EPA Issues New Emission Rules for Diesel Generators

   By Cassandra Sweet 
 

The U.S. Environmental Protection Agency issued new emission rules Tuesday for diesel generators used for oil and natural-gas production, emergency situations and other uses that the agency said would cut costs while reducing air pollution.

The rules are in line with a settlement agreement the EPA reached with EnerNOC Inc. (ENOC) and other companies to resolve an appeals court challenge the companies had filed against the EPA over an earlier version of the regulations.

Shares of EnerNoc closed Tuesday more than 25% higher at $15.76, following release of the new rules.

The new rules will cut costs for diesel-generator users by $139 million a year, while reducing hazardous air pollutants, carbon monoxide, nitrogen oxides and other pollution, the EPA said.

Diesel generators emit pollution that can cause cancer and can aggravate respiratory and heart diseases as well as cause neurological or other health problems, the EPA said.

EnerNOC and other providers of what are called "demand-response" services, arrange with large electricity users to agree in advance to cut their power use during times of peak power demand. Quickly removing large chunks of energy demand can ease a strained power grid on a hot summer day. In the U.S. Mid-Atlantic and other power markets, such removal of power demand is considered akin to providing additional backup power to the grid.

Many demand-response customers use diesel generators during times when they reduce the amount of power they take off the grid.

Under the EPA's new rules, diesel generators used during emergencies, including during times of peak power demand, can operate for up to 100 hours a year and the operators must file a yearly report detailing the dates and times of their operation.

The new rules are good for EnerNOC; however, power-plant operators that compete to supply power to the grid in the U.S. Mid-Atlantic are likely to request additional changes to the rules, said UBS analyst Julien Dumoulin-Smith.

"Expect vigorous appeal by the generators, and potential for state-specific air regulations," Mr. Dumoulin-Smith said. He noted that power-plant operators FirstEnergy Corp. (FE) and Exelon Corp. (EXC), among others were likely to be negatively affected by expanded opportunities for demand-response providers afforded by the new EPA rules.

Write to Cassandra Sweet at [e-mail]

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