Issue Study 3. Electricity in North America: Some Environmental Implications of the North American Free Trade Agreement (NAFTA) Table of Contents – Issue Study 3 Acronyms 263 Acknowledgements 265 I. Introduction 266 II. The Issue in Context: Environmental, Economic, Social and Geographic Conditions 272 A. The Environmental Context 272 1. Air 273 2. Water 275 3. Land 277 4. Biota 278 B. The Economic Context 279 C. The Social Context 281 D. The Geographic Context 282 III. The NAFTA Connection 288 A. NAFTA Rule Changes 288 B. NAFTA’s Institutions 290 C. Trade Flows 292 260 1. Trade in Electricity 292 a. United States–Canada 293 b. United States–Mexico 294 c. Canada–Mexico 295 2. Trade in Fuels 296 a. Natural Gas 296 b. Coal 298 3. Trade in Enery-Sector Equipment 301 D. Transborder Investment Flows 302 1. Mexico 303 2. Canada 305 3. United States 306 IV. Linkages to the Environment 308 A. Production, Management and Technology 308 1. New Generation Technologies 308 a. Impact of New Enabling Technologies 312 2. Trends in Energy Production 313 a. Coal 313 b. Natural Gas 314 c. Hydroelectricity 315 d. Nuclear 317 e. Renewable Energy 319 f. Cogeneration, Demand-Side Management (DSM) and other Energy-Efficiency Measures 323 B. Physical Infrastructure 329 1. Electricity 329 a. Generation 329 b. Transmission 330 2. Natural Gas 333 a. Canada 333 b. Mexico 334 c. United States 335 C. Social Organization 336 D. Government Policy 337 1. Electricity 338 a. Canada 338 able of Contents: Electricity in North America T b. United States 339 c. Mexico 339 2. Natural Gas 340 a. Canada 340 A T b. United States 340 c. Mexico 341 NAF 3. Coal 342 4. Environmental Policy 343 a. United States 343 b. Mexico 344 c. Canada 346 5. Trends in International Environmental Policy 347 V. Environmental Impacts and Indicators 348 A. Production Data 352 Assessing Environmental Effects of B. Investment Data 352 C. Environmental Impact Data 353 1. Air 353 a. Air Emissions Inventories and Ambient Air 261 Quality Record (SOx, NOx and O3) 353 b. Particulate matter 353 c. Greenhouse gases 353 d. Mercury 354 e. Heavy metals 354 2. Water 354 a. Fuel Treatment and Processing 354 b. Acidified Lakes and Water Bodies 354 c. Mercury 354 3. Land 354 a. Waste Disposal 354 b. Acid Deposition 355 c. Reservoirs and Corridors 355 d. Forest Health 355 D. Energy Consumption and End-Use Efficiencies 355 References 356 Appendix A: Cross-Border Electric Interconnections between Canada, the United States, and Mexico 361 Appendix B: Installed Capacity and Generation by Fuel Type in North America 364 Appendix C: Electricity Consumption by State/Province in North America 365 Appendix D: Sample US Residential Electricity Tariffs 368 Appendix E: Electricity Sector Institutions and Voluntary Organizations 369 Appendix F: Planned or Projected Electricity Sector Expansion 373 Appendix G: Trade in Equipment and Materials in the Energy Sector 377 Appendix H: Background on Electricity Restructuring at State/Provincial Level in the United States and Canada 378 List of Figures Figure 1 Generation by Fuel Type in Canada, 1994 283 Figure 2 Generation by Fuel Type in the United States, 1994 284 Figure 3 Generation by Fuel Type in Mexico, 1994 284 Figure 4 Total Projected Additions of US Electricity-Generating Capability by Technology Type, 1996-2005 310 Figure 5 Technology Selected for New Capacity in Mexico, 1998-2006 310 Figure 6 Projected Canadian Capacity Expansions, 1996-2010 311 Figure 7 Existing and Anticipated Non-Attainment Zones under EPA Ozone Standards 345 Figure 8 Trade-Energy Sector-Environment Linkages 349 Figure H-1 Industry Restructuring in the United States 380 List of Tables Table 1 Installed Electricity Generation Capacity in North America, 1995/1996 282 Table 2 Electricity Consumption in North America 285 Table 3 Industrial Electricity Tariffs in North America 287 Table 4 Trade in Electricity in North America 292 Table 5 Trade in Natural Gas in North America 298 Table 6 Trade in Steam Coal in North America 301 Table 7 Representative Capital and Operational Costs for Renewable Energy Technologies 320 Table 8 US Generation from Renewable Energy Resources, by Source, 1992-1996 322 262 Table 9 Comparative Impact of Energy Efficiency Programs in North America 324 Table 10 Patterns in US Coal Production 343 Table 11 Emissions Limits in Mexico for Criteria Pollutants 345 Table A-1 US-Mexico Interconnections 361 Table A-2 US-Canada Interconnections 362 Table B-1 Installed Capacity and Generation: Fossil Fuels, Nuclear, Hydroelectric 364 Table B-2 Installed Capacity and Generation: Renewables 364 Table C-1 Consumption in Canada 365 Table C-2 Consumption in the United States 366 Table C-3 Consumption in Mexico 367 Table D-1 Tariff Ranks of Sample US Companies 368 Table E-1 MAPP