When developing new regulations agencies often conduct Regulatory Impact Analysis (RIA). RIA is a systematic approach to evaluating the effects of proposed regulations and is a critical component of evidence based policymaking. Veritas has contributed to a number of regulatory impact analyses through technical commenting for the regulated community and by conducting detailed economic analyses.
Example Regulatory Impact Analysis Projects
EPA Stated Preference Study Comments
When the EPA was developing regulations under §316(b) of the Clean Water Act it developed information that was summarized in a Notice of Data Availability (NODA). One part of this information consists of a stated preference survey that was used to determine the use and nonuse value of hypothetical environmental changes. EPA solicited comments on what role, if any, the survey should play in EPA’s assessment of the benefits of regulatory options for the final rule.
Veritas reviewed the EPA effort for the Electric Power Research Institute (EPRI). The objective was to review the technical foundation for the survey, the analyses EPA performed from the data collected and the implications of using the data to support a final Clean Water Act §316(b) Rule for existing facilities. Veritas reviewed the NODA and supporting documents and addressed several fundamental econometric and economic questions raised by the NODA. The issues addressed and comments prepared focused on: (1) the econometric modeling approach and results; (2) sampling and weighting; (3) the experimental design and survey approach; and (4) the validity of the approach and its results. Overall, the review suggested that significant additional effort would be necessary for the Stated Preference Study to provide sound information to support public policy. Ultimately the study was not used for policymaking.
Net Employment Impacts from Coal Combustion Products Regulation
EPA proposed regulations that would alter the economics of coal-fired power plants and other electricity sources, the industries that recycle coal combustion products (CCPs) and the consumers that purchase electricity and use products made from CCPs. For the Utility Solid Waste Activities Group, Veritas developed a quantitative model of the economic impacts of the putative regulation focusing on the expected employment dislocations. The regulation was proposed under Subtitles C and D of the Resource Conservation and Recovery Act (RCRA). The analysis was conducted at the regional level because of the significant geographic variation in both the generation of electricity using coal and the national distribution of coal power plants. Employment impacts were traced to increases in the prices of electricity, premature retirement of coal-fired power plants, and reductions in the output levels of industries using CCRs.
Financial and Reliability Implications of Potential CCP Regulations
A breach in an ash surface impoundment caused a large coal ash spill at a Tennessee Valley Authority facility in Kingston, Tennessee. In response to resulting public scrutiny of coal combustion products (CCP) disposal practices, EPA developed regulations addressing the management of coal-combustion residuals. In anticipation of a proposed rule, the Electric Power Research Institute (EPRI) engaged Veritas to evaluate the financial and electric system reliability impacts of expected changes to CCP management and disposal. The study assessed unit-level financial impacts associated with those changes and compliance costs, and employed Electric Policy Simulation Model (EPSM) economic models of regional electricity markets to assess the baseline (without regulation) financial condition of coal units.
An important part of the study was the use of non-public information gained from interviews with individual utilities on CCP handling, management and disposal practices at the unit- and plant-level. These interviews covered 274 generating units at 95 plants. This information was utilized to develop cost functions that were site-specific for the utilities interviewed, and to refine the assumptions of the cost specification for non-interviewed utilities. An important result was that costs would be highly variable depending on (for example) the possibility of constructing Subtitle C compliant landfill, proximity to other (commercial or utility owned) landfills, and the amount of CCPs generated. Using this cost information, plant financial and system reliability implications were evaluated for six major electricity reliability regions. The results of the Veritas analysis were presented to the One Hundred Twelfth Congress of the U.S. House of Representatives, Subcommittee on Energy and Environment.
Closed Cycle Cooling Five Part Regulatory Impact Analysis
The Electric Power Research Institute (EPRI) led a five part Regulatory Impact Analysis about the effects of a national regulation that would require power plant closed-cycle cooling conversions. Veritas participated as a Principal Investigator in four of the five studies that comprise the EPRI Closed-Cycle Cooling Retrofit Research Program. This program had a critical role in informing regulatory understanding of the social costs and benefits of closed-cycle cooling as reflected in the final rule.
Veritas participated as a Principal Investigator on the analysis of efficiency impacts of closed cycle cooling, the fishery benefits of reducing impingement and entrainment, the financial and economic impacts of closed cycle cooling, and the electric system reliability impacts of requiring closed cycle cooling retrofits. Veritas used its suite of fishery models to evaluate the benefits of changes in catch. Veritas used its Environmental Policy Simulation Model (EPSM) to analyze owners’ retrofit decisions and estimate the resulting economic and financial impacts (e.g., changes in owner revenues, costs, and projects; changes in electricity prices; and changes in employment). The analysis uses EPSM to evaluate adequacy impacts and PowerWorld to simulate grid stability under NERC contingency conditions to identify security implications. Social costs were identified as the cost of system upgrades required to maintain reliability.