Pulling the American Energy Industry Out of the 20th Century

by Patrick Meyer

Why is it that lately it has been impossible to escape the onslaught of energy-related chatter coming off Capitol Hill? Simply put, Congress is closer today to passing comprehensive energy policy than it has been since it passed the well-aged Energy Policy Act of 1992. The Energy Policy Act of 2005 (H.R. 6) will have immense and widespread effects on countless industries across the United States, North America and, many argue, the entire world. At the very least, H.R. 6 will have an impact on energy efficiency; renewable energy development; the type of fuels used in the vehicles of the future; electricity interconnection and reliability; the roles of the Federal Energy Regulatory Commission (FERC), the Public Utility Regulatory Policy Act (PURPA), and the Public Utility Holding Company Act (PUHCA); and the oil, gas, nuclear, coal and newly emerging hydrogen industries.

Energy efficiency has been declared the central focus of the national energy policy. H.R. 6 calls for a reduction of energy consumption in federal- and state-owned facilities, energy efficiency standards for public and assisted housing, and requires the President to develop methods to save 1 million barrels of petroleum per day by 2015. In a 2001 position statement, IEEE-USA stated that “energy efficiency must be an integral component of a comprehensive, national energy strategy that addresses the supply and demand for energy in a balanced set of policies.” IEEE-USA supports actions that increase user awareness of energy efficient opportunities, provide incentives for investment in energy efficient technologies, or reduce energy consumption in the residential and commercial sectors.

The incorporation of renewable energy provisions has been a hot topic as well. On 16 June, the Senate voted 52-48 to approve an amendment for a nationwide Renewable Portfolio Standard (RPS). The RPS will require utilities to generate 10 percent of their electricity from renewable energy sources — primarily wind, solar and geothermal — by 2020. The Senate was narrowly divided on the issue because criticism of the amendment runs high. The provision's detractors argue that it is not fair to make utilities in all states comply with the RPS. In fact, in some states it may be technically impossible to do so — states where the wind doesn’t blow fast enough, the sun doesn’t shine bright enough, or the ground’s warmth isn’t easily accessible. Although IEEE-USA has been a long-time supporter of increased funding for renewable technology R&D, it has not released a position statement concerning a nationwide RPS.

H.R. 6 provides major incentives for the production of oil and gas both on federal lands and offshore on the Outer Continental Shelf. Furthermore, the Act promotes investment in natural gas storage, and increases penalties for violations of the Natural Gas Act and Natural Gas Policy Act. Coal industries will be affected by a new program established to promote research, development and demonstration of advanced coal gasification and combustion technologies. Nuclear is also affected by the 20-year extension of the Price-Anderson liability protection for both Nuclear Regulatory Commission licensees and Department of Energy contractors.

In the shadow of the Northeast Blackout of 2003, and with reports that California will face a blitz of rolling blackouts this summer, reliability standards play a key role. H.R. 6 calls for creating an Electric Reliability Organization (ERO), which will be responsible for setting and enforcing reliability standards, and imposing penalties for non-compliance. Since 2002, IEEE-USA has supported enacting  legislation to empower FERC to create a self-regulating ERO. IEEE-USA’s “Electric Power Reliability Organization” position statement argued that the decline in electric reliability “is a consequence of under-investment in needed infrastructure to meet growing customer demands” — a problem that an ERO can help remedy.

Under H.R. 6, PURPA is amended to include long-awaited interconnection standards. In accordance with these standards, which will be set by the IEEE, each electric utility will have to make interconnection service available to any electric consumer that requests such a service. IEEE-USA has been pushing for uniform, nation-wide interconnection standards since 2001, and has also encouraged coordination with Canada and Mexico.

FERC's powers are broadened significantly under H.R. 6. In the electricity sector, FERC is granted the authority to exercise eminent domain for the construction of electric transmission infrastructure. Additionally, FERC will have the power to issue siting permits if a state withholds approval inappropriately. FERC will also have limited jurisdiction over unregulated transmitting utilities.

The highly disputed repeal of the Public Utility Holding Company Act (PUHCA) is accompanied by a further increase in FERC power. FERC is given limited jurisdiction over the selling, leasing, merging, consolidating, purchasing, and acquiring of any generation facility valued at more than $10 million. In a recent House Committee on Government Reform hearing entitled “Ensuring the Reliability of the Nation’s Electricity System,” FERC Chairman Pat Wood argued that the PUHCA repeal is long overdue, and that the repeal would spur investment and competition while allowing multiple companies in different states to join together to save money. Contrary to this, Dr. Mark Cooper, director of research of the Consumer Federation of America, argued that PUHCA was created to protect consumers from unreasonable energy prices and should not be repealed.

Many wonder what will come of the Energy Policy Act of 2005. Some look to the future pessimistically expressing that we have been here and been disappointed before. Others believe that for the first time in more than a decade, a chance to finally bring the nation’s energy industries up to date is in the offing. On 28 June, the Act passed the Senate floor by an impressive 85-12 vote, and now enters the conference stage in which the House will surely push to maintain their liability waiver for MTBE manufacturers and the inclusion of their ANWR amendment — while the Senate will argue for their 1 million gallon oil consumption reduction and the inclusion of the recent RPS amendment. Meanwhile, the President has persistently called for the bill to reach his desk by August. The nation eagerly awaits the actions of the coming months.

Patrick Meyer is a graduate student at the Rochester Institute of Technology. He is currently working as a summer intern with IEEE-USA's Energy Policy Committee in Washington, D.C. He will return to RIT in September to complete his Masters of Science in Science, Technology, and Public Policy. Comments may be submitted to todaysengineer@ieee.org.