On Friday evening, June 26, the U.S.
House of Representatives narrowly passed H.R. 2454, the Waxman-Markey American Clean Energy and
Security Act (ACES), by a vote of 219-212, after defeating a
Republican substitute bill. The vote on
the climate/energy bill was mostly partisan, with eight Republicans crossing
party lines and voting in favor of the bill and 44 Democrats joining 168
Republicans in opposing it. All New
England Members voted in support of final passage.
Title III of the Waxman-Markey
bill requires greenhouse gas (GHG) emissions
reductions of 17% by 2020 from 2005 levels (see details on allocations of
allowances below) and a renewable energy standard (RES)
requirement of 20% by 2020 for electric distribution companies that sell more
than four million megawatt hours of energy at retail/year, allowing 15% to be
met with renewables and 5% through efficiency measures, among other measures.
More than 200 amendments were filed with the Rules
Committee, which determines what amendments are germane for floor consideration.
After reviewing all amendments, the Rules Committee incorporated 21 of them into
a "Managers' Amendment," crafted by Energy and Commerce Committee Chairman
Henry Waxman (D-CA) and Energy and Environment Subcommittee Chairman Ed Markey
(D-MA). The Manager's Amendment was incorporated
into the final text of the bill. The Rules Committee allowed the Republicans to
offer one amendment -- their alternative bill -- which failed by a vote of 172 - 256.
Among the measures rolled into the Managers' Amendment was
Rep. Jay Inslee's (D-WA) transmission amendment (see more details below), which
gives FERC enhanced "backstop" siting authority only in the Western
Interconnection and only for lines needed for renewable energy. Controversial aspects of the Inslee amendment
will have to be resolved when the House and Senate meet in conference.
Peterson Objections with Allocations
Addressed
Last week's negotiations with House Agriculture Committee
Chairman Collin Peterson (D-MN), over provisions he said would adversely affect
the Midwest agriculture industry,
ultimately proved successful. Peterson had
said that if his concerns were not met, he would
oppose the bill and bring with him 40-plus farm state Members.
Though Peterson's initial concern with the bill was with EPA's authority over emissions offsets and biofuels
(he wanted USDA, not EPA, to have authority in both cases), more recently he
also strongly objected to the bill's formula for distributing emissions
allowances to utilities. Peterson insisted
that the 50/50 split of allowances allocated to Local Distribution Companies
(LDCs) at no cost, based on historic emissions/retail sales, be changed to
prevent utilities that receive surplus allowances from getting a "windfall."
Peterson's objections with the allocations were
made on behalf of the coops in his state and throughout the Midwest. The original 50/50 agreement was negotiated by
Chairmen Waxman, Markey and Rep. Rick Boucher (D-VA) with the Edison Electric
Institute (EEI), without the participation of the National
Rural Electric Cooperative Association (NRECA) or American Public Power
Association (APPA). That agreement also
provided that approximately ten percent of the utility sector allowances go to
merchant coal generators.
To win Peterson's vote, the
Managers' Amendment included a new agreement relating to allowances for the utility
sector:
1)
From 2012 through
2025, one-half of one percent of the pool of allowances for all covered sources
will go to small LDCs (public, coop and private), defined as those that sell
less than 4 million megawatt hours of energy at retail/year. From 2026
through 2029 this percentage decreases to zero. The value of those
allowances must be used for energy efficiency, renewable resources or customer
assistance purposes; and
2) EPA is directed to issue regulations to ensure that no LDC
receives a greater quantity of allowances than is necessary "to offset any
increased electricity costs to such company's retail ratepayers, including
increased costs attributable to purchased power costs," due to enactment of the
climate change title. Allowances that are not distributed for this reason
will be ratably allocated among all LDCs, based on their historic emissions;
and
3) Allowances to merchant generators, units with long-term,
fixed costs contracts and certain coops are capped at the lesser of 14.3% of
the pool of allowances to the utility sector, or 105% of their emissions.
The prior bill capped merchants at 10% of the utility allowances,but there was
no cap on the units with long-term fixed price contracts. In the prior version, coops were not eligible
for any of this set of allowances.
Given these concessions, Peterson
announced that he would support the bill.
Changes were also included to appease his concerns regarding biomass,
renewable fuels and offsets.
Inslee Transmission Amendment
Just prior to floor consideration, on June 24, Rep. Jay
Inslee (D-WA) circulated a controversial amendment related to green
transmission requirements and siting authority that would have:
-
Given
FERC backstop siting authority only in the Western Interconnection and only for
transmission projects identified in regional plans that are "needed to meet
demand for renewable energy."
-
Allowed
transmission developers in the Western Interconnection to seek FERC siting
approval if the states had: 1) failed to act on an application within 18
months; 2) denied the permit; or 3) authorized the siting subject to conditions
that unreasonably interferes with the development of the transmission facility.
-
Repealed
the National Interest Electric Transmission Corridor (NIETC) provisions of the Energy Policy Act of 2005. Under the law, once DOE designates the corridors,
a transmission developer can apply to FERC for "backstop" siting authority if a
state has withheld approval for more than one year or has conditioned the
siting permit in such a manner that the project does not reduce congestion or
is not economically feasible.
Subsequently, Rep. Inslee revised his amendment, in response
to d complaints from a number of other Members of Congress, as well as industry.
The revised amendment, which was incorporated into the Waxman-Markey bill is improved,
but still problematic. Improvements to
the measure include:
-
Restoring the NIETC process for the Eastern
Interconnection;
-
Requiring that the transmission planning process
be "open, inclusive and transparent"; and
-
Specifying that planning for long-term
transmission rights for load-serving entities be one of the objectives of the
regional process.
However, the revised provision still limits the use of the
revised FERC "backstop" siting in the Western Interconnection to projects that
"are needed in significant measure to meet demand for renewable energy in such
plans" and does not fix the 4th Circuit Court decision (which held
that state denial of a siting permit does not trigger NIETC FERC "backstop"
siting authority) in the Eastern Interconnection.
Because the changes made were improvements over earlier
iterations, APPA, NRECA, the Large Public Power Council and the Edison Electric
Institute (representing investor-owned utilities) decided to take a "neutral"
position on the amendment, rather than oppose it. All organizations believe, however, that it
is still problematic in certain areas, and will likely work to fix those
problems later in the process.