Senate Holds Hearing on PUHCA Repeal On May 1, the Senate Energy and Natural Resources (ENR) Committee held a hearing to examine the adequacy of state and federal regulatory structures governing electric utility holding companies, following the repeal of the Public Utility Holding Company Act (PUHCA) in the Energy Policy Act of 2005 (EPAct). The hearing focused on a February 2008 report by the Government Accountability Office (GAO) which looked primarily, at how the Federal Energy Regulatory Commission (FERC) and state public utility commissions are addressing the potential for cross subsidization of electricity company affiliates, post-EPAct.
The report was requested by Sens. Russ Feingold (D-WI) and Sam Brownback (R-KS), who opposed the PUHCA repeal provisions in EPAct and tried unsuccessfully to substitute strict "ring-fencing" requirements on holding company affiliates to offset the risk of cross-subsidization to consumers of PUHCA repeal. Cross-subsidization occurs when utility companies and their affiliates unfairly pass on the cost of their transactions, by either unfairly charging electric ratepayers too much for affiliate services or by paying too little and creating unfair subsidies for the affiliates.
"FERC has made few substantive changes to either its merger review process or its postmerger oversight since EPAct and, as a result, does not have a strong basis for ensuring that harmful cross-subsidization does not occur," the GAO said. The report recommended that FERC use a risk-based approach to detect cross-subsidization, enhance its audit report and reassess resource allocation to demonstrate adequate oversight is occurring.
Sen. Feingold testified that he was concerned that, following the repeal of PUHCA, there were not enough consumer protections in the utility sector. He may introduce a "ring-fencing" bill, which he said would protect consumers by providing a way for utilities to insulate themselves from the activities of their unregulated affiliates, which is a condition of approving mergers.
All five FERC Commissioners testified at the hearing and defended their overall implementation of the provisions of EPAct. Four of the five echoed FERC Chairman Joe Kelliher's disagreement with the GAO report's assertion that FERC "does not have a strong basis for ensuring that harmful cross-subsidization does not occur." However, Commissioner Suedeen Kelly agreed with the findings of the GAO report and said that the GAO report had raised issues regarding the ability of FERC to perform oversight on risky mergers.
All of the commissioners said that the best way to ensure against cross-subsidization was in the review of utility rates. The commissioners also argued that they did not want to pre-empt states' ability to review mergers.
Boucher Fears Gridlock Could Halt House Cap-and-Trade Bill
On April 24, House Energy and Air Quality Subcommittee Chairman Rick Boucher (D-VA) said that the Republican leadership is not allowing rank-and-file Republicans to enter negotiations on a mandatory cap-and-trade bill. Boucher said that without the support of Republicans, he doubts that climate change legislation is possible and that it would be bad policy-wise and politically unsuccessful to try to pass a purely partisan bill.
Energy and Commerce (E&C) Committee Ranking Member Joe Barton (R-TX), a skeptic of climate change, was recently quoted as saying that, given the state of the economy, putting together a cap-and-trade bill would be "political suicide" and that the "steam has gone out of this issue for this Congress." E&AQ Subcommittee Ranking Member Fred Upton (R-MI), who in the past has been supportive of climate change measures, indicated he would wait to see what the Senate does on cap-and-trade before determining what action the House would take.
Judge Orders Polar Bear Decision by May 15
On April 29, Judge Claudia Wilken of the U.S. District Court of the Northern District of California, ruled that the Bush administration's decision as to whether the polar bear should be granted endangered species protection must appear in the Federal Register by May 15. This decision rejects a request from the Department of the Interior to delay the decision until the end of June.
Last month, three environment groups, the Center for Biological Diversity (CBD), the Natural Resources Defense Council and Greenpeace sued the Bush Administration for missing the original deadline of Jan. 9 for making the decision. A spokesperson for the CBD said that yesterday's decision was a huge "victory for the polar bear."
Last year, the Bush Administration had proposed listing the polar bear as threatened out of concern that their sea ice habitat was diminishing as a result of rising global temperatures.
The Administration's decision will be significant, because if listed, the polar bear would be the first mammal to receive ESA protection as a result of threats from climate change. Environmentalists and other groups are pushing for this result, hoping it will result in more rapid implementation of greenhouse gas emissions reductions.
Senate Still Stalemated on Extension of Energy Incentives
On May 5, a coalition of businesses, construction companies, environmental organizations, investors, labor, nongovernmental organizations, states, trade associations and other wrote a letter to Senate Majority Leader Harry Reid (D-NV), Minority Leader Mitch McConnell (R-KY), House Speaker Nancy Pelosi (D-CA) and House Minority Leader John Boehner (R-OH) urging them to do everything possible to "ensure prompt enactment, with significant bipartisan support, of extensions of federal tax incentives that promote renewable energy and energy efficiency technologies." The letter argues that failing to extend the tax incentives puts more than 116,000 jobs at risk in the wind and solar technology sectors as well as more than $19 billion in clean energy investment.
On April 23, forty-one Republican Senators sent a letter to the Chairman of the Senate Finance Committee, Max Baucus (D-MT), declaring their support for extension of various expiring tax provisions, including energy tax incentives, the research and experimentation tax credit, various accelerated depreciation provisions, the education, charitable and other individual incentives and the 2008 Alternative Minimum Tax (AMT) "patch," without offsetting tax increases.
The question over how and whether to "pay" for extensions of expiring energy tax incentives has resulted in a virtual stalemate in Congress. Extending these incentives without any tax increases would be a departure from the "pay-as-you-go" rules that Democrats have been following since becoming the majority party following the 2006 elections; House Democratic leadership is insistent upon them, while Senate Democratic leadership seems to be willing to make exceptions.
In the letter, the Senators note that several energy tax incentive provisions have already been extended this year, without offsetting tax increases, and these provisions and the others mentioned should be extended in the same way. They are referring to an amendment that was successfully inserted into the recently passed housing bill by Sens. Maria Cantwell (D-WA) and John Ensign (R-NV) that provides a one-year extension for the production tax credit (PTC), investment tax credit (ITC) and an additional $400 million in allocation authorization for Clean Renewable Energy Bonds (CREBs), among others.
Domenici Introduces Domestic Oil and Gas Production Bill
On May 1, Senate Energy and Natural Resources Committee Ranking Member Pete Domenici (R-NM) introduced the Domestic Energy Production Act of 2008. According to Sen. Domenici, the bill is intended to "address America's soaring gas prices by using common sense measures that will increase production of oil and gas in America." Republicans have been critical of Democrats' energy policy agenda, which focus on increasing renewable energy generation and energy efficiency rather than domestic oil and gas production.
The bill, if enacted, would produce up to 24 billion barrels of oil, enough to keep American running for five years with no imports. The bill plans to expand offshore oil production and in the Arctic National Wildlife Refuge and remove obstacles to domestic production in the West. The bill would also suspend filling the Strategic Petroleum Reserve for 180 days and would repeal a provision in last year's omnibus appropriations bill which reduced mineral leasing revenue payments to states by two percent.
Regarding alternative fuels, the bill would establish a direct loan program to accelerate the production of advanced batteries. It would establish a research program to determine infrastructure needs for the transport of renewable fuel blends and create a study to test the environmental impacts and efficiency of diesel-fueled vehicles. The bill would also mandate that 6 billion gallons of coal-derived fuels be produced by 2022, starting at 750 million gallons in 2015 and increasing by that amount annually.