Memorandum by National Power PLC (EA 81)
National Power welcomes the opportunity to comment
on the Environment Agency's policies and regulatory practice.
We would wish to make the following points.
1. BACKGROUND
National Power works closely with the Agency
which has responsibility for regulating power station environmental
impacts, ranging from gaseous emissions of sulphur dioxide, nitrogen
oxides and dust to the operation of ash disposal sites and the
temperature of cooling water discharges. We have developed a good
working relationship with the Agency and fully support the Agency's
role in seeking continuous environmental improvement.
With regard to environmental regulation, we
see the following elements as crucial components of the environmental
regulatory framework:
— Open, transparent and stable regulation.
Our industry is capital intensive. It is, therefore, crucial that
we have clear ground rules which enable us to plan and invest
wisely for the future.
— Recognition of the highly competitive
nature of the electricity generation market. While environmental
regulation should provide the clear framework within which participants
operate, the mechanisms by which targets are achieved within a
competitive environment are best left to the players concerned.
— A balance between regulation, the
operation of the competitive market and socio-economic priorities.
We see tradeable permits as a potentially important component
of this framework going forward.
— Equitable treatment across and within
different sectors based on the operation of the BATNEEC principle.
The environmental regulatory framework should be capable of providing
a level playing field.
— Sound scientific principles aligned
to a risk-based approach to environmental regulation.
We would offer the following comments on specific
aspects of the Agency's approach:
2. ALIGNING ENVIRONMENTAL
REGULATION AND
COMMERCIAL REQUIREMENTS
The Agency is required "to seek to take
advantage of companies' planned investment cycles" and "establish
clear and consistent policy parameters, so that regulated organisations
can plan for the future". In doing this it must also ensure
a fair balance between the costs and benefits of environmental
regulation. We also recognise that the Agency should take account
of the impact of its decisions in terms of social issues and on
the environment as a whole.
Planning horizons within the electricity industry
in terms of major capital investments are typically three to five
years, with remuneration over much longer timescales. There have
been instances where the Agency has sought to make significant
changes to environmental authorisation conditions on shorter timescales
and there have been extended periods where future environmental
requirements have been uncertain.
We would encourage the Agency to:
— Take account of planning horizons
to provide a stable regulatory framework so that industry can
plan for the future and remunerate environmental investments;
— Deliver regulation in a consistent
and proportionate manner across industry and within industrial
sectors;
— Regulate in a way which minimises
interference in the operation of competitive markets, thereby
ensuring the consumer is not disadvantaged;
— Ensure environmental regulation reinforces
rather than sets Government policy on environment, energy and
competition.
3. PROMOTING
FLEXIBLE REGULATION
TO ENCOURAGE
COST-EFFECTIVE
ENVIRONMENTAL SOLUTIONS
The Agency is required to discharge its functions
in partnership with regulated organisations in ways that maximise
the scope for cost-effective investment in technologies and techniques
to achieve environmental improvement.
We will support the Agency in developing its
understanding of the electricity industry and the technical issues
associated with the operation of generating plant. However, we
believe that the industry is ultimately best placed to understand
the specific commercial implications of environmental constraints.
Consequently, we would encourage the Agency
to set emission limits and authorisation conditions in a manner
which is consistent with BATNEEC, but allowing the operator sufficient
flexibility to choose the most cost-effective means of compliance.
This should also allow the use of economic instruments, such as
emissions trading, where these are appropriate.
In regulating industry, we would encourage the
Agency to:
— Impose environmental constraints
in a flexible way which allows operators to choose the most cost-effective
solution consistent with compliance;
— Regulate in a manner whereby prescriptive
limits are avoided where other instruments can deliver the same
level of benefit in a more cost-effective manner ie where limits
based on BATNEEC could rule out options for emissions trading
or other economic instruments;
— Avoid unduly penalising industry
where more cost-effective solutions are available in other regulated
and non-regulated sectors eg transport.
4. RISK-BASED
REGULATION
The Agency has stated its intention to move
to a risk-based approach to regulation, with the objective of
targeting its resources on sites with the highest potential environmental
impact by means of risk-based procedures.
We believe that an effective risk-based approach
to regulation should:
— Reward good operational and management
practice, including the adoption of appropriately accredited environmental
management systems;
— Lead to the adoption of a holistic
approach to target operations that represent the highest risk
to the environment, in terms of both operational and environmental
impact, rather than those with the highest emissions;
— Result in a more appropriate regulatory
overhead, where structure and budgets reflect the apportionment
of environmental risk between sectors and media (air, land and
water);
— Provide a focused approach to the
implementation of the EU Integrated Pollution Prevention and Control
(IPPC) regime. In particular, minimise bureaucracy and regulatory
difficulties associated with the transition from Integrated Pollution
Control (IPC).
5. MAKING REGULATORY
DECISIONS BASED
ON SOUND
SCIENCE
A key objective of the Agency's environmental
strategy is to base its regulatory decisions around sound science
and research. This requires professionally and technically competent
staff, advisers and consultants.
To ensure decisions are based on sound science
or appropriate to the current level of scientific understanding,
the Agency should endeavour to ensure:
— Relevant scientific and technical
reports underpinning consultation documents and key decisions
are subject to peer review and made available at the time of release
and determination respectively;
— An incremental approach to environmental
improvement is adopted where the science or scientific methods
are not sufficiently robust to justify a more radical solution;
— The precautionary principle, where
action is taken in circumstances of scientific uncertainty, should
only be adopted when it is fully supported by a detailed environmental
risk analysis.
6. ENCOURAGING
OPEN REGULATION
The Agency identifies operating openly and consulting
widely as key regulatory priorities. Statutory guidance requires
it to develop a close responsive relationship with the public,
local authorities, regulated organisations and public bodies with
environmental responsibilities.
We fully support the adoption of such an approach,
which should encourage:
— More consistent, accountable and
transparent decision making for the regulated, local authorities,
NGOs and the public;
— No surprises to the regulated or
the regulator, with all parties working from the same documents;
— The minimisation of delays in decision
making.
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