curb Ability of Public Power Utilities to Meet Growing Demand: Fitch

New rules from the Environmental Protection Agency could accelerate the retirement of existing coal-fired generating facilities and limit new baseload natural gas facilities, hampering the public power sector's ability to meet growing electricity demand, Fitch Rating said recently.

“Utilities exposed to market dislocation, price spikes and operational disruptions as a result could face drains on liquidity and downward rating pressure,” it said.

With roughly 75% of the nation already subject to high or elevated risk of shortfalls in electricity supply according to the North American Electric Reliability Corporation, the rules heighten market concerns about the adequacy of generating capacity across the U.S., Fitch said.

The finalized rules require coal plants that plan to operate past 2039 and new baseload gas-fired plants to reduce their carbon dioxide emissions beginning in 2032 using carbon capture or other methods.

According to the rating agency, the new rules “were largely expected by the market, and public power utilities have been broadly planning and taking action to reduce carbon emissions.”

It said that the EPA has been attempting to regulate carbon dioxide as a pollutant since 2009, having previously released its Clean Power Plan and Affordable Clean Energy Plan, both of which were subject to legal challenges and replaced by new incoming administrations.

“The new rules have also been challenged in court and are likely to face renewed political debate if the November elections produce a Republican administration,” Fitch said.

It also noted that the Energy Information Administration's projected capacity needs to offset plant closures and meet growing demand were deemed to be aggressive by Fitch even before the new EPA rules were finalized.

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