[Federal Register Volume 60, Number 69 (Tuesday, April 11, 1995)]
[Rules and Regulations]
[Pages 18462-18471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8601]




[[Page 18461]]

_______________________________________________________________________

Part IV





Environmental Protection Agency





_______________________________________________________________________



Clean Air Act: Acid Rain Program Permits; Final Rule and Proposed Rule

  Federal Register / Vol. 60, No. 69 / Tuesday, April 11, 1995 / Rules 
and Regulations   
[[Page 18462]] 

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 72

[FRL-5186-3]
RIN 2060-AE59


Acid Rain Program: Permits

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

-----------------------------------------------------------------------

SUMMARY: Title IV of the Clean Air Act (the Act), as amended by the 
Clean Air Act Amendments of 1990, authorizes the Environmental 
Protection Agency (EPA or Agency) to establish the Acid Rain Program. 
The program sets emissions limitations to reduce acidic deposition and 
its serious, adverse effects on natural resources, ecosystems, 
materials, visibility, and public health. On January 11, 1993, the 
Agency promulgated final rules under title IV. Several parties filed 
petitions for review of the rules. On January 10, 1995, EPA and the 
parties signed a settlement agreement addressing reduced utilization 
issues.
    Based on a review of the record, the Agency concludes that the 
January 11, 1993 regulations concerning reduced utilization should be 
revised. The overall effect of the revisions is to reduce the reporting 
and recordkeeping burden on utilities. The regulations require that, 
unless certain requirements are met, the designated representative of a 
unit in Phase I of the program whose annual utilization of fuel is less 
than its average annual utilization in 1985-1987 must submit a reduced 
utilization plan. The regulations also require designated 
representatives to submit end-of-year compliance reports that estimate 
the sulfur dioxide emissions resulting from any underutilization of 
Phase I units and to surrender allowances for the estimated emissions. 
The Agency is revising the regulations to simplify the criteria for 
determining if a reduced utilization plan must be submitted: Where the 
end-of-year reporting and allowance surrender requirements are met, 
such a plan is not required. Further, the Agency is revising the 
formulas for estimating emissions resulting from underutilization to 
correct errors, clarify certain provisions, and take account of and 
facilitate compliance by Phase I units with multiple owners or whose 
owners are required by law to purchase electricity from non-utility 
power production facilities.
    The rule revision is being issued as a direct final rule because it 
is consistent with the January 10, 1995 settlement and no adverse 
comment is expected.

EFFECTIVE DATE: This direct final rule will be effective on May 22, 
1995 unless significant, adverse comments are received by May 11, 1995. 
If significant, adverse comments are timely received on any portion of 
the direct final rule, that portion of the direct final rule will be 
withdrawn through a notice in the Federal Register.

ADDRESSES: All written comments must be identified with the appropriate 
docket number and must be submitted in duplicate to: EPA Air Docket 
Section (LE-131), Waterside Mall, Room 1500, 1st floor, 401 M St., 
S.W., Washington DC 20460.
    Docket No. A-93-40, containing supporting information used to 
develop the proposal, copies of all comments received, and responses to 
comments, is available for public inspection and copying from 8:30 a.m. 
to 12:00 p.m. and 1:00 p.m. to 3:30 p.m., Monday through Friday, 
excluding legal holidays, at EPA's Air Docket Section, Waterside Mall, 
Room 1500, 1st floor, 401 M St., S.W., Washington, DC 20460. A 
reasonable fee may be charged for copying.

FOR FURTHER INFORMATION CONTACT: Dwight C. Alpern, Attorney-advisor, at 
(202) 233-9151, Acid Rain Division (6204J), U.S. Environmental 
Protection Agency, 401 M St., S.W., Washington, DC 20460, or the Acid 
Rain Hotline at (202) 233-9620.

SUPPLEMENTARY INFORMATION: All public comment received on any portion 
of this direct final rule on which significant, adverse comments are 
timely received will be addressed in a subsequent final rule. That 
final rule will be based on the relevant portion of the rule revision 
that is noticed as a proposed rule in the Proposed Rules Section of 
this Federal Register and that is identical to this direct final rule. 
The contents of the preamble to the direct final rule are as follows:

I. Background: Purposes of Reduced Utilization Plans and Allowance 
Surrender for Underutilization of Phase I Units
II. Reduced Utilization Plan
III. Dispatch System
    A. Utility System and Identification of Dispatch System
    B. Apportionment of Phase I Units
IV. Emissions Rate
    A. Non-Utility Generators
    B. Dispatch System Emissions Rate
    C. NERC Emissions Rate
V. Administrative Requirements
    A. Executive Order 12866
    B. Unfunded Mandates Act
    C. Paperwork Reduction Act
    D. Regulatory Flexibility Act
    E. Miscellaneous

I. Background: Purposes of Reduced Utilization Plans and Allowance 
Surrender for Underutilization of Phase I Units

    A Phase I unit is underutilized if, in any year in Phase I, the 
total annual utilization of fuel at the unit is less than its baseline, 
i.e., its annual average fuel utilization for 1985-1987. The provisions 
of the Act that relate to reduced utilization or underutilization of 
Phase I units are found in sections 403(d) and 408(c)(1)(B).
    In dividing the Acid Rain Program into two phases, i.e., Phase I 
applicable only to larger, dirtier units and Phase II applicable to 
virtually all utility units, the Congress recognized the potential for 
circumvention of Phase I emission reduction requirements. A Phase I 
unit, which receives allowances for its baseline, could simply reduce 
its utilization below baseline by shifting generation of electricity to 
a unit that was not covered by Phase I and did not have to use 
allowances to authorize its SO2 emissions. The Phase I unit would 
retain the unused allowances but the same amount of SO2 could be 
emitted by the second unit, which would not use up any allowances. See 
58 FR 60951 (Nov. 18, 1993). In section 408(c)(1)(B), Congress adopted 
the solution of requiring submission of a reduced utilization plan by 
owners and operators of any Phase I unit that plans to reduce the 
unit's utilization in order to comply with Phase I emissions 
limitations. The plan must designate the units (referred to as 
``compensating units'') to which generation was shifted or account for 
the reduced utilization through energy conservation or improved unit 
efficiency. 59 FR 60219 (Nov. 22, 1994).
    Section 403(d) provides that the Acid Rain regulations must permit 
utilities to continue to operate in an economic and reliable fashion 
(e.g., through central dispatching that may result in shifting 
generation from Phase I units to other units or generators). However, 
section 403(d) also provides that the Acid Rain regulations must 
require utilities to compensate at the end of the year for emissions 
resulting from such operations and must facilitate orderly and 
competitive functioning of the allowance system. 56 FR 63019 (Dec. 3, 
1991).
    In order to achieve the objectives of both section 403(d) and 
section 408(c)(1)(B), EPA adopted, in the January 11, 1993 regulations, 
requirements concerning the submission of reduced utilization plans and 
allowance surrender for underutilization. The regulations 
[[Page 18463]] require that the designated representative of any Phase 
I unit with utilization below baseline apply formulas in Secs. 72.91 
and 72.92 estimating the emissions (if any) resulting from such 
underutilization and surrender allowances covering the estimated 
emissions. In this way, the emissions consequences of shifting 
generation from Phase I units are accounted for, and Phase I SO2 
emission reduction goals are preserved, without the designation of 
specific compensating units.
    In addition, the January 11, 1993 regulations require the 
submission of a reduced utilization plan for any Phase I unit that is 
planned to be utilized below baseline as a method of complying with 
SO2 emissions limitations. However, if the allowance surrender 
requirements are met and the unit meets criteria in Sec. 72.43(e), a 
plan is not required. The criteria are broadly drawn. For example, 
under these criteria, a plan need not be submitted for underutilization 
caused by economic dispatching that reflected increases in generation 
costs (e.g., allowance costs) at the unit. The Agency adopted this 
approach of limiting the plan submission requirement because of concern 
that, inter alia, economic dispatch and operation of utility systems or 
power pools might be inhibited because utilities might be unable to 
designate compensating units. 56 FR 63021.

