House Passes "Energy Independence" Bill, Moves to House-Senate Conference
On Saturday, August 4, the House passed an energy bill, H.R. 3221, the New Direction for Energy Independence, National Security, and Consumer Protection Act, by a vote of 241-172, largely along party lines. The House also passed an energy tax bill, H.R. 2776, Renewable Energy and Energy Conservation Tax Act of 2007, by vote of 221-189, which was then added to the larger energy bill, H.R. 3221, before final passage.
H.R. 3221 is a compilation of several committee-passed bills and would, among other things, increase renewable fuels infrastructure, increase appliance and building efficiency, enhance carbon sequestration research, increase the availability of alternative fuels (such as E-85), establish a loan-guarantee program for advanced vehicle battery technology and expand further development of plug-in hybrid vehicle technology.
After last minute changes to garner enough votes for passage, the House adopted a federal Renewable Portfolio Standard (RPS) amendment, offered by Reps. Tom Udall (D-NM) and Todd Platts (R-PA). The amendment, adopted 220-190, requires private utilities (with 1 million MWh or greater in annual retail sales) to produce 15 percent of their electricity from renewable energy sources, such as wind, solar, biomass, etc., by 2020. It also allows up to 4% of the 15% to be met through energy efficiency measures. Federal utilities and consumer-owned utilities are exempt from the Udall-Platts RPS.
Private utilities and others are likely to lobby aggressively against the inclusion of a RPS in a final conference agreement between the House-Senate, or at a minimum, have it apply to federal and consumer-owned utilities, as well.
The Senate-passed bill does not contain an RPS because the lead Senate sponsor, Sen. Jeff Bingaman (D-NM), did not have the 60 votes needed to stop a filibuster when the Senate considered its energy bill in June. Most observers speculate that Bingaman had 56 or 57 votes. After passage of the House bill, however, Bingaman issued a press release indicating that he would work to include an RPS in the final bill.
The House defeated an amendment, 169 to 245, offered by Reps. Michael Arcuri (D-NY) and Maurice Hinchey (D-NY), which would have repealed FERC's "back-stop" authority to construct or modify transmission lines within DOE-designated National Interest Electric Transmission Corridors (NIETC), granted in the Energy Policy Act of 2005 (EPAct 2005). In place of this, the amendment would have required companies to proceed in accordance with state law. APPA and others opposed the amendment.
In addition, before going to the floor, House leadership stripped out a provision from the Natural Resources Committee title that would have rolled back a provision from EPAct 2005 dealing with Energy Right-of-Way Corridors on Federal Land (Sec. 368). Sec. 368 of EPAct 2005 currently directs five federal agencies (Agriculture, Energy, Commerce, Defense, and Interior) to designate corridors for oil, gas and hydrogen pipelines and electricity transmission and distribution facilities on federal lands in the 11 contiguous Western States. The House Resources Committee had, instead, inserted a study of the need for such designations, and would have required the maximum level of mitigation practicable for such corridors. APPA opposed the amendment and welcomed its elimination before the energy bill moved to the floor.
The House also adopted a tax title to the energy bill that provides a number of incentives for renewable developers and energy efficiency and conservation measures. The Senate bill does not include a tax component.
Of interest to NEPPA is the inclusion of provisions related to the Clean Renewable Energy Bond (CREB) program, called the "New CREBs". The bill provides an additional allocation for New CREBs of $2 billion and creates a new category of eligible "public power providers," consistent with the Federal Power Act definition (i.e. those with an "obligation to serve"). The bill divides the $2 billion allocation authority between projects of public power providers and rural electric coops only. Public power is to receive 60 percent of the national volume cap and rural electric coops are to receive 40 percent. The bill does not include a sunset provision for the program; current law sunsets the CREB program at the end of 2008. The bill also adopts the APPA supported "pro rata" allocation methodology (vs. the current IRS "smallest to largest" project) for public power providers.
Also of interest in the tax title are provisions to extend for four years (until 12/31/12) the renewable energy production tax credit (PTC) and the investment tax credit (ITC) for solar and fuel cell projects for private developers, and credits for individuals for purchasing plug-in hybrid vehicles ($4,000/vehicle). In addition, the bill extends incentives for energy efficiency improvements in commercial buildings, and creates two new tax credit bonds; one for energy efficiency improvements in homes and the other to assist state and local governments in implementing a variety of conservation measures.
