3-25-08 NEPPA e-Weekly: A Summary of Recent Legislative Activities of Interest to NEPPA Members
ISO-NE Issues Statement on RTO Legislation Indicates, "Mission Accomplished, Legislation Not Needed"
On March 13, ISO-New England (ISO-NE) issued a statement on S. 2660/ H.R. 5547, the Sanders-Snowe Consumer Protection and Cost Accountability Act, indicating that the legislation was unnecessary, because consumer protections are already in place. S. 2660/H.R. 5547, essentially, would expand the mission and function of ISOs and RTOs to include facilitating the provision of "reliable service to consumers at the lowest reasonable cost" and require cost-benefit analysis for market rule changes. The ISO statement, circulated to all New England congressional offices, said these changes are "unnecessary - and could jeopardize achievement of New England's energy, economic and environmental policy goals." Moreover, ISO-NE says that effective electricity markets are in place, and, therefore, the purpose of the bill has already been achieved.
Specifically, ISO-NE took issue with the provision to mandate a cost-benefit analysis of market changes, saying it was ambiguous and could have "unintended consequences." Congressional staff explained that they purposely left the "cost-benefit" criteria undefined - to allow proposals to take into account longer-term environmental issues, such as development of renewable resources, which is important to the bill's sponsors. The bill does not bind the ISO's or RTO's hands, but leaves them relatively free to pursue initiatives that they think are necessary (environmentally or otherwise). However, RTOs and ISOs would be required to spell the costs/benefits out in their FERC filings.
Public power's response to the ISO statement was simple: we fail to see how "putting the consumer back in the equation" is a bad thing. If the markets are truly working for consumers, meeting requirements of the bill should be an easy bar to jump.
In a related development, at a March 20 NEPOOL Competition Working Group meeting, NEPOOL discussed the RTO legislation and indicated that it plans to prepare draft comments on the bills. The group suggested that NEPOOL Counsel would draft comments in consultation with Sector Vice-Chairs; then the NEPOOL Participants Committee will vote on the comments, at a later date.
For a copy of the IS0-NE statement on the bill, please contact Lori Pickford at Morgan Meguire.
Meeting with Wind Association on RTO Bills
On March 13, Lori Pickford of Morgan Meguire and Scott Strauss of Spiegel & McDiarmid met with the staff of the American Wind Energy Association (AWEA) to discuss S. 2660/H.R. 5547. The wind industry had raised preliminary concerns that the bills might discourage renewable energy development. Pickford and Strauss informed AWEA that it was not the intent of the bill's sponsors to affect development of renewables. Instead, its purpose is to make clear to all RTO/ISOs that their mission must be expanded to ensure that they operate in a cost‑effective manner, and prepare a cost/benefit analysis for major market rules. Strauss highlighted that the legislation is sufficiently flexible to permit the assessment of costs or benefits to include, among other things, increasing the nation's energy independence and addressing, over time, important global warming/climate change concerns.
Staff to AWEA said, generally, that they are pro-RTO regional markets, because organized markets provide better access to the grid for wind development. As a result, anything that could be interpreted as "anti-RTO" they generally oppose. Pickford and Strauss indicated that they did not see the bill as an anti-RTO effort, but instead as an effort to improve RTOs. AWEA expressed support for even larger RTO control areas, because they provide a single transmission rate, and region-wide operational protocols.
On the other hand, they seemed to understand that large, continued rate increases were detrimental to the end-consumer and, therefore, a problem. AWEA staff also mentioned that in New England congressional offices, rising rates is a consistent theme. Lastly, they seemed pleased to hear the bill was not an attempt to undercut renewable development or efforts to expand the transmission grid to these resources, but instead an effort to help make the underlying market more efficient and less costly.
In addition, FERC staff recently met with Senate staff and expressed concerns that the bill might limit renewables resources, because they are more expensive than other resources.
EPA Report on Lieberman-Warner Bill; Industry Report Claims Severe Economic Impacts
According to a March 14 analysis of the Lieberman-Warner climate change bill and two competing Senate bills prepared by the U.S. Environmental Protection Agency (EPA), the former would impact the U.S. economy more severely than the others, but it would make significantly greater reductions in greenhouse gas (GHG) emissions.