II. Reduced Utilization Plans

    As noted above, Sec. 72.43(e) of the January 11, 1993 regulations 
sets forth criteria for making retrospective determinations as to 
whether a Phase I unit was underutilized for the purpose of complying 
with SO2 emissions limitations. If underutilization was for the 
purpose of compliance, then the unit must have a reduced utilization 
plan. If underutilization was incidental to utility operations, no plan 
is needed. In particular, a plan is not required if the allowance 
surrender requirements under Secs. 72.91 and 72.92 are met and one of 
several demonstrations are made. The demonstrations involve showing 
that the unit's underutilization was caused by a dispatch-system-wide 
sales decline, a forced outage at the unit, or economic dispatching. If 
none of these demonstrations can be made, the Agency determines on a 
case-by-case basis, considering certain indicators set forth in 
Sec. 72.43(e)(2), whether a plan should have been submitted.
    The Agency has concluded that this approach is unnecessarily 
complicated and burdensome. Because of concerns that Phase I units 
would be unable to designate compensating units, the criteria in 
Sec. 72.43(e) for avoiding submission of a reduced utilization plan 
were designed to apply broadly. In particular, a plan is not required 
to the extent underutilization is caused by economic dispatching. 
Consequently, under these criteria, plan submission is largely optional 
so long as the allowance surrender requirements are met.
    However, despite their broad scope, the criteria still leave some 
uncertainty as to whether the Agency will agree that a reduced 
utilization plan is not required even if allowances are surrendered. 
Further, owners and operators of Phase I units carry the burden of 
showing that the criteria are met. In fact, the January 11, 1993 
regulations require Phase I unit owners and operators to show in their 
annual compliance certification reports the amounts of underutilization 
caused by sales decline, forced outage, or economic dispatching. 40 CFR 
72.92(a)(2) (1993). The annual reports must also include specified 
information on forced outages at Phase I units. 40 CFR 72.92(a)(3) 
(1993). Additional submissions are required during the year in the 
event of a forced outage that will permanently shut down a Phase I unit 
and result in shifting generation to other units. 40 CFR 72.92(b)(1) 
(1993). Yet, this uncertainty and burden serve no real purpose if the 
allowance surrender requirements of Secs. 72.91 and 72.92 are met. The 
allowance surrender procedures account for the emissions consequences 
of underutilization and consequent shifting of generation and therefore 
obviate the need for a reduced utilization plan under section 
408(c)(1)(B) of the Act. Once underutilization is accounted for under 
Secs. 72.91 and 72.92, there is no basis for requiring any further 
accounting through the designation of compensating units or energy 
conservation or unit efficiency measures.
    The Agency concludes that Sec. 72.43(e) should be revised so that 
the requirement to submit a reduced utilization plan for an 
underutilized Phase I unit is eliminated if the allowance surrender and 
reporting requirements of Secs. 72.91 and 72.92 are met. This is a 
reasonable way of harmonizing sections 408(c)(1)(B) and 403(d) of the 
Act. The other criteria in Sec. 72.43(e) are therefore superfluous and 
are removed. Sections 72.92(a)(2) and (3) and (b)(1) of the January 11, 
1993 regulations, requiring submission of information in annual and 
other reports related to the removed criteria in Sec. 72.43(e), are 
also unnecessary and are removed.1

    \1\In addition, Sec. 72.91(a) of the January 11, 1993 
regulations is revised to make it clear that the reporting 
requirements in Sec. 72.91 apply only to calendar years in Phase I. 
Since Sec. 72.92(a) applies to calendar years covered by Sec. 72.91, 
this limitation applies to reporting under both sections. This 
reflects the fact that reduced utilization is a problem only in 
Phase I, when a minority of utility units are subject to Acid Rain 
SO2 emissions limitations. See 56 FR 63018 and 58 FR 3605.
---------------------------------------------------------------------------

III. Dispatch System

    The dispatch system of a unit plays an important role in the 
allowance surrender calculations under Secs. 72.91 and 72.92. For 
example, if a Phase I unit has a reduced utilization plan, the amount 
of reduced utilization accounted for under the plan (by a compensating 
unit, conservation or improved unit efficiency measures, or sulfur-free 
generators) must be determined. See 40 CFR 72.91(a)(3) (1993) 
(requiring calculation of ``plan reductions''). The percentage change 
in the total sales of the dispatch system is a factor in calculating 
reduced utilization accounted for by a sulfur-free generator. 40 CFR 
72.91(a)(3)(iii) (1993). As a further example, the total generation 
produced by the units and generators in a dispatch system during a 
Phase I calendar year must be used to determine the percentage of total 
dispatch system sales for the year that was generated by units and 
generators in the dispatch system. That percentage is used in 
calculating the emissions rate that is in turn used to determine how 
many allowances must be surrendered for the year. 40 CFR 
72.92(c)(2)(v)(A) (1993).
    The Agency is revising Sec. 72.33(a), (b), and (c) to clarify 
certain matters concerning the determination of a unit's dispatch 
system. In addition, while Sec. 72.33(f) allowed owners and operators 
of Phase I units to request that a Phase I unit be apportioned among 
its owners and their dispatch systems, certain revisions of the 
provision are needed to make it more workable and to coordinate it with 
the allowance surrender procedures under Secs. 72.91 and 72.92.

A. Utility System and Identification of Dispatch System

    Under Sec. 72.33, each Phase I unit must be treated as part of a 
dispatch system for purposes of the allowance surrender 
procedures,2 and the unit's utility [[Page 18464]] system (as 
defined in Sec. 72.2) is its dispatch system unless a complete 
identification of dispatch system including that unit is submitted 
under Sec. 72.33.

    \2\Because the allowance surrender procedures are found in both 
Sec. 72.91 and Sec. 72.92, Sec. 72.33(a) is revised to refer to both 
sections. The same change is made, for the same reason, in 
Sec. 72.33(c)(4) and (e)(2) and Sec. 72.33(f)(2) (iv) and (v). This 
conforms these provisions with other provisions in the January 11, 
1993 regulations that cite both sections.
---------------------------------------------------------------------------

