316(b)

State lawmakers are trying to block relicensing of the Indian Point nuclear power plant near New York City, but the owner hopes to keep the plant generating low-cost electricity. The battle over Indian Point raises new legal issues—and represents a microcosm of the struggle for America’s nuclear future.

The energy industry has known for decades that federal regulators eventually would set rules under the Clean Air Act to govern emissions of mercury and other air toxics from coal-fired power plants. However, with the U.S. Environmental Protection Agency now having issued a final mercury rule, along with guidelines for possible extensions of the compliance deadline, utilities and power plant owners finally have a clear idea what they are up against. And the outlook isn't pretty. The challenge is to retrofit many hundreds of generating plants across the country--and all on the same three-year compliance schedule. Yet two wildcards remain in play: what deference the EPA will give to electric reliability needs, as it "consults" with the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Council; and how effective FERC Chairman Jon Wellinghoff will be as Republican leadership in Congress works to derail the new rules.

The next decade will bring serious disruption to the utility industry. But with cooperation from regulators and legislators, utility companies will be able to shift their business models to capture significant value—both in existing businesses and emerging ones.

With budget battles heating up in Washington, Congress and the Obama administration are squaring off to debate energy policy legislation. While Democratic leadership favors a clean energy standard, Republican lawmakers are focused on blocking administration initiatives to regulate greenhouse gas emissions. A compromise approach might bring substantial changes to America’s national energy strategy.