Senate Votes in Favor of Energy Bill, Tumultuous Conference Awaits

          In what some have described as the easy first step down what will surely be a long and difficult road, on June 28, 2005, the Senate voted 85-12 to pass its version of the energy bill (H.R. 6), which has an estimated price tag of up to $35 billion.  The Senate's version would benefit the power industry in several key ways, but it also addresses energy conservation and development of clean energy alternatives.  Despite drawing praise from President Bush for its bipartisan support, the bill still faces an iffy future in a Senate-House conference that is sure to be contentious.  There are substantial differences between the Senate version and the earlier House version, which was passed April 21, 2005.  See UPDATE (04/30/03).  The President has said he wants a bill from Congress by August 1, before Congress recesses, leaving lawmakers a short window in which to iron out differences.  Given Congress's recent record of failure on passing comprehensive energy legislation, this could prove to be a tall order.

The Senate bill is encompassing.  Democrats were especially pleased with the inclusion of a Renewable Portfolio Standard, which will require utilities to generate ten percent of their electricity from renewable sources by 2020.  The bill also repeals the Public Utility Holder Company Act ("PUHCA") of 1935.  In lieu of PUHCA's regulatory protections against holding company abuses, the bill would expand FERC's authority to review utility mergers.  The Senate version also grants to FERC exclusive siting authority for liquefied natural gas ("LNG") facilities, an issue that has caused serious friction between FERC and various state governments that want more control over the siting of LNG facilities.

The Senate bill's tax incentives total $18 billion over the next ten years, offset by $4 billion in revenue-generating measures.  Forty percent of these tax incentives are geared toward renewable energy, conservation, and energy-efficient buildings.  The House's tax package, in contrast, provided only $8 billion in tax incentives.  Both exceed the Administration's proposal for only $6.7 billion in tax breaks.

The Senate bill also includes a voluntary plan for reducing greenhouse gases, along with a sense-of-Senate provision putting that branch of government on lonely record in support of action on global warming.  Although non-binding and unlikely to emerge from conference, this sense-of-Senate provision represents the first time that a branch of the federal government has officially acknowledged that greenhouse gases cause global warming.

Other key provisions include: an ethanol mandate of 8 billion gallons by 2012 (as compared with the House's mandate of 5 billion gallons); an oil savings provision requiring the President to reduce demand by 1 million barrels per day by 2015; a provision granting FERC new authority to approve the location of electrical transmission lines; mandatory electric reliability standards to improve operation of the nation's high-voltage transmission system and prevent blackouts; a call for an inventory of the oil and gas resources in the outer continental shelf; and a federal loan guarantee program to commercialize new technologies for fuel cells, coal, nuclear, carbon sequestration, and other advancements, including government-backed loans for power plants that create electricity from cleaner-burning coal and facilities that turn coal into natural gas.

Supporters of the Senate version, including Senate Energy and Natural Resources Committee Chairman Pete Domenici (R-NM) and Ranking Minority Member Jeff Bingaman (D-NM), acknowledge that the bill will not have an immediate impact on high gasoline, natural gas, or electricity prices.  High power prices are a keen political issue since oil prices peaked at a record high in June of $60/barrel and gasoline averaged $2.00/gallon nationwide.  In lieu of short-term benefits, the bill's supporters instead emphasized the long-term impact of the Senate bill, which they hope will increase domestic energy production by increasing renewable energy and alternative fuels, improving electricity transmission reliability, and reducing demand and the need for more power plants by boosting energy conservation and efficiency programs.  Senator Domenici did say, however, that the bill might offer some short-term relief for U.S. manufacturers from skyrocketing natural gas costs.

The main sticking point in the upcoming conference committee will likely be the insistence by House Republicans that the energy bill include a waiver of liability for manufacturers of the gasoline additive MTBE, which has polluted water supplies in many parts of the country.  Other contentious areas are likely to be the House provision authorizing oil and gas drilling in the wilderness of the Arctic National Wildlife Refuge, which is absent from the Senate bill, the differing tax packages included in each version, and the Senate's Renewable Portfolio Standard.  (H.R. 6) [UPDATE]