    In the January 11, 1993 regulations, utility system is defined as 
all interconnected units and generators controlled by the same utility 
operating company, as reported in the National Allowance Data Base 
(NADB). The difficulty with this definition is that the NADB was 
published in final form in March 1993 and necessarily reflects 
information on utility systems as of that time. The Agency recognizes 
that the owners and operators of some units have changed since 1993 
and, particularly in light of increased competition in the electric 
utility industry, that more changes may occur during Phase I. In order 
to clarify that designated representatives may submit identifications 
of dispatch system to correct the utility system in which a unit or 
generator is listed in the NADB and that is used as its dispatch 
system, the Agency is revising the utility-system definition. Section 
72.2 now defines utility system as all interconnected units and 
generators operated by the same utility company and does not refer to 
the NADB. Section 72.33(e)(1) is revised to state that unless otherwise 
provided in an identification of dispatch system, a unit or generator 
included in the NADB retains, as its dispatch system, the utility 
system reported in the NADB.
    The NADB lists one utility operating company for each Phase I unit, 
Phase II unit, and non-affected unit in the database. Section 
72.33(b)(2) of the January 11, 1993 regulations states that, except as 
provided under Sec. 72.33(f), no Phase I unit may be listed in more 
than one identification of dispatch system. Although Sec. 72.33(b) of 
the January 11, 1993 regulations does not state explicitly that other 
units or generators also must be confined to a single identification of 
dispatch system, other provisions of the regulations reflect such a 
limitation. For example, Sec. 72.33(f) states that, except for the 
provisions for apportioning Phase I units under Sec. 72.33(f), all 
provisions of the regulations ``applicable to an affected source or 
affected unit * * * apply to the entire unit.'' 40 CFR 72.33(f)(6) 
(1993). By further example, the provisions requiring calculation of the 
``total'' generation of the units and generators in a dispatch system 
are based on entire units and generators and do not provide for 
division of a unit's or generator's generation among more than one 
dispatch system, except for Phase I units apportioned under 
Sec. 72.33(f). 40 CFR 72.92(c)(2)(v)(A) (1993). See also 40 CFR 
72.91(a)(3)(iii)(A) (1993) (``actual annual'' generation of the sulfur-
free generator). In addition, dispatch system emissions rate, which is 
calculated using the actual annual emissions rate of all Phase II units 
in the dispatch system, is based on the utilization of entire units, 
and there is no provision allowing apportionment of Phase II units. 40 
CFR 72.92(c)(2)(v)(C) (1993).
    In order to remove any possible uncertainty concerning the 
treatment of Phase II units, non-affected units, and generators 
(including sulfur-free generators and, as discussed below, non-utility 
generators), the Agency is revising Sec. 72.33(b)(2) to state that, 
with one exception, a unit or generator can be included in only one 
dispatch system.3 The only exception is provided in Sec. 72.33(f), 
under which a petition to apportion a Phase I unit among two or more 
dispatch systems may be submitted and approved. Section 72.33(f) 
provides that, if the petition is approved, the portions of the Phase I 
unit will be treated as separate units under Secs. 72.91 and 72.92, the 
allowance surrender provisions.

    \3\ The units and generators included in a given dispatch system 
under Sec. 72.33(b) or (e) may be changed under Sec. 72.33(d). A 
complete identification of dispatch system, reflecting the change, 
must be submitted for both the dispatch system from which the units 
or generators are removed and the dispatch system to which the units 
or generators are added. If the entire dispatch system from which 
the units or generators are removed is included in the dispatch 
system to which they are added, then an identification of dispatch 
system is necessary only for the latter dispatch system.
---------------------------------------------------------------------------

    Several other revisions are made here to the provisions concerning 
identification of dispatch system. While the January 11, 1993 
regulations require a complete identification of dispatch system to 
include a list of all units and sulfur-free generators in the dispatch 
system, the revised rule expands that list to include all generators, 
including sulfur-free generators and non-utility generators. The 
January 11, 1993 regulations also require that if the submissions under 
Secs. 72.91 and 72.92 by all designated representatives of the units in 
the identified dispatch system do not conform to the system-wide data 
provided for the dispatch system, the Administrator must reject the 
identification of dispatch system and all the submissions and require 
resubmission using the utility system of each unit as that unit's 
dispatch system. The revised regulations make such rejection optional 
so that the Agency may instead require corrections of the submissions 
and allow the identification of dispatch system to remain in effect. 
Sections 72.33(c)(4) and (e)(2) are revised to implement that change. 
Finally, Sec. 72.33(b)(3) is revised so that the deadline for providing 
an identification of dispatch system is the same as for providing a 
petition to apportion a Phase I unit under Sec. 72.33(f)(1), i.e., 
submission to EPA by January 30 of the year that the dispatch system is 
to take effect.

B. Apportionment of Phase I Units

    The January 11, 1993 regulations only allow for the apportionment 
of Phase I units, and such apportionment is only for the purpose of 
applying the allowance surrender procedures of Secs. 72.91 and 72.92. 
Under Sec. 72.33(f) of the January 11, 1993 regulations, Phase I units 
with multiple owners may petition to divide up the unit, for allowance 
surrender, into portions, i.e., one or more individual owners' portions 
representing the owners' respective percentage ownership interests in 
the capacity of the unit and the remaining portion of the unit. The 
petition requests that each individual owner's portion be treated as 
part of a dispatch system different than the dispatch system of the 
remaining portion. If the petition is approved, the adjusted 
utilization (which, if greater than zero, is underutilization) is 
calculated for the entire unit for the Phase I year governed by the 
approved petition, and each portion of the unit takes its percentage of 
the adjusted utilization reflecting the ownership percentage that the 
portion of the unit represents. Each portion of the unit then uses its 
share of the entire unit's adjusted utilization in calculating how many 
allowances (if any) must be surrendered for underutilization of the 
Phase I units in its respective dispatch system.
    The Agency received public comment expressing concern that 
requiring the portions of a Phase I unit to divide among them the 
adjusted utilization calculated for the entire unit fails to reflect 
differences among the Phase I unit owners' respective utilizations of 
their shares of the unit. While during the Phase I year one owner might 
take generation representing more than its percentage share of the 
baseline of the entire unit, another owner might take generation 
representing less than its percentage share.
    Section 72.33(f) is revised to require the separate calculation of 
adjusted utilization under Sec. 72.91 for each portion of the unit for 
which a petition to apportion is approved and for the remaining portion 
of the unit. This [[Page 18465]] approach meets the commenters' 
concerns. The separate calculation of adjusted utilization is made a 
uniform requirement for all apportioned Phase I units in order to 
ensure that overall there is no net adverse environmental impact from 
apportionment and to avoid the potential confusion and administrative 
burden of having two entirely different approaches for calculating 
reduced utilization of apportioned units.
    Public comment has also been directed at the requirement that 
apportionment be based exclusively on the owners' percentage ownership 
interest in the capacity of the Phase I unit. According to commenters, 
unit owners in some cases have entered into private agreements to 
divide up the allowances allocated to the unit based on percentage 
ownership of capacity during 1985-1987 while owners in other cases have 
agreed to divide up allocated allowances based on each owner's 
percentage share of utilization of the unit during 1985-1987. 
Commenters have requested that the regulations allow the basis for unit 
apportionment for purposes of allowance surrender to be consistent with 
the basis for dividing up the unit's allowance allocation.
    The Agency is willing to meet these concerns and accommodate 
underlying private agreements among unit owners so long as the 
resulting regulatory provisions are not too complex and do not appear 
to cause overall any net adverse environmental impact. This is 
consistent with the Agency's general approach of avoiding interfering 
with existing relationships among owners and operators. See 58 FR 3598. 
Consequently, the revised Sec. 72.33(f) allows the designated 
representative to elect in the apportionment petition one of two 
methods for apportioning the Phase I unit: the first method is based on 
the average of the owner's percentage ownership of the capacity of the 
unit for each year in 1985-1987; and the second method is based on the 
average of the unit's annual utilization that is attributed to the 
owner for 1985-1987. In order to avoid gaming by changing the 
apportionment method to minimize allowance surrender each year, the 
regulations make the selection of the apportionment method a one-time 
election for each Phase I unit. The same apportionment method must be 
used for all portions of the units for all years in Phase I for which 
any petition to apportion is approved and in effect.
    Further, the Agency is concerned that, whichever apportionment 
method is elected, the baselines and actual utilizations for the 
portions of the unit must not double-count or undercount any of the 
baseline and actual utilization for the entire unit. Consequently, the 
revised regulations require that the sum of the baselines of the 
portions of the unit (including the individual owners' portions and the 
remaining portion of the unit) equal 100% of the baseline of the entire 
unit. Similarly, for each Phase I year, the sum of the actual 
utilizations of the portions must equal 100% of the entire unit's 
actual utilization. In order to ensure that the attribution of a unit's 
utilization (whether baseline or actual utilization) to specific owners 
is not arbitrary, the regulations require that the same accounting 
procedures used to attribute the unit's fuel costs among the owners be 
used for attributing utilization. This is reasonable because fuel costs 
at a unit are directly related to the unit's utilization (i.e., the 
mmBtu of fuel consumed).
    The revised Sec. 72.33(f) establishes the requirements for the 
contents of a complete petition to apportion and provides that the 
Administrator may prescribe a format. In addition to the requirements 
in the January 11, 1993 regulations, the petition must include the 
election of apportionment method and a list of the units and generators 
and apportioned units to be included in the dispatch system proposed 
for each portion of the unit covered by the petition. The designated 
representative is not required to submit with the petition the 
documentation supporting the baselines for the portions of the unit or 
the dispatch systems proposed for each portion of the unit. The Agency 
maintains that this is a sound approach in light of: the certifications 
by the designated representatives that the information in the petition 
is true, accurate, and complete; the Agency's ability to require 
submission of additional information before acting on the petition or 
at any other time; and the potential for after-the-fact spot audits.
    The January 11, 1993 regulations require that, with regard to the 
dispatch system proposed for each owner's portion of the unit, the 
dispatch system must be a group of all units and generators that are 
interconnected and centrally dispatched and that are included in the 
same utility system, holding company, or power pool. The difficulty 
with this requirement is that a Phase I unit to be apportioned has 
multiple owners and only one owner may be the operator. A non-operating 
owner's portion of the unit cannot be in the ``utility system'' of the 
non-operating owner's other units and generators because, as defined in 
Sec. 72.2, only units and generators with the same operator comprise a 
``utility system''. In order to avoid this problem, the revised 
regulations require that the proposed dispatch system for each owner's 
portion of the unit include all units and generators that are 
interconnected and centrally dispatched by a single utility system, the 
service company of a single holding company, or a single power pool.
    Upon approval of an apportionment petition and the proposed 
dispatch systems, the allowance surrender formulas are applied to each 
portion of the Phase I unit and its respective dispatch system. The 
designated representative of the apportioned unit must surrender all 
allowances required for surrender by each portion of the unit.
    There is no provision in the January 11, 1993 regulations for 
termination of an approved apportionment of a Phase I unit. The Agency 
is concerned that after approval of an apportioned Phase I unit, 
circumstances may change so that the apportionment is no longer 
appropriate. For example, the owner of one portion of the apportioned 
unit could sell its entire interest in the unit and stop dispatching 
that portion of the unit. The dispatch system that, because of the 
approved apportionment, includes that portion of the unit would now 
include a portion of the unit that was no longer centrally dispatched 
along with the other units and generators in the dispatch system. That 
aspect of the approved apportionment (and the designated 
representative's certification concerning the continued central 
dispatching of the dispatch system) would no longer be accurate and the 
apportionment should be terminated. Of course, a new apportionment 
reflecting the new composition of ownership interests in the Phase I 
unit could be submitted for approval. Even without any change in 
ownership or dispatching, the owners of the Phase I unit might 
determine that an apportionment is no longer desirable. To accommodate 
changes in circumstance and to provide owners more flexibility, the 
revised regulations include a procedure for terminating apportionments. 
If a notice of termination is signed by the designated representatives 
of all units that could be affected by the termination (i.e., of all 
units included in all dispatch systems that include any portion of the 
unit) and submitted by January 30, the apportionment is terminated for 
that year and all remaining Phase I years.

