109th Congress Adjourns: Passes Energy Tax Extenders in the End-of-the-Session Flurry
The House and Senate adjourned sine die over the weekend and will convene for the 110th Congress on January 4, 2007.
On Saturday, Dec.9, three separate "issue" bills - involving tax, trade and energy policy, were wrapped together in a single legislative package and cleared by the Senate by a vote of 79-9. Shortly thereafter, the House of Representatives voted to pass the package as well, completing action on the final, major legislation of the 109th Congress. Of interest to NEPPA members is a provision in the package that extends the Clean Renewable Energy Bond (CREB) program for an additional year (from 12/31/2007 to 12/31/2008) and adds $400 million in bonding authority to be used during that period.
The legislative tax package also extends the 1.9 cents per kWh renewable energy production tax credit (PTC) for private developers; credits for investment in clean coal facilities; credits for construction and purchase of energy-efficient new homes; and a 30 percent investment tax credit for businesses that install fuel cells and solar facilities.
On energy conservation, the bill extends the tax credit for builders of new energy efficient homes through Dec. 31, 2008. This credit applies to manufactured homes meeting a 30 percent energy reduction standard and other homes meeting a 50 percent standard. It also extends for one year the deduction for energy efficient commercial buildings meeting a 50 percent energy reduction standard. The maximum deduction is $1.80 per square foot of the building. These energy efficient tax incentives have been championed in the Senate by Olympia Snowe (R-ME) and Dianne Feinstein (D-CA) and Rep. Ed Markey (D-MA) in the House.
"Limited" Offshore Drilling Included
Also included in the bill is a provision to open 8.3 million acres in the eastern Gulf of Mexico to offshore drilling. This more limited bill, originally advanced by the Senate, was much more politically palatable than the original House approach that would have opened the entire U.S. Eastern coastline to drilling.
Continuing Resolution Passed to Fund Government Until February 15th
Before adjourning, Congress also approved a continuing resolution (CR) extending until February 15 funding at FY '06 levels for the 13 federal departments and various programs whose appropriations bills have not been passed. President Bush signed that CR within hours.
NEPPA Members Participate in Congressional Briefing on ISO-NE Markets
About a dozen Hill staffers attended a congressional briefing hosted by the American Public Power Association (APPA) on Thursday, December 7, to hear NEPPA members give their views on how electricity markets in New England are functioning. Sharon Staz, NEPPA's Legislative Committee Chair and Kennebunk Light and Power General Manager, along with Glenn Steiger, General Manager of Massachusetts Municipal Wholesale Electric Company (MMWEC) and Brian Forshaw, on behalf of the Connecticut Municipal Electric Energy Cooperative (CMEEC), participated in a panel discussion highlighting the escalating prices in the region.
Staz told staff that the problems are so significant in Maine that the State Legislature considered a bill that would have taken Maine completely out of ISO-NE. Steiger stated that ISO-NE is not cost-conscious, and encouraged ISO-NE to join with public power to fix the transmission problems in the region. Forshaw told the gathering that, before utilities in New England can solve the ISO problems, they need the help of the Congressional delegation "to put consumers back into the equation." Forshaw said that CMEEC's power supply and transmission costs increased from 1% to 28% in one year, and unfortunately, "there is nothing much consumers can do about these increases in costs." Forshaw indicated that ISO-NE, like other RTO/ISO's, are searching for the "holy grail "of competitive markets, without regard to the impact on electric consumers. "Until the ISO is directed to be cost accountable to consumers, we should not expect the situation to change," Forshaw concluded.
NEPPA Members Hear from Treasury on CREB Allocations
NEPPA members are starting to hear from the U.S. Treasury regarding the status of applications for Clean Renewable Energy Bond (CREB) authority. The Hull Municipal Lighting Plant was awarded a $1.5 million CREB allocation for a wind turbine it is in the process of building and expects to have operational by May 2006. Hull was also denied a separate $30 million request, however. The New Hampshire Electric Cooperative (NHEC) was also successful in receiving an allocation. Given the limited overall funding for the program ($800 million split $500/$300 for governmental entities and coops, respectively) and the allocation methodology embraced by Treasury (smallest projects to largest), both the Ipswich Municipal Light Department and the Princeton Municipal Light Department were denied requests for $3.8 million and $5.75 million, respectively.
Demand for the program was three times the amount of total program funding ($2.6 billion vs. $800 million), which should help in NEPPA's efforts to convince Congress of the need for expanding the $800 million cap to help buy down the high costs of renewable power projects for the public power sector. In addition, Morgan Meguire has heard that because of the broad definition of "governmental entities," a number of non-utility "governmental entities," such as school districts applied for and received allocations.