Statistics for the US and Canada 372 Table F-1 Projected Capacity Additions in Canada, by Province 373 Table F-2 Planned Capacity Additions in Mexico: CFE’s Expansion Plan 374 Table F-3 Planned Capacity Additions in Mexico, by State, 1996-2006 375 Table F-4 Structure of CFE’s Current and Planned Capacity, 1995-2006 375 Table F-5 Projected Capacity Additions in the United States, by State 376 Table G-1 Mexican Trade with US and Canada, Selected Energy Sector Goods 377 Table G-2 US Trade with Mexico and Canada, Selected Energy Sector Goods 377 Table G-3 Mexican Trade with Selected Nations, Selected Energy Sector Goods 378 Table H-1 Restructuring Legislation Passed in Ten US States 379 Table H-2 US State-level Activities on Restructuring 381 Acronyms AECB Atomic Energy Control Board (Canada) ANIQ Asociación Nacional de la Industria Quimica (National Association of the Chemical Industry) ATC available transfer capability BANCOMEXT Banco de Comercio Exterior (National Foreign Trade Bank) BCG billion cubic feet cronyms Electricity in North America: A BCFD billlion cubic feet per day BLT build lease transfer BPA Bonneville Power Administration (United States) A T CCGT combined cycle gas turbine NAF CEA Canadian Electricity Association CFE Comisión Federal de Electricidad (Federal Electricity Commission) CO2 carbon dioxide CONAE Comisión Nacional para el Ahorro de Energía (National Commission for Energy Conservation) CRE Comisión Reguladora de Energía (Energy Regulation Commission) DFAIT Department of Foreign Affairs and International Trade DFO Department of Fisheries and Oceans (Canada) Assessing Environmental Effects of DOE Department of Energy EIA Energy Information Administration EPAct Energy Policy Act 263 EPA see USEPA EPECO El Paso Electric Company EPMI Enron Power Marketing Inc. ERCOT Electric Reliability Council of Texas EWGs exempt wholesale generators FCCC Framework Convention on Climate Change FDI foreign direct investment FERC Federal Energy Regulatory Commission FIDE Fideicomiso de Apoyo al Programa para el Ahorro de Energía (Trust for Energy Efficiency) FTA Canada-United States Free Trade Agreement GHG greenhouse gas GW gigawatt GWH gigawatthour IAQMB (USA-Mexico) Internation Air Quality Management Basin ICA Ingenieros Civiles Asociados (Associated Civil Engineers), Mexican engineering and construction firm INE Instituto Nacional de Ecología (National Ecology Institute) IOUs investor-owned utilities. IP Illinois Power IPPs independent power producers ISO independent system operator ITC investment tax credit kV kilovolt LLW low-level waste MAPP mid-continental area power pool MBTU million British thermal units MCF million cubic feet MCM million cubic meters MVA mega-voltamperes MLLW mixed low-level waste NARUC National Association of Regulatory Utility Commissioners NEB National Energy Board (Canada) NERC North American Electric Reliability Council NOx nitrogen oxides NPCC Northeast Power Coordinating Council NRC Nuclear Regulatory Commission (United States) NUG non-utility generator (United States and Canada) PEMEX Petróleos Mexicanos (Mexican National Oil Company) PCBs polychlorinated biphenyls PM particulate matter PURPA Public Utility Regulatory Policies Act QFs qualifying facilities (United States) 264 RFF resources for the future RTU remote terminal units SCADA supervisory control and data acquisition SDG&E San Diego Gas & Electric SE Secretaría de Energía (Energy Secretariat; Mexico) Secofi Secretaría de Comercio y Fomento Industrial (Trade and Industrial Promotion Secretariat; Mexico) Semarnap Secretaría de Medio Ambiente, Recursos Naturales y Pesca (Environment, Natural Resources and Fisheries Secretariat; Mexico) SERC Southeast Electric Reliability Council SOx sulfur oxides SRP Salt River Project STP Alliance Salt River Project-Tenaska-PowerEx marketing alliance TCF trillion cubic feet TQM Trans-Quebec and Maritime Pipeline Inc. (Canada) TMGT Trans-Maritime Gas Transmission UIC United Illuminating Company (Connecticut utility) USEPA US Environmental Protection Agency USAID US Agency for International Development VAT value-added tax VPSB Vermont Public Service Board WSCC Western Systems Coordinating Council Acknowledgements cknowledgements cronyms - A Electricity in North America: A A T NAF This paper was prepared by a trilateral team of researchers. John Paul Moscarella and Edward Hoyt of Econergy International Corporation (EIC) integrated material prepared by Ralph Cavanagh of the Natural Resources Defense Council, Dermot Foley of the Association for the Advancement of Sustainable Energy, Carol Reardon of Heenan Blaikie, Rogelio Ramirez de la O. of Ecanal S.A. de C.V., and David Wilk from WG Consultores y Asociados S.A. de C.V., as well as work by EIC itself. Assessing Environmental Effects of 265 I.