The House bill does not include provisions on the controversial Corporate Average Fuel Economy (CAFE) standards; the Senate bill increased CAFE to 35 miles per gallon by 2020.
The bill now heads to a House-Senate conference committee where differences between the two versions must be reconciled. While there are many similarities between the House and Senate energy independence bills, there are major differences on controversial issues, including the RPS, tax incentives and CAFE, that signal a difficult conference ahead.
In addition, the Administration has threatened to veto the House bill. In a statement issued the morning the House was expected to consider the bill, the Administration said "Because H.R. 2776 and H.R. 3221 fail to deliver American consumers or businesses more energy security, but rather would lead to less domestic oil and gas production, higher energy costs, and higher taxes, the President's senior advisors would recommend that he veto these bills."
Inslee "Rural Clean Energy Super Highways Bill"
Rep. Jay Inslee (D-WA) is readying a bill for introduction, called the "Rural Clean Energy Super Highways Bill," designed to promote the development of new transmission facilities to make more capacity available for potential renewable resources.
The Inslee bill would authorize the President to designate areas that meet certain criteria as "National Renewable Energy Zones" and allow a surcharge to be levied on all transmission users in the region to pay the costs up-front of connecting renewable projects in those zones to the grid. It is unclear how the provisions would apply to transmission-owners in organized markets, such as ISO-NE, but it could possibly be used as an "overlay."
In addition, the Inslee bill would also:
Direct the President or his designee to identify and provide public notice of specific, additional renewable energy trunkline facilities and networks upgrades needed to substantially increase generation of renewable energy within each Zone, taking into account existing transmission plans for areas within a Zone;
Direct FERC to allow private utilities that finance transmission needed to transmit electricity from a Zone to one or more load centers to recover "all prudently incurred costs and a reasonable return on equity" associated with the construction and operation of such new facilities;
- Permit interconnection lines from a renewable project to the grid to be "initially funded" by a surcharge on all transmission customers of the transmission provider or RTO/ISO;
- Allow state regulators, or other appropriate bodies with jurisdiction over private utilities serving load within a Zone, to jointly propose to FERC a cost allocation plan for high voltage transmission lines built to serve load. If no jointly proposed plan is approved by FERC, then FERC shall allocate costs of new high voltage transmission built in a Zone according to a "rolled in" transmission charge;
- If no privately- or publicly-funded entity commits within three years to finance the specific high voltage transmission facilities identified by the President or his designee, direct the federal power marketing administration (PMA) or the Tennessee Valley Authority (TVA) in which such facilities would be located to finance the construction of the facility and operate and maintain it;
- Authorize the Department of Energy to issue bonds, in an amount not to exceed $10 billion, and deposit those funds into a Transmission Fund in the Treasury to fund construction, operation and maintenance of the facilities by the appropriate PMA or TVA;
- Ensure that not less than 75% of the capacity of any high-voltage transmission line constructed by a PMA or TVA under this new authority is used for transmission of electricity from renewable resources;
Concern has been raised that a bill like this, if enacted, could increase costs associated with renewable power generation and transmission. Public power representatives and others have met with Rep. Inslee's staff and highlighted areas of technical and substantive concern. Some changes were made, but public power made clear they had serious concerns with the underlying measure. The bill is strongly supported by American Wind Energy Association (AWEA) and PPM Energy, the merchant power arm of Scottish Power, now part of the Spanish utility Iberdrola.
Rep. Inslee is a member of the House Energy and Commerce Committee and Natural Resources Committee, so he is in a key position to advocate for the bill's advancement. He plans to introduce the legislation shortly after Congress reconvenes in the fall.
On the Senate side, Majority Leader Harry Reid (D-NV) filed an amendment similar to the Inslee bill during debate on H.R. 6, the "energy independence" bill. Reid ultimately did not offer the amendment, but his staff said he is committed to this approach, and will introduce a stand-alone bill soon in the Senate.