IV. Emissions Rate

    The January 11, 1993 regulations require that the emissions 
consequences [[Page 18466]] of underutilization for a dispatch system 
be estimated for each Phase I year by multiplying that underutilization 
(referred to as ``dispatch system adjusted utilization'') by an 
emissions rate for generation used by the dispatch system to compensate 
for the underutilization. The emissions rate is composed of an 
emissions rate for compensating generation produced by non-Phase I 
units and generators within the dispatch system and another emissions 
rate for compensating generation produced outside the dispatch system 
by non-Phase I, non-foreign units and generators and acquired by the 
dispatch system. To calculate the composite emissions rate, the 
emissions rate for generation within the dispatch system is weighted by 
a fraction equal to total generation by the units and generators in the 
dispatch system divided by total dispatch system sales (i.e., total 
sales for direct use or resale) of the named utility system, holding 
company, or power pool that is the dispatch system) for the year. The 
actual annual emissions rates of the Phase II units in the dispatch 
system are used as a proxy for the actual emissions rates of all non-
Phase I units and generators in the dispatch system. Similarly, the 
emissions rate for generation outside the dispatch system is weighted 
by the fraction of total dispatch system sales that is accounted for by 
generation outside the dispatch system. NERC region emissions rates for 
non-Phase I, non-foreign units for 1985 are used as a proxy for the 
current emissions rates of non-Phase I, non-foreign units and 
generators.
    In light of public comment concerning compensating generation from 
non-utility generators, the calculation of the emissions rate of non-
Phase I units in the dispatch system, and 1985 NERC emissions rates, 
the Agency is revising these aspects of the January 11, 1993 
regulations.

A. Non-Utility Generators

    The Agency received public comment that some utilities are required 
by Federal or State law or by order of their State public utility 
commission to purchase electricity from non-utility generators. This 
required purchase of electricity may result in reduced utilization of 
the utility's own Phase I units. Since non-utility generators may have 
a different--apparently often lower--emissions rate than that of the 
utility's Phase II units or the NERC region emissions rate, the 
commenters urged that the formulas in Sec. 72.92 be revised to take 
account of this third possible source of compensating generation.
    The allowance surrender procedures in Secs. 72.91 and 72.92 are not 
intended to result in a precise calculation of the emissions 
consequences of underutilization of Phase I units. The procedures were 
adopted to provide an administratively feasible method of developing 
reasonable estimates of the emissions resulting from generation 
compensating for underutilization. In light of this goal, the January 
11, 1993 regulations establish a composite emissions rate based on two 
general categories of compensating generation. Because some utilities 
are obligated by law to purchase non-utility generation that may force 
them to reduce generation at their own units and because non-utility 
generators tend to have relatively low SO2 emissions, the Agency 
is revising the regulations to take account of non-utility generation. 
This change increases somewhat the complexity of the allowance 
surrender formulas but, as a practical matter, only utilities that must 
buy from non-utility generators are affected by the change. While the 
Agency maintains that, on balance, the change is reasonable, the Agency 
stresses that the allowance surrender formulas are only intended to 
estimate emissions and that any more refinements that would further 
complicate the formulas would seem to be counterproductive.
    The provisions incorporating non-utility generators into the 
allowance surrender procedures are premised on the fact that utilities 
acquiring non-utility generation have very limited information about 
the non-utility generators. Utilities contract to purchase non-utility 
generation but, as a result of not owning or operating these 
generators, have little or no knowledge about the fuels used by, and 
the heat rates and emission rates of, the generators. The Agency 
similarly has limited information about non-utility generators because 
they are not affected units. Consequently, the revised regulations use 
the available information on these generators (i.e., their emissions 
limitations and Kwh sales to utilities) to estimate emissions from 
compensating generation acquired from them.
    In order to be treated as a non-utility generator, a power 
production facility cannot be an affected unit or a sulfur-free 
generator. The facility must use its most stringent federally 
enforceable or State enforceable SO2 emissions limitation for the 
Phase I year as the estimate of its actual emissions rate.4 With 
one exception, if no unit-specific limitation that can be expressed in 
lbs/mmBtu is applicable to the facility for the year, then the facility 
cannot be treated as a non-utility generator for that year. The only 
exception is where a facility without an emissions limitation is 
authorized by law to use only natural gas as fuel; in that case the 
most stringent emissions limitation for the facility is deemed to be 
0.0006 lbs/mmBtu.5

    \4\If emissions limitations vary depending on the fuel used, the 
most stringent emissions limitation must be calculated for each fuel 
used. The resulting limitation with the highest lbs/mmBtu must be 
used as the estimate for the actual emissions rate of the non-
utility generator.
    \5\This default emissions rate is the average SO2 emissions 
rate for natural gas and was used for purposes of allocating 
allowances to utility units under section 405 of the Act. See 
Compilation of Air Pollutant Emission Factors (AP-42), Vol. 1 at 
1.4-1 through 1.4-3, US EPA (4th ed. 1985).
---------------------------------------------------------------------------

