ENERGY BILL THIS WEEK?

House and Senate leaders have been negotiating the energy bill since the two bodies passed different versions this past summer. The fight about auto mileage standards, though perhaps the longest standing controversy, is only one of the important elements of the pending legislation. Equally important is the Renewable Electricity Standard (RES).

The House-passed RES requires US utilities to obtain at least 15% of their electricity from renewable sources by 2020. It is rumored to be part of a bigger set of compromises concerning (1) a provision for the federal government to provide insurance for new nuclear energy plants, (2) provisions for billions in oil and gas industry tax breaks to be shifted to incentives for New Energy, and (3) an allowance for utilities to claim 4% of the required 15% for efficiency efforts.

An RES is a federal mandate for the development of New Energy. The RES makes it practical for entrepreneurs to go national with some certainty there will be demand commensurate with their efforts. It is a signal by national leaders that they see the importance of giving the wind, solar, geothermal and marine energy industries the same kind of incentives the fossil fuel and nuclear industries get.

A Union of Concerned Scientists study showed enormous savings to ratepayers from a Renewable Electricity Standard (RES) (click to enlarge)

The American Petroleum Institute last month released a response to the proposals for New Energy, lumping them into a “worst case scenario” and “proving” they would damage the economy. Other economic studies show New Energy dramatically driving US economic expansion. Check Capturing the Energy Opportunity

The new CAFÉ standard perfectly exemplifies the old definition of politics as “the art of the possible.” Now legislators turn to the matter of New Energy. They can make it “possible” to start toward energy independence, to start to fight climate change and to begin building the energy infrastructure of sustainability. If they have the “art” and the vision.

There has been some indication that the RES is a horizon too far this year. If legislation can only include incentives for New Energy like extensions for Production Tax Credits (PTCs) and Investment Tax Credits (ITCs) it will keep the industries growing while more support is generated in the 2008 election.

Let legislators know the nation is waiting for their leadership: POWER OF WIND

Democrats reach deal on energy bill
H. Josef Hebert, November 30, 2007 (AP via Yahoo News)
and
Negotiators Close In on Energy Measure; Bill Raises Ethanol, Efficiency Targets; Fuel Credits for Auto Industry at Issue
Steven Mufson, November 29, 2007 (Washington Post)
and
Energy Bill Talks Turn to Refiners, Fuels; As Congress Nears Deal on Auto Efficiency, Focus Shifts to Ethanol
John J. Fialka, November 30, 2007 (Wall Street Journal)
and
Wrangling Continues Over Energy Bill
Brian Wingfield, December 1, 2007 (Forbes)

WHO
Congressional leaders, especially Speaker of the House Nancy Pelosi (D-CA), Senate Majority Leader Harry Reid (D-NV) and House Energy and Commerce Committee Chairman John Dingell (D-Mich), Senator Carl Levin (D-Mich)

WHAT
The Corporate Average Fuel Efficiency (CAFÉ) standard, the most contentious element in the pending energy legislation, has been resolved. Other issues may remain to be settled but a vote on the final bill is now considered imminent.

An EIA study of the effect on utility rates of an RES showed no significant increase over the long run. (click to enlarge)

WHEN
Resolution of the months-long contention over the CAFÉ standard, producing the 1st new mileage standard in 32 years, was announced by Speaker Pelosi late November 30. The vote on the legislation is expected this week, December 3-7 and it looks like Pelosi will be able to keep her promise to get a bill to the President’s desk by Christmas.

WHERE
- Resolving Capitol Hill’s stalemate on energy legislation meant crafting a compromise satisfactory to legislators demanding more stringent mileage standards for US vehicles and legislators representing Detroit automakers’ reluctance to have such standards imposed on them.
- Utility and fossil fuel industry lobbies must now be appeased to resolve remaining contentious issues.

WHY
- The Senate version of the energy legislation contained a more stringent CAFÉ standard but it was opposed by powerful Detroit-based Congressman Dingell until he and Pelosi struck an agreement November 30 to set a fleet average 35 mpg by 2020 (increasing the current standard 40%).
- A key compromise: Automakers can use offset requirements with production of ethanol-burning vehicles thru 2014.
- Opponents of the RES largely represent fossil fuel-producing states (the so-called “hydrocarbon Democrats”) and the utilities in those states (most notably the Southern Company). While the Edison Electric Institute (allied with the Southern Company and other like-minded utilities) claims that an RES will raise the cost of electricity, the Union of Concerned Scientists, the Department of Energy’s Energy Information Administration (EIA) and other groups have done studies that show it will not.
- The House version of the energy legislation also has very contentious populist measures (1) diverting billions in oil and gas industry tax breaks to New Energy, (2) allowing the Justice Department to sue OPEC for conspiring to keep the price of oil high and (3) allowing Congress to sue for gas price gouging. It will be exceedingly interesting to see how these measures do.

A recent EIA study showed enormous increases in energy production would be generated by even a regional RES. Think what a national RES would do! (click to enlarge)

QUOTES
- Dave McCurdy, Alliance of Automobile Manufacturers (including Ford, GM, Chrysler and Toyota): "Upon adoption of this legislation, Congress will have established aggressive, nationwide fuel economy requirements, concluding a longstanding debate."
- Dingell: "A compromise has been reached on automobile fuel efficiency standards…The agreement reached today prescribes standards that are both aggressive and attainable…We have achieved consensus on several provisions that provide critical environmental safeguards without jeopardizing American jobs."
- Levin: "[The 35 mpg by 2020 requirement] will require new fuel economy standards that will be challenging for auto manufacturers… (But) we got concessions on some of the most important issues."