Lieberman and Warner Announce Climate Initiative
On August 2, Sens. Joe Lieberman (I-CT) and John Warner (R-VA), both members of the Senate Environment and Public Work (EPW) Committee, announced details of their climate change proposal, titled the "America's Climate Security Act of 2007." The bill, expected to be introduced in the Fall, calls for a 70 percent reduction in greenhouse gas emissions (GHG) by 2050 by implementing an economy-wide, cap-and-trade program. The draft proposal, comprised of various provisions from a number of climate bills, would initially require electric utilities, major industrial manufacturers and petroleum refiners and importers to limit their emissions to 2005 levels beginning in 2012. Those sources must then cut their greenhouse gases by ten percent by 2020, with an end target of a 70 percent reduction in 2050.
Senior Senate Democrats and some environmental groups welcomed the proposal to the well-underway climate debate on Capitol Hill. "This proposal has taken good ideas from a variety of bills and will be an excellent starting point for the committee," said Sen. Barbara Boxer (D-CA), chair of the EPW Committee.
In addition, to setting up a cap-and-trade program, the Lieberman-Warner proposal also set up a mandatory greenhouse gas registry, and create an emissions monitoring system for regulated industries, within two years, to be administered by Environmental Protection Agency (EPA).
Moreover, to control the costs of the new program, the proposal would set up a seven-member Carbon Market Efficiency Board with the task of tracking the cap-and-trade system, much like the Federal Reserve monitors the U.S. economy. The Board would track prices for carbon dioxide in the emerging U.S. market and would allow industry a flexible option if compliance prices stay too high for too long.
Also included are provisions from Sens. Jeff Bingaman's (D-NM) and Arlen Specter's (R-PA) legislation (described below), which seeks to bring along China and India. Under the Lieberman-Warner plan, U.S. trading partners must purchase pollution credits for their carbon-intensive exports if they do not have sufficient global warming policies in place. The President of the United States would have to impose trade restrictions on trading nations, within eight years of the start of the U.S. program, if such policies were not implemented.
On another key point, the Lieberman-Warner plan would allow industry to meet up to 15 percent of its emission requirements through the purchase of carbon offsets, such as implementation of environmentally sound farming and forestry practices and methane capture.
Below are the links to a press released sent out by Sen. Lieberman's office and a detailed outline of the bill, which has not yet been released.
http://lieberman.senate.gov/newsroom/release.cfm?id=280310
http://lieberman.senate.gov/documents/acsa.pdf
Bingaman and Specter Staff Hold Briefing on Climate Bill
On July 17, Jonathan Black, staff to Senate Energy and Natural Resources Committee Chairman Bingaman and Tom Dower, staff to Sen. Specter, discussed with utility stakeholders the senators' "Low Carbon Economy Act of 2007." The Bingaman-Specter bill has the support of some industry and labor organizations, including American Electric Power Corporation, one of the nation's largest coal-fired electric utilities, as well as the AFL-CIO, International Brotherhood of Electric Workers and the United Mine Workers of America.
The bill proposes an economy-wide, market-based plan that, starting in 2012, would require that CO2 emissions be reduced to 2006 levels by 2020. Following that, the bill hopes to achieve reductions to 1990 emission levels by 2030 and at least 60% below current levels by 2050. These reductions are dependent on technological and scientific advancement and international cooperation, staff said.
The Bingaman-Specter bill includes a provision dealing with international cooperation, including five-year reviews to see how other countries are handling the issue. Another unique feature of the Bingaman-Specter bill is the so-called "safety valve" provision, which allows entities to purchase climate change credits at a relatively low cost in early years, to allow time for carbon sequestration technologies to be developed. This feature was recommended by economists in Senate hearings earlier this year as a means of addressing price volatility concerns and may be key to attracting the votes of moderate Republicans.
The environmental community, however, is strongly opposed to the "safety valve," as is EPW Committee Chairman Boxer.
Hearings on the Bingaman-Specter bill are expected in the Fall.
Boucher and Upton Introduce "Community Broadband Act of 2007"
On Wednesday, August 1, Reps. Rick Boucher (D-VA) and Fred Upton (R-MI) introduced H.R. 3281, the "Community Broadband Act of 2007." The bill, strongly supported by public power, would prohibit states from precluding municipal governments from offering competitive alternatives to incumbent providers.
This legislation is similar to S. 1853, the "Community Broadband Act of 2007," the bill recently introduced by Sens. Frank Lautenberg (D-NJ) and Gordon Smith (R-OR).