    As discussed above, the January 11, 1993 regulations calculate a 
composite emissions rate for a dispatch system reflecting compensating 
generation from within or from outside the dispatch system. The revised 
regulations introduce a third category, non-utility generation from 
non-utility generators, which equals the total generation acquired from 
non-utility generators that the dispatch system is required to purchase 
by Federal or State law or order of a utility regulatory commission or 
under a contract awarded as the result of a power purchase solicitation 
required by Federal or State law or utility regulatory commission 
order. To prevent double-counting, such generation is excluded in 
calculating the fractions of dispatch system sales accounted for by 
generation within or outside the dispatch system. Total non-utility 
generation from non-utility generators is used to calculate the 
fraction of dispatch system sales accounted for by such generators.
    The non-utility generator average emissions rate is calculated 
using the most stringent emissions limitation (or for natural-gas-only 
facilities, the default emissions rate) for each non-utility generator 
from which the dispatch system was required to purchase electricity, 
weighted by the amount (kwh) of required electricity purchases during 
the year. The fraction of generation from non-utility generators and 
the non-utility generator average emissions rate are used, along with 
the comparable data for generation within and outside the dispatch 
system, to derive the composite emissions rate multiplied by the 
underutilization for the dispatch system for the year.6 This 
yields the total number of allowances [[Page 18467]] that must be 
surrendered by Phase I units in the dispatch system.

    \6\The dispatch-system-wide data related to non-utility 
generators must be included in the dispatch system data report under 
Sec. 72.92(b).
---------------------------------------------------------------------------

B. Dispatch System Emissions Rate

    The January 11, 1993 regulations use the actual annual emissions 
rate for a dispatch system's Phase II units to estimate the emissions 
rate for the dispatch system's non-Phase I units. In the December 3, 
1991 proposed regulations, the Agency proposed to weight the actual 
annual emissions rate for each Phase II unit by the amount of the Phase 
II unit's increase in utilization for the year over baseline. 56 FR 
63147-48 (Dec. 3, 1991). The January 11, 1993 regulations adopted a 
simpler approach of weighting actual annual emissions rates by each 
Phase II unit's total utilization for the year. 58 FR 3685.
    However, the Agency has received public comments suggesting that 
weighting by the increase over baseline provides a more realistic 
estimate. It seems reasonable to treat a utilization reduction since 
1985-1987 of one unit in a dispatch system as being compensated for by 
a utilization increase since 1985-1987 of another unit in that dispatch 
system. Further, this approach is similar to that taken with regard to 
sulfur-free generators. Compensating generation claimed to be acquired 
from sulfur-free generators under a reduced utilization plan cannot 
exceed the amount of electricity produced by the sulfur-free generator 
in excess of the average annual amount produced by the generator in 
1985-1987. See 58 FR 3682. For these reasons, the Agency is revising 
the provisions for calculating dispatch system emissions rate to weight 
Phase II units' actual emissions rates by each unit's increased 
utilization over baseline. However, the Agency recognizes that it is 
possible that no Phase II unit in a dispatch system has increased 
utilization over baseline. In that case, non-affected units are 
providing the compensating generation but, because of the lack of 
emissions data from such units, the Phase II unit emissions rate must 
still be used as a proxy for non-affected units' emissions rates. The 
revised regulations therefore provide that if no Phase II unit is used 
above baseline, an average rate must be calculated using the Phase II 
units' annual actual emissions rates weighted by each unit's total 
utilization. Moreover, if a dispatch system has no Phase II unit 
emissions rate for the year, the NERC region emissions data will be 
used instead.

C. NERC Region Emissions Rate

    The January 11, 1993 regulations use 1985 NERC data to establish 
the non-Phase I, non-foreign emissions rate for each NERC region. The 
1985 emissions rate for units in the NERC region is multiplied by the 
fraction of non-Phase I, nonforeign units in the NERC region in order 
to exclude generation and resulting emissions from Phase I units and 
all foreign units and generators.
    The Agency has learned through public comment that the figures in 
the regulations for the fraction of non-Phase I, non-foreign generation 
contained inadvertent errors and failed to actually exclude foreign 
generation. The Agency has recalculated the fractions of non-Phase I, 
non-foreign generation for each NERC region. Table 1 of the revised 
regulations includes the corrected figures so that foreign generation 
is excluded as intended.7

    \7\The definition of ``sulfur-free generation'' is revised to 
make it clear that only facilities in the 48 contiguous states in 
the United States or the District of Columbia may qualify as sulfur-
free generators under reduced utilization plans. All foreign 
generation (including foreign generation that involves no SO2 
emissions) that offset underutilization is already excluded from 
allowance surrender in the revised Table 1. Allowing foreign 
facilities to be designated as sulfur-free generators and the 
generation acquired from them to be used to offset underutilization 
would double-count such generation.
---------------------------------------------------------------------------

VI. Administrative Requirements

A. Executive Order 12866

    Under Executive Order 12866, 58 FR 51735 (Oct. 4, 1993), the 
Administrator must determine whether the regulatory action is 
``significant'' and therefore subject to Office of Management and 
Budget (OMB) review and the requirements of the Executive Order. The 
Order defines ``significant regulatory action'' as one that is likely 
to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, it has been 
determined that this rule is a ``significant regulatory action'' 
because the rule seems to raise novel legal or policy issues. As such, 
this action was submitted to OMB for review. Any written comments from 
OMB to EPA, any written EPA response to those comments, and any changes 
made in response to OMB suggestions or recommendations are included in 
the docket. The docket is available for public inspection at the EPA's 
Air Docket Section, which is listed in the ADDRESSES section of this 
preamble.

B. Unfunded Mandates Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded 
Mandates Act'') (signed into law on March 22, 1995) requires that the 
Agency prepare a budgetary impact statement before promulgating a rule 
that includes a Federal mandate that may result in expenditure by 
State, local, and tribal governments, in aggregate, or by the private 
sector, of $100 million or more in any one year. Section 203 requires 
the Agency to establish a plan for obtaining input from and informing, 
educating, and advising any small governments that may be significantly 
or uniquely affected by the rule.
    Under section 205 of the Unfunded Mandates Act, the Agency must 
identify and consider a reasonable number of regulatory alternatives 
before promulgating a rule for which a budgetary impact statement must 
be prepared. The Agency must select from those alternatives the least 
costly, most cost-effective, or least burdensome alternative that 
achieves the objectives of the rule, unless the Agency explains why 
this alternative is not selected or the selection of this alternative 
is inconsistent with law.
    Because this direct final rule is estimated to result in the 
expenditure by State, local, and tribal governments or the private 
sector of less than $100 million in any one year, the Agency has not 
prepared a budgetary impact statement or specifically addressed the 
selection of the least costly, most cost-effective, or least burdensome 
alternative. Because small governments will not be significantly or 
uniquely affected by this rule, the Agency is not required to develop a 
plan with regard to small governments. However, as discussed in this 
preamble, the rule has the net effect of reducing the burden of part 72 
of the Acid Rain regulations on regulated entities, including both 
investor-owned and municipal utilities.

C. Paperwork Reduction Act

    The information collection requirements in this rule have been 
approved by OMB under the Paperwork Reduction Act, 44 U.S.C. 3501, et 
seq., and have been assigned control number 2060-0258. [[Page 18468]] 
    This collection of information reduces the estimated burden, as 
compared to the burden under the January 11, 1993 regulations, by an 
average of 35 hours per response for about 110 responses. These 
estimates include time for reviewing instructions, searching existing 
data sources, gathering and maintaining the data needed, and completing 
and reviewing the collection of information. An Information Collection 
Request document and estimates of the public reporting burden were 
prepared in connection with the January 11, 1993 regulations. 56 FR 
63098; 58 FR 3650.
    Send comments regarding this burden analysis or any other aspect of 
this collection of information, including suggestions for reducing the 
burden, to Chief, Information Policy Branch, EPA, 401 M Street, SW. 
(Mail Code 2136), Washington, DC 20460; and to the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
Washington, DC 20503, marked ``Attention: Desk Officer for EPA.''

