	Introduction

On December 21, 2011, EPA Administrator Lisa Jackson announced final standards for mercury and other air toxics emissions from electric generating units (EGUs). The rule, commonly referred to as the "Utility MACT" or the "Mercury and Air Toxics Standards" (MATS), has been a long time in the making: Congress authorized the standards in the 1990 Clean Air Act Amendments, and EPA made a preliminary determination and began developing actual standards in 2000. The rule is among the most expensive rules that EPA has ever promulgated: EPA estimates the annualized cost at $9.6 billion in 2015. Industry estimates have been higher, although most analyses were conducted before EPA proposed or promulgated the final rule. Industry and environmental groups have been keenly interested in both the substance of the rule and the schedule for its implementation, and the House has already passed legislation ( H.R. 2401 ) that would change both. This report describes the rule and its potential impact. The report begins with a background section that describes the statutory authority and history of the rule's development before discussing the specifics of the rule, its estimated costs and benefits, and legislation related to it that has been considered in the 112 th Congress. All previous sources of mercury subject to emission standards had been required to meet plant-specific MACT standards. EPA estimates that the total annualized costs for compliance by oil-fired units will be $56 million (less than 0.1% of the rule's cost), and that there will be no change in oil-fired capacity as a result of the rule. In this respect, the standards reflect the statute's requirement that existing sources of HAPs should meet standards based on the current emissions of the best performing similar sources. EPA is also developing other rules for electric generating units, affecting air emissions, cooling water intake, and the management of coal combustion residuals, leading some stakeholders and policy-makers to question whether the cumulative impacts of these rules will have harmful impacts on electric generation capacity. The average consumer will see an increase of 3.1% ($3-$4 per month) in the cost of electricity in 2015 due to the rule, according to EPA, falling to less than 1% by 2030. As shown in Figure 1 , electricity prices have declined by about 20% since the early 1980s, after adjusting for inflation. This is not complicated or new technology. Benefits

The benefits of the rule are estimated by EPA at $37 billion to $90 billion annually—4 to 9 times as great as the costs—due primarily to the avoidance of up to 11,000 premature deaths each year. It is likely to affect older coal-fired plants that have not yet installed current pollution control technology. Companies that rely on nuclear power or natural gas for most of their power, and have fewer coal-fired plants, and companies that have already invested in controls due to state requirements or other federal regulations, generally support the rule. The NERC data suggest that ERCOT may experience reliability problems, but the emission standards will play a minor role. In New England, NERC reports conflicting information. Many in industry argue that three or four years is not enough time to complete installation of the required pollution control equipment, and as a result that the reliability of the nation's electric power supply could be harmed by the rule while construction is ongoing, even if ultimately the industry will have sufficient generating capacity. Circuit Court of Appeals overturned it.
On December 21, 2011, EPA Administrator Lisa Jackson announced final standards aimed at reducing mercury and other air toxics emissions from electric generating units (EGUs) by about 90%. The rule, commonly referred to as the "Utility MACT" or the "Mercury and Air Toxics Standards" (MATS), has been more than a decade in the making (Congress authorized the standards in the 1990 Clean Air Act Amendments), and it is among the most expensive rules that EPA has ever promulgated. EPA estimates the annualized cost at $9.6 billion in 2015. Industry estimates have been higher.
The benefits are also large, according to EPA, ranging from $37 billion to $90 billion annually. The benefits mostly reflect the monetized value of avoiding up to 11,000 premature deaths annually.
The rule's costs will fall primarily on older coal-fired units that do not have state-of-the art pollution controls. EPA says that this is a minority of coal-fired plants and an even smaller share of all electric generation: the agency estimates that 56% of coal-fired units have already installed equipment that can be used to meet the standards. In addition, about 55% of the nation's electricity supply comes from natural gas, nuclear, and renewable sources that are not subject to the rule's requirements.
This report describes the rule and its potential impact. The report discusses previous EPA efforts to regulate utility mercury emissions, the court decision overturning those regulations, the specifics of the new rule, its estimated costs and benefits, the impact of the rule on electric reliability, and legislation related to it that has been or may be considered in the 112th Congress.
Industry and environmental groups have been keenly interested in both the substance of the rule and the schedule for its implementation, and the House has already passed legislation (H.R. 2401) that would change both. A particular issue has been whether the standards will lead to retirement of a significant number of electric generating units, with negative effects on the reliability of the power supply. EPA and many other analysts maintain that this will not be the case.
To address this question, this report reviews industry data on planning reserve margins and potential retirement of units that do not currently meet the standards. Based on these data, it appears that, although the rule may lead to the retirement or derating of some facilities, almost all of the capacity reductions will occur in areas that have substantial reserve margins. Two areas that may have difficulty meeting reserve margins, Texas and New England, will experience few plant retirements and deratings, according to industry data. Furthermore, to address the reliability concerns expressed by industry, the final rule includes provisions aimed at providing additional time for compliance if it is needed to install pollution controls or add new capacity to ensure reliability in specific areas. As a result, it is unlikely that electric reliability will be harmed by the rule.
Another potential concern, given the rule's cost, is what impact it may have on the price of electricity. EPA estimates that the average price of electricity nationally will increase by 3.1% by 2015, as a result of the rule. Electricity prices have declined more than 20% in real terms since 1980. The impact of price changes would be relatively small compared to this downward trend, and well within the normal range of historical price fluctuations.