Acid Rain Program Annual Reconciliation Fact Sheet
At the end of the year, utilities are granted a 60-day grace period, during which additional SO2 allowances may be purchased, if necessary, to cover each facility's emissions for the year. At the end of the grace period (the Allowance Transfer Deadline), the allowances a facility holds in its Allowance Monitoring System (AMS) account must equal or exceed the facility's annual SO2 emissions. Any remaining allowances may be sold or banked for use in future years. This fact sheet covers annual reconciliation for Phase II of the Acid Rain Program, which began in 2000.
Note also that annual reconciliation results are available in our Compliance/Progress Reports.
Frequently Asked Questions
- Who must comply with the Acid Rain Program?
- As a Designated Representative, what must I do for the annual reconciliation?
- Are there restrictions on allowance transfers after the allowance transfer deadline?
- How does EPA deduct allowances?
- What if an affected source is out of compliance?
- What are the important dates for annual reconciliation?
Who must comply with the Acid Rain Program?
In general, electric utility units at power plants that burn fossil fuel and both produce and sell electricity are subject to the Acid Rain Program requirements. For more information on whether your unit is covered, please contact Robert Miller at 202-343-9077 or email@example.com.
As a Designated Representative, what must I do for the annual reconciliation?
The Designated Representative (DR) is responsible for ensuring that the facility holds enough allowances in its account to cover its emissions, that the monitoring equipment has been kept in proper working condition and the monitoring plan maintained, and that all emissions were either monitored or accounted for through missing data procedures. If the facility does not have enough allowances to cover its emissions, the DR must pay an excess emissions penalty and surrender allowances first usable in the next compliance year. In addition, if a unit is subject to the Acid Rain Program NOx regulations, then the DR must ensure that the unit meets its NOx emissions limit for the year.
The other optional forms are the Common Stack Allowance Deduction Form (described in a later section below) and the Allowance Deduction Form. DRs may choose to use the optional Allowance Deduction Form to identify specific serial numbered allowances for deduction. Otherwise, EPA will use the default method of first-in, first-out (FIFO) when deducting allowances.
Are there restrictions on allowance transfers after the allowance transfer deadline?
Yes. EPA will return or hold any Allowance Transfer Form postmarked after March 1 to move allowances that are available for compliance into or out of facility accounts. Such transfer requests will be processed after the annual reconciliation process is complete. Of course, allowance trading can continue, only the recordation of trades involving allowances useable for compliance in the Allowance Management System (AMS) must wait.
Allowance transfers among general accounts are not affected by this restriction. The authorized account representatives for these accounts may transfer any allowances contained within general accounts at any time.
How does EPA deduct allowances?
Each affected unit measures its SO2 emissions using, for the most part, continuous emissions monitors, as specified in 40 CFR part 75. Affected units submit their emissions data quarterly to the EPA. EPA then verifies the quality, completeness, and consistency of the data reported, the adherence to the Electronic Data Report (EDR) format, and the appropriate usage of missing data procedures.
Once all the emissions data are checked and all the optional information from the Allowance Deduction Forms are entered into the Allowance Monitoring System (AMS), allowances will be transferred into a permanent EPA retirement account. Any remaining allowances of the current compliance year vintage will be valid for compliance deductions in any future year. After reconciliation is complete, EPA sends each DR a report entitled: "Allowance Deductions for Compliance Year 20XX" detailing the facility's allowance deductions.
What if a facility is out of compliance?
If the number of tons of emissions exceeds the number of allowances held in the facility's account, the facility is out of compliance and the owners or operators must pay a penalty (The 1990 penalty of $2000 per ton is adjusted each year for inflation). In addition, violating utilities must offset the excess SO2 emissions with allowances in an amount equivalent to the excess. A utility may either have allowances deducted immediately or at a later date. If the facility plans to have allowances deducted at a later date, the DR must submit to EPA an Excess Emissions Offset Plan, which must undergo public review and comment before approval. This offset plan outlines how and when the unit will provide the necessary allowances for compliance.
Important dates for annual reconciliation
*Dates are subject to change if they fall on a non-business day.
Deadline to submit 3rd quarter emissions reports.
Compliance year ends.
Deadline to submit 4th quarter emissions reports.
March 1 (Feb. 29 in a leap year)
Allowance transfer deadline.
Deadline to submit optional Allowance Deduction form