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires 
each federal agency to consider potential impacts of its regulations on 
small business ``entities.'' Under 5 U.S.C. 604(a), an agency issuing a 
notice of proposed rulemaking must prepare and make available for 
public comment a regulatory flexibility analysis. Such an analysis is 
not required if the head of an agency certifies that a rule will not 
have a significant economic impact on a substantial number of small 
entities, pursuant to 5 U.S.C. 605(b).
    In the preamble of the January 11, 1993 regulations, the 
Administrator certified that those regulations, including the 
provisions revised by today's final rule, would not have a significant 
impact. 58 FR 3649. The final rule revisions adopted today are not 
significant enough to change the economic impact addressed in the 
January 11, 1993 preamble. Pursuant to the provisions of 5 U.S.C. 
605(b), I hereby certify that the revised rule will not have a 
significant, adverse impact on a substantial number of small entities.

E. Miscellaneous

    In accordance with section 117 of the Act, issuance of this rule 
was preceded by consultation with any appropriate advisory committees, 
independent experts, and federal departments and agencies.

List of Subjects in 40 CFR Part 72

    Environmental protection, Acid rain program, Air pollution control, 
Compliance plans, Electric utilities, Permits, Reporting and 
recordkeeping requirements, Sulfur dioxide.

    Dated: March 31, 1995.
Carol M. Browner,
Administrator, U.S. Environmental Protection Agency.

    For the reasons set forth in the preamble, chapter I of title 40 of 
the Code of Federal Regulations is amended as follows.

PART 72--[AMENDED]

    1. The authority citation for part 72 continues to read as follows:

    Authority: 42 U.S.C. 7601 and 7651, et seq.

    2. Section 72.2 is amended by revising the definitions for 
``sulfur-free generation'' and ``utility system'' to read as follows:


Sec. 72.2  Definitions.

* * * * *
    Sulfur-free generation means the generation of electricity by a 
process that does not have any emissions of sulfur dioxide, including 
hydroelectric, nuclear, solar, or wind generation. A ``sulfur-free 
generator'' is a generator that is located in one of the 48 contiguous 
States or the District of Columbia and produces ``sulfur-free 
generation.''
* * * * *
    Utility system means all interconnected units and generators 
operated by the same utility operating company.
* * * * *
    3. Section 72.33 is amended by revising paragraphs (a), (b)(2), 
(b)(3), (c)(2), (c)(4), (e), and (f) to read as follows:


Sec. 72.33  Identification of dispatch system.