According to the agency report, the Lieberman-Warner bill would cost the economy between 1 - 3.8 percent of GDP growth ($238 - $983 billion). By contrast, the Bingaman-Specter and Lieberman-McCain proposals would cost roughly 0.5 - 1.4 percent.
Comparing the three bills' respective reductions of GHG between 2012 and 2050, the report says that Lieberman-Warner would reduce emissions by 35 - 48 percent, Bingaman-Specter by 23 - 27 percent, and Lieberman-McCain by 25 - 29 percent.
In a future GHG market, carbon dioxide prices under Lieberman-Warner would cost industry more than double ($46 - $83 per ton) what it would pay under rival measures. By 2050, Lieberman-Warner's CO2 price would jump to between $121 and $220 per ton, Bingaman-Specter bill tops off at $65 per ton, and Lieberman-McCain would cost $70 - $85.
Regarding impacts to U.S. energy production under the three bills, the report says the Lieberman-Warner bill's tighter emission limits would drive significant growth by 2025 in renewable energy (61 new gigawatts) and nuclear power (44 new GW). The bill contrasts sharply with current U.S. energy policy, under which renewables would grow by only 4 GW and nuclear by just 6 GW.
In response to the EPA analysis, Sens. Lieberman and Warner explained in a press release that their legislation directs more than $1 trillion toward consumers to help lower and offset any increased energy costs.
On March 13, the National Association of Manufacturers (NAM) and the American Council for Capital Formation (ACCF) unveiled a joint study of the Lieberman-Warner measure, which concluded that the legislation would have a profound economic impact on the U.S., including:
- GDP losses of $151 - $210 billion in 2020 and $631 - $669 billion per year in 2030;
- Employment losses of 1.2 - 1.8 million jobs in 2020 and 3 - 4 million jobs in 2030;
- Household income losses of $739 - $2,927 per year in 2020 and $4,022 to $6,752 per year in 2030;
- Electricity price increases of 28 - 33 percent by 2020 and 101 - 129 percent by 2030;
- Gas price increases per gallon of 20 - 69 percent by 2020 and 77 - 145 percent by 2030.
APPA Holds Forum to Help Members Analyze Lieberman-Warner Bill
On March 25, Morgan Meguire's Lori Pickford, Deborah Sliz and Tom Porter attended a briefing by APPA regarding the costs associated with the Lieberman-Warner climate change bill. APPA Legislative Representative James Williams briefed attendees on recent Capitol Hill meetings on timing of legislation moving through both chambers. Key messages from those meetings included:
- Although it has recently been reported that the House Energy and Commerce Committee will release a climate change bill next month, key House staff told APPA that the reported timeline is "too aggressive" and that legislation is more likely to be made public in June.
- Staff to Senate Environment and Public Works Committee (EPW) Chairman Barbara Boxer (D-CA) said that they want to bring a modified Lieberman-Warner bill to the floor in June, but if there are any "poison pills" adopted as part of the floor consideration, Sen. Boxer will pull the legislation from consideration. One example of a poison pill could be an amendment to promote more development of nuclear power. Further, they are willing to receive more input from interested parties, but only if they are offering improvements and not to bash the bill. EPW Ranking Member James Inhofe's (R-OK) staff is planning a week of briefings in April on the effects of the legislation on different industry sectors. APPA has been invited to present its economic analysis of the Lieberman-Warner bill at the briefing on the electric industry. Morgan Meguire will provide this schedule of briefings when we receive it.
- In the House, Rep. Jay Inslee (D-WA) is drafting a climate change bill, but has said he will work to "protect public power." Although Inslee supports an auction of emissions allowances, he is willing to consider a "cap" on allowance costs and limits on entities that could participate in the auction. Separately, APPA will meet with staff to Sen. Barack Obama (D-IL), who has said he supports 100% auctions.
APPA's Dianne Moody has done a detailed analysis, presented via a series of spreadsheets on the Lieberman-Warner bill's allocation program, the number of allowances that would be available to public power under the program and the likely cost to consumers served by public power systems if the bill was enacted into law. The analysis includes a page that allows each public power system to estimate the cost to its consumers. These spreadsheets and more are located on the APPA secured site for members only.