APPA, along with Morgan Meguire and others, will work to refine the definition of "governmental entities" and also increase (or possibly eliminate) the funding cap on the program to provide "comparability" with the unlimited production tax credits (PTC) benefits which are available to private developers.
Industrial Customers Say Electricity Competition Is Not-Working
On December 4, the Electricity Consumers Resource Council (ELCON) advanced a new position paper that states that the U.S. electricity markets need "significant refinement" or Congress should examine a "return to traditional regulation." ELCON representing large energy intensive industrial customers that felt it would be in their best interest to "shop-the-market" for better energy prices, was at the forefront in advancing retail competitive markets. According to the new position paper, the group has concluded that organized markets, as currently structured, are not competitive.
ELCON's President, John Anderson, noted that this new position is a departure from previous policy. In 2004, the organization released a position paper that noted the problems in organized markets, and underlined why industrial electricity users thought that electricity markets were less competitive than those that existed before restructuring. It also noted that markets had become less consumer-oriented.
ELCON added that, despite the fact that it was hoping to see development of real competition, today's markets are "run by suppliers to benefit suppliers.... and that consumer groups have nothing good to say about today's organized markets."
ELCON current position paper, titled "Organized Markets - A Step toward Competition or an Exercise in Re-regulation?" advances three recommendations:
- If states have not moved to retail competition, they should not do so;
- Organized markets in their current structure (with problematic governance structures and market flaws) must be fixed;
- If today's organized markets cannot be fixed, traditional regulation should be revisited.
The link to the report is: http://www.elcon.org/Documents/Publications/12-4piom.pdf , and primarily focuses on the New York Independent System Operator, ISO New England and the PJM Interconnection.
Anderson was a featured speaker at the 2006 NEPPA Annual Meeting in Plymouth Massachusetts.
Northeast Officials May Favor Shift to Nuclear Power
Some policymakers in the Northeast have begun to reexamine nuclear power and the public's concern with it, in light of a need to reduce CO2 emissions and increase energy output in the region. In New York, some officials are now favoring both existing nuclear power and the creation of new plants. Other states in the region are expected to re-license or upgrade existing plants, with future CO2 emission regulations possibly creating the need for new construction.
Officials are recognizing the need for nuclear power as the Northeast starts to adapt to new carbon dioxide caps and increased customer demand, although public opinion may not totally be there yet. Former NYC mayor Rudy Guiliani, a likely 2008 presidential candidate, supports a 20-year license renewal for the Indian Point nuclear plant, which is 25 miles outside of Manhattan. This plant is controversia,l though, due to security concerns and the fact that governor-elect Eliot Spitzer, has called for its closure. Despite this, the New York State Public Service Commission expects to adopt a more favorable position toward nuclear power.
States across the Northeast are currently developing mandatory caps on CO2 emissions through the Regional Greenhouse Gas Initiative (RGGI). Under the cap-and-trade system being established, up to 25 percent of allowances, allocated on the basis of "consumer benefits and strategic energy purposes" could be put toward new nuclear construction. One source stated that after the RGGI program takes effect in 2009, it is likely that more states will spend these allowances on the creation of nuclear plants. However, an environmental activist disagrees, saying that the Northeast will adapt to more stringent CO2 standards by improving energy efficiency; in his opinion, cleaner gas plants will replace coal plants, and the number of wind facilities will increase.
A report by nuclear industry consultants contends that in order to meet CO2 emissions requirements, all of the region's nuclear power plants will have to stay online and new plants would have to be constructed. Oswego County, New York is looking at building a new plant, with constructing beginning in 2010 and reaching completion by 2014. Entergy Nuclear Northeast will seek a license renewal for the Indian Point plant.
Barton Says He Will Block Emissions Cap Legislation
On December 4, outgoing House Energy and Commerce Committee Chairman Joe Barton (R-TX) said he intends to block Democrats from passing a mandatory federal cap on greenhouse gas emissions. Barton expressed doubt that the Democrat-controlled Senate could move such a bill.
The House is less likely to move a bill because of skepticism among Republicans and more moderate and conservative Democrats, namely incoming Energy and Commerce Committee Chairman John Dingell (D-MI). "His counsel to me for the last four years has not been to be an activist in the legislative arena on this issue, so I'd be a little surprised if he decides to be an activist," Barton said.
On December 5, incoming Senate Environment and Public Works Committee Chairman Barbara Boxer (D-CA) downplayed chances of replicating California's global warming law for the entire country but still insisted she will try next year to move as much legislation on climate change as she can. "Will I get everything that I want, meaning a bill that looks like California? I will doubt that," Boxer said during a Capitol Hill press conference on her upcoming agenda.