    (a) Every Phase I unit shall be treated as part of a dispatch 
system for purposes of Secs. 72.91 and 72.92 in accordance with this 
section.
    (b) * * *
    (2) Except as provided in paragraph (f) of this section, each unit 
or generator may be included in only one dispatch system.
    (3) Any identification of dispatch system must be submitted by 
January 30 of the first year for which the identification is to be in 
effect.
    (c) * * *
    (2) The list of all units and generators (including sulfur-free 
generators) in the dispatch system.
* * * * *
    (4) The following statement: ``I certify that, except as otherwise 
required under a petition as approved under 40 CFR 72.33(f), the units 
and generators listed herein are and will continue to be interconnected 
and centrally dispatched, and will be treated as a dispatch system 
under 40 CFR 72.91 and 72.92, during the period that this 
identification of dispatch system is in effect. During such period, all 
information concerning these units and generators and contained in any 
submissions under 40 CFR 72.91 and 72.92 by me and the other designated 
representatives of these units shall be consistent and shall conform 
with the data in the dispatch system data reports under 40 CFR 
72.92(b). I am aware of, and will comply with, the requirements imposed 
under 40 CFR 72.33(e)(2).''
* * * * *
    (e) (1) Any unit or generator not listed in a complete 
identification of dispatch system that is in effect shall treat its 
utility system as its dispatch system and, if such unit or generator is 
listed in the NADB, shall treat the utility system reported under the 
data field ``UTILNAME'' of the NADB as its utility system.
    (2) During the period that the identification of dispatch system is 
in effect all information that concerns the units and generators in a 
given dispatch system and that is contained in any submissions under 
Secs. 72.91 and 72.92 by designated representative of these units shall 
be consistent and shall conform with the data in the dispatch system 
data reports under Sec. 72.92(b). If this requirement is not met, the 
Administrator may reject all such submissions and require the 
designated representatives to make the submissions under Secs. 72.91 
and 72.92 (including the dispatch system data report) treating the 
utility system of each unit or generator as its respective dispatch 
system and treating the identification of dispatch system as no longer 
in effect.
    (f)(1) Notwithstanding paragraph (e)(1) of this section or any 
submission of an identification of dispatch system under paragraphs (b) 
or (d) of this section, the designated representative of a Phase I unit 
with two or more owners may petition the Administrator to treat, as the 
dispatch system for an owner's portion of the unit, the dispatch system 
of another unit.
    (i) The owner's portion of the unit shall be based on one of the 
following apportionment methods:
    (A) Owner's share of the unit's capacity in 1985-1987. Under this 
method, the baseline of the owner's portion of the unit shall equal the 
[[Page 18469]] baseline of the unit multiplied by the average of the 
owner's percentage ownership of the capacity of the unit for each year 
during 1985-1987. The actual utilization of the owner's portion of the 
unit for a year in Phase I shall equal the actual utilization of the 
unit for the year that is attributed to the owner.
    (B) Owner's share of the unit's baseline. Under this method, the 
baseline of the owner's portion of the unit shall equal the average of 
the unit's annual utilization in 1985-1987 that is attributed to the 
owner. The actual utilization of the owner's portion of the unit for a 
year in Phase I shall equal the actual utilization of the unit for the 
year that is attributed to the owner.
    (ii) The annual or actual utilization of a unit shall be 
attributed, under paragraph (f)(1)(i) of this section, to an owner of 
the unit using accounting procedures consistent with those used to 
determine the owner's share of the fuel costs in the operation of the 
unit during the period for which the annual or actual utilization is 
being attributed.
    (iii) Upon submission of the petition, the designated 
representative may not change the election of the apportionment method 
or the baseline of the owner's portion of the unit.
    The same apportionment method must be used for all portions of the 
unit for all years in Phase I for which any petition under paragraph 
(f)(1) of this section is approved and in effect.
    (2) The petition under paragraph (f)(1) of this section shall be 
submitted by January 30 of the first year for which the dispatch system 
proposed in the petition will take effect, if approved. A complete 
petition shall include the following elements in a format prescribed by 
the Administrator:
    (i) The election of the apportionment method under paragraph 
(f)(1)(i) of this section.
    (ii) The baseline of the owner's portion of the unit and the 
baseline of any other owner's portion of the unit for which a petition 
under paragraph (f)(1) of this section has been approved or has been 
submitted (and not disapproved) and a demonstration that the sum of 
such baselines and the baseline of any remaining portion of the unit 
equals 100 percent of the baseline of the unit. The designated 
representative shall also submit, upon request, either:
    (A) Where the unit is to be apportioned under paragraph 
(f)(1)(i)(A) of this section, documentation of the average of the 
owner's percentage ownership of the capacity of the unit for each year 
during 1985-1987; or
    (B) Where the unit is to be apportioned under paragraph 
(f)(1)(i)(B) of this section, documentation showing the attribution of 
the unit's utilization in 1985, 1986, and 1987 among the portions of 
the unit and the calculation of the annual average utilization for 
1985-1987 for the portions of the unit.
    (iii) The name of the proposed dispatch system and a list of all 
units (including portions of units) and generators in that proposed 
dispatch system and, upon request, documentation demonstrating that the 
owner's portion of the unit, along with the other units in the proposed 
dispatch system, are a group of all units and generators that are 
interconnected and centrally dispatched by a single utility company, 
the service company of a single holding company, or a single power 
pool.
    (iv) The following statement, signed by the designated 
representatives of all units in the proposed dispatch system: ``I 
certify that the units and generators in the dispatch system proposed 
in this petition are and will continue to be interconnected and 
centrally dispatched, and will be treated as a dispatch system under 40 
CFR 72.91 and 72.92, during the period that this petition, as approved, 
is in effect.''
    (v) The following statement, signed by the designated 
representatives of all units in all dispatch systems that will include 
any portion of the unit if the petition is approved: ``During the 
period that this petition, if approved, is in effect, all information 
that concerns the units and generators in any dispatch system including 
any portion of the unit apportioned under the petition and that is 
contained in any submissions under 40 CFR 72.91 and 72.92 by me and the 
other designated representatives of these units shall be consistent and 
shall conform to the data in the dispatch system data reports under 40 
CFR 72.92(b). I am aware of, and will comply with, the requirements 
imposed under 40 CFR 72.33(f) (4) and (5).''
    (3) (i) The Administrator will approve in whole, in part, or with 
changes or conditions, or deny the petition under paragraph (f)(1) of 
this section within 90 days of receipt of the petition. The 
Administrator will treat the petition, as changed or conditioned upon 
approval, as amending any identification of dispatch system that is 
submitted prior to the approval and includes any portion of the unit 
for which the petition is approved. Where any portion of a unit is not 
covered by an approved petition, that remaining portion of the unit 
shall continue to be part of the unit's dispatch system.
    (ii) In approving the petition, the Administrator will determine, 
on a case-by-case basis, the proper calculation and treatment, for 
purposes of the reports required under Secs. 72.91 and 72.92, of plan 
reductions and compensating generation provided to other units.
    (4) The designated representative for the unit for which a petition 
is approved under paragraph (f)(3) of this section and the designated 
representatives of all other units included in all dispatch systems 
that include any portion of the unit shall submit all annual compliance 
certification reports, dispatch system data reports, and other reports 
required under Secs. 72.91 and 72.92 treating, as a separate Phase I 
unit, each portion of the unit for which a petition is approved under 
paragraph (f)(3) of this section and the remaining portion of the unit. 
The reports shall include all required calculations and demonstrations, 
treating each such portion of the unit as a separate Phase I unit. Upon 
request, the designated representatives shall demonstrate that the data 
in all the reports under Secs. 72.91 and 72.92 has been properly 
attributed or apportioned among the portions of the unit and the 
dispatch systems and that there is no undercounting or double-counting 
with regard to such data.
    (i) The baseline of each portion of the unit for which a petition 
is approved shall be determined under paragraphs (f)(1) (i) and (ii) of 
this section. The baseline of the remaining portion of such unit shall 
equal the baseline of the unit less the sum of the baselines of any 
portions of the unit for which a petition is approved.
    (ii) The actual utilization of each portion of the unit for which a 
petition is approved shall be determined under paragraphs (f)(l) (i) 
and (ii) of this section. The actual utilization of the remaining 
portion of such unit shall equal the actual utilization of the unit 
less the sum of the actual utilizations of any portions of the unit for 
which a petition is approved. Upon request, the designated 
representative of the unit shall demonstrate in the annual compliance 
certification report that the requirements concerning calculation of 
actual utilization under paragraph (f)(1)(ii) and any requirements 
established under paragraph (f)(3) of this section are met.
    (iii) Except as provided in paragraph (f)(5) of this section, the 
designated representative shall surrender for deduction the number of 
allowances calculated using the formula in Sec. 72.92(c) and treating, 
as a separate Phase I unit, each portion of unit for which a petition 
is approved under paragraph (f)(3) of this section and the remaining 
portion of the unit.
    (5) In the event that the designated representatives fail to make 
all the proper attributions, apportionments, 
[[Page 18470]] calculations, and demonstrations under paragraph (f)(4) 
of this section and Secs. 72.91 and 72.92, the Administrator may 
require that:
    (i) All portions of the unit be treated as part of the dispatch 
system of the unit in accordance with paragraph (e)(1) of this 
paragraph and any identification of dispatch system submitted under 
paragraph (b) or (d) of this section;
    (ii) The designated representatives make all submissions under 
Secs. 72.91 and 72.92 (including the dispatch system data report), 
treating the entire unit as a single Phase I unit, in accordance with 
paragraph (e)(1) of this paragraph and any identification of dispatch 
system submitted under paragraph (b) or (d) of this section; and
    (iii) The designated representative surrender for deduction the 
number of allowances calculated, consistent with the reports under 
paragraph (f)(5)(ii) of this section and Secs. 72.91 and 72.92, using 
the formula in Sec. 72.92(c) and treating the entire unit as a single 
Phase I unit.
    (6) The designated representative may submit a notification to 
terminate an approved petition by January 30 of the first year for 
which the termination is to take effect. The notification must be 
signed and certified by the designated representatives of all units 
included in all dispatch systems that include any portion of the unit 
apportioned under the petition. Upon receipt of the notification 
meeting the requirements of the prior two sentences by the 
Administrator, the approved petition is no longer in effect for that 
year and the remaining years in Phase I and the designated 
representatives shall make all submissions under Secs. 72.91 and 72.92 
treating the petition as no longer in effect for all such years.
    (7) Except as expressly provided in paragraphs (f)(1) through (6) 
of this section or the Administrator's approval of the petition, all 
provisions of the Acid Rain Program applicable to an affected source or 
an affected unit shall apply to the entire unit regardless of whether a 
petition has been submitted or approved, or reports have been 
submitted, under such paragraphs. Approval of a petition under such 
paragraphs shall not constitute a determination of the percentage 
ownership in a unit under any other provision of the Acid Rain Program 
and shall not change the liability of the owners and operators of an 
affected unit that has excess emissions under Sec. 72.9(e).
    4. Section 72.43 is amended by revising paragraph (e) to read as 
follows:


Sec. 72.43  Phase I reduced utilization plans.

* * * * *
    (e) Failure to Submit a Plan. The designated representative of a 
Phase I unit will be deemed not to violate, during a Phase I calendar 
year, the requirement to submit a reduced utilization plan under 
paragraph (b)(1) or (4) of this section if the designated 
representative complies with the allowance surrender and other 
requirements of Secs. 72.33, 72.91, and 72.92 of this chapter.
* * * * *
    5. Section 72.91 is amended by revising the introductory language 
of paragraph (a) (the formula is unchanged) to read as follows:


Sec. 72.91  Phase I unit adjusted utilization.

    (a) Annual Compliance Certification Report. The designated 
representative for each Phase I unit shall include in the annual 
compliance certification report the unit's adjusted utilization for the 
calendar year in Phase I covered by the report, calculated as follows:
* * * * *
    6. Section 72.92 is amended by revising paragraphs (a), 
(b)(2)(ii)(F), (b)(2)(ii)(G), (b)(2)(ii)(H), (c)(2)(v) and Table 1, 
removing and reserving paragraph (b)(1), and adding paragraphs 
(b)(2)(ii)(I) and (b)(2)(ii)(J) to read as follows:


Sec. 72.92  Phase I unit allowance surrender.

