Off-Gas Provisions of the Powerplant and Industrial Fuel Use Act

GAO surveyed electric utilities to determine the potential effects of the Powerplant and Industrial Fuel Use Act prohibitions on natural gas use in electric utility boilers starting in 1990. These provisions were designed to conserve natural gas for uses other than the generation of electricity, encourage the use of coal or alternative fuels in the place of natural gas, and ensure natural gas availability for high priority purposes. The utility industry has maintained strong opposition to the provisions because of: (1) the high costs of replacing natural gas-dependent utilities; (2) the fact that the utilities were already planning the replacement on an orderly basis; and (3) the fact that implementation of the provisions would increase dependence on imported oil.

Of the 144 utilities that responded to the GAO questionnaire, 31 stated that the provisions would have no effect on their operations or future fuel choices. Over half of the utilities responded that compliance with the Act's provisions presented difficulties. Most of these companies were located in Texas, the Southwest, and the West. Some of the companies said that compliance presented difficulties because financing the added generating capacity to replace their gas-fired capacity was beyond their financial capability and that their financial resources were directed at coal and nuclear capacity additions which will be needed to accommodate load growth and to replace units which are due to retire. They believed that their plans for gradual replacement of natural gas-burning boilers were financially prudent. The industry's initial strategy for complying with the provisions was to seek exemptions and convert to residual oil. They also felt that the base period for computing natural gas consumption, the period of 1974 to 1976, was not representative of their historical natural gas usage because of the natural gas curtailments during the period. The utilities believed that the unit basis for restricting natural gas use would result in inefficient fuel use and reduce their ability to shift fuel among available units to attain maximum efficiencies. The Act's provisions may not have provided a satisfactory solution for preserving natural gas supply availability.