    (a) Annual Compliance Certification Report. If a Phase I unit's 
adjusted utilization for the calendar year in Phase I under 
Sec. 72.91(a) is greater than zero, then the designated representative 
shall include in the annual compliance certification report the number 
of allowances that shall be surrendered for adjusted utilization using 
the formula in paragraph (c) of this section and the calculations that 
were performed to obtain that number.
    (b) Other Submissions.
    (1) [Reserved]
    (2) * * *
    (ii) * * *
    (F) The calculation of ``dispatch system emissions rate'' under 
paragraph (c)(2)(v)(B) of this section;
    (G) The calculation of ``fraction of generation from non-utility 
generators'' under paragraph (c)(2)(v)(C) of this section;
    (H) The calculation of ``non-utility generator average emissions 
rate `` under paragraph (c)(2)(v)(F) of this section;
    (I) A certification that each designated representative will use 
these figures, as appropriate, in its annual compliance certification 
report and will submit upon request the data supporting these 
calculations; and
    (J) The signatures of all the designated representatives.
    (c) * * *
    (2) * * *
    (v) Calculating Emissions Rate. ``Emissions rate'' (in lbs/mmBtu) 
is the weighted average emissions rate for sulfur dioxide of all units 
and generators, within and outside the dispatch system, that 
contributed to the dispatch system's electrical output for the year, 
calculated as follows:

Emissions rate = [fraction of generation within dispatch system  x  
dispatch system emissions rate] + [fraction of generation from non-
utility generators  x  non-utility generator average emissions rate] 
+ [fraction of generation outside dispatch system  x  fraction of 
non-Phase 1 and non-foreign generation in NERC region  x  NERC 
region emissions rate]

Where:

    (A) ``Fraction of generation within dispatch system'' is the 
fraction of the dispatch system's total sales accounted for by 
generation from units and generators within the dispatch system, other 
than generation from non-utility generators. This term equals the total 
generation (in Kwh) by all units and generators within the dispatch 
system for the calendar year minus the total non-utility generation 
from non-utility generators within the dispatch system for the calendar 
year and divided by the total sales (in Kwh) by the dispatch system for 
the calendar year.
    (B) Dispatch system emissions rate'' is the weighted average rate 
(in lbs/mmBtu) for the dispatch system calculated as follows:
    Dispatch system emissions rate =
[GRAPHIC][TIFF OMITTED]TR11AP95.000


[[Page 18471]]

Where:

gi = the difference between a Phase II unit's actual 
utilization for the calendar year and that Phase II unit's baseline. 
If that difference is less than or equal to zero, then the 
difference shall be treated as zero only for purposes of paragraph 
(c)(2)(v) of this section and that unit will be excluded from the 
calculation of dispatch system emissions rate. Notwithstanding the 
prior sentence, if the actual utilization of each Phase II unit for 
the year is equal to or less than the baseline, then gi shall 
equal a Phase II unit's actual utilization for the year. 
Notwithstanding any provision in this paragraph (c)(2)(v)(B) to the 
contrary, if the actual utilization of each Phase II unit in the 
dispatch system is zero or there are no Phase II units in the 
dispatch system, then the dispatch system emissions rate shall equal 
the fraction of non-Phase I and non-foreign generation in the NERC 
region multiplied by the NERC region emissions rate.
ri = a Phase II unit's emissions rate (in lbs/mmBtu), 
determined in accordance with part 75 of this chapter, for the 
calendar year.
k = number of Phase II units in the dispatch system.

    (C) ``Fraction of generation from non-utility generators'' is the 
fraction of the dispatch system's total sales accounted for by 
generation acquired from non-utility generators within or outside the 
dispatch system. This term equals the total non-utility generation from 
non-utility generators (within or outside the dispatch system) for the 
calendar year divided by the total sales (in Kwh) by the dispatch 
system for the calendar year.
    (D) ``Non-utility generator'' is a power production facility 
(within or outside the dispatch system) that is not an affected unit or 
a sulfur-free generator and that has a ``non-utility generator 
emissions rate'' for the calendar year under paragraph (c)(2)(v)(F) of 
this section.
    (E) ``Non-utility generation'' is the generation (in Kwh) that the 
dispatch system acquired from a non-utility generator during the 
calendar year as required by federal or State law or an order of a 
utility regulatory authority or under a contract awarded as the result 
of a power purchase solicitation required by federal or State law or an 
order of a utility regulatory authority.
    (F) ``Non-utility generator average emissions rate'' is the 
weighted average rate (in lbs/mmBtu) for the non-utility generators 
calculated as follows:
    Non-utility generator average emissions rate =
[GRAPHIC][TIFF OMITTED]TR11AP95.001


Where:

Ni = non-utility generation from a non-utility generator;
Ri = non-utility generator emissions rate for the calendar year 
for a non-utility generator, which shall equal the most stringent 
federally enforceable or State enforceable SO2 emissions 
limitation applicable for the calendar year to such power production 
facility, as determined in accordance with paragraphs (c)(2)(v)(F) 
(1), (2), and (3) of this section; and
n = number of non-utility generators from which the dispatch system 
acquired non-utility generation. If n equals zero, then the non-
utility generator average emissions rate shall be treated as zero 
only for purposes of paragraph (c)(2)(v) of this section.

    (1) For purposes of determining the most stringent emissions 
limitation, applicable emissions limitations shall be converted to lbs/
mmBtu in accordance with Appendix B of this part. If an applicable 
emissions limitation cannot be converted to a unit-specific limitation 
in lbs/mmBtu under appendix B of this part, then the limitation shall 
not be used in determining the most stringent emissions limitation. 
Where the power production facility is subject to different emissions 
limitations depending on the type of fuel it uses during the calendar 
year, the most stringent emissions limitation shall be determined 
separately with regard to each type of fuel and the resulting 
limitation with the highest amount of lbs/mmBtu shall be treated as the 
facility's most stringent federally enforceable or State enforceable 
emissions limitation.
    (2) If there is no applicable emissions limitation that can be used 
in determining the most stringent emissions limitation under paragraph 
(c)(2)(v)(F)(1) of this section, then the power production facility has 
no non-utility generator emissions rate for purposes of paragraphs 
(c)(2)(v) (D) and (F) of this section and the generation from the 
facility shall be treated, for purposes of this paragraph (c)(2)(v) as 
generation from units and generators within the dispatch system if the 
facility is within the dispatch system or as generation from units and 
generators outside the dispatch system if the facility is outside the 
dispatch system.
    (3) Notwithstanding paragraphs (c)(2)(v)(F) (1) and (2) of this 
section, if the power production facility is authorized under federal 
or State law to use only natural gas as fuel, then the most stringent 
emissions limitation for the facility for the calendar year shall be 
deemed to be 0.0006 lbs/mmBtu.
    (G) ``Fraction of generation outside dispatch system'' = 1-fraction 
of generation within dispatch system-fraction of generation from non-
utility generators.
    (H) ``Fraction of non-Phase I and non-foreign generation in NERC 
region'' is the portion of the NERC region's total sales generated by 
units and generators other than Phase I units or foreign sources in the 
unit's NERC region in 1985, as set forth in Table 1 of this section.
    (I) ``NERC region emissions rate'' is the weighted average emission 
rate (in lbs/mmBtu) for the unit's NERC region in 1985, as set forth in 
Table 1 of this section.

       Table 1.--NERC Region Generation and Emissions Rate in 1985      
------------------------------------------------------------------------
                                                    Fraction            
                                                     of non-      NERC  
                                                     phase I    weighted
                                                    and non-    average 
                   NERC region                       foreign   emissions
                                                   generation  rate (lbs/
                                                     in NERC     mmBtu) 
                                                     region             
------------------------------------------------------------------------
WSCC.............................................       0.847      0.466
SPP..............................................       0.948      0.647
SERC.............................................       0.749      1.315
NPCC.............................................       0.423      1.058
MAPP.............................................       0.725      1.171
MAIN.............................................       0.682      1.495
MAAC.............................................       0.750      1.599
ERCOT............................................       1.000      0.491
ECAR.............................................       0.549      1.564
------------------------------------------------------------------------

[FR Doc. 95-8601 Filed 4-10-95; 8:45 am]
BILLING CODE 6560-50-P