U.S. Energy Bill, Much Maligned, Hangs Fire

Enactment of a comprehensive bill was imminent yet still uncertain at press time

Washington-- Somehow it seemed symptomatic of the unending debate over U.S. energy legislation that the final bill, just when it was due to emerge from a congressional conference committee on 5 October, got snagged by a dispute over an obscure issue having to do with gasohol. That led to a further two-week delay and still more uncertainty as to whether a comprehensive law will ever be enacted.

It's no secret that as each presidential election year nears, as candidates start flocking to the farm state Iowa to compete for voters' favor in a crucial early balloting, that extra-special respect must be paid to the idea of producing liquid fuels from grains. But why would an essentially routine and minor matter like that stall what is supposed to be a landmark bill?

The answer, in a nutshell, is that the law, assuming it soon makes it to the president's desk for signature (if it has not done so already), is nobody's idea of what a comprehensive energy law should really look like. It's a patchwork of complicated compromises that satisfies hardly anybody's main concern, whether the worry is dependence on foreign oil, the need for innovative energy technology, or environmental degradation and climate change.

Nevertheless, the energy bill also is one of the few really important laws to have emerged in the last two decades from the chronically gridlocked U.S. political system and, if signed into law, will be for better or worse the main force shaping policy for years to come. And the bill does do some things that are long overdue. The one part of it that seems sure to survive any last-minute log-rolling and pork-barreling is the electricity section: it gives, at long last, the North American Electric Reliability Council (NERC, Princeton, N.J.), the utility industry's self-regulating organization, the authority the council has sought since the Western-grid blackouts of 1996 to make its regulations legally binding on members. Organizations trying to bolster the country's thin-stretched transmission grid get some help, and such organizations may be easier to form with the repeal of a 1936 utility law deemed obsolete in the new world of electricity competition. The bill also seems, on balance, to leave the Federal Energy Regulatory Commission (FERC, Washington, D.C.) with the powers it needs to muscle utilities into regional organizations capable of implementing and enforcing NERC's rules.

A poor advance billing

More than five years in the making, various versions of the energy bill had repeatedly got stuck in committee or were able to survive one chamber's scrutiny but not the other's. The bill finally got moving in earnest in mid-summer, when Senate Republicans took everybody by surprise and agreed to accept as their working version a draft the Democrats had proposed when they had control of the Senate two years earlier. With gasoline and natural gas prices rising sharply during the summer, while situations in the Middle East deteriorated, the Senate Republicans evidently concluded it would be politically dangerous to allow a perception of inaction on energy to fester. The Northeast-Midwest electricity blackout of 14 August naturally added to the general sense of emergency.

Yet, as that sense of urgency became more acute, expectations also rose, without being fulfilled. Perhaps that is why the bill was so thoroughly derided and dismissed on its way to the White House. On 14 April, after the House passed its draft, The New York Times denounced it as "uninspired." Its editorial that day took the House to task for allocating only about one-third of US $18 billion in tax breaks to conservation and renewables and for failing to require improved vehicle fuel efficiency. On 12 May, the Times ridiculed the Senate version for doing nothing about global warming, except for placing "an expensive and chancy bet on nuclear power" [for a comparison of the two drafts, see chart].

Meanwhile, the bill was faring no better among the Times 's ideological opposites, downtown in the editorial offices of The Wall Street Journal . On 20 June, the Journal complained that in "three years of massaging an energy bill, Congress has debated everything under the sun (and the sun too, for that matter)" without addressing "the one serious energy problem we now have," namely a shortage of natural gas.

Even those voting the bill out of committee did not seem unduly impressed with their own work. "Rather than crafting a long-term energy strategy that balances conservation with supply and alternative sources with investment in the grid," said Senator Bob Graham, a Florida Democrat on the Senate's Committee on Energy and Natural Resources, the Republican Congress' bill was just "advancing the energy industry's short-sighted goal of drilling America first."

Electricity re-regulation

Despite the misgivings even of its progenitors, the energy bill seemed to be coming out of conference as this issue of IEEE Spectrum went to press, and to be ready for House and Senate votes. Unless it encounters yet another last-minute obstacle, such as a filibuster on the Senate floor—the time-honored tradition of delaying or killing a bill by talking endlessly—the energy bill will be law by the time this magazine reaches its readers.

Surely the bill's most important effect will be to shore up central regulation of the common-carrier electricity grid, as it is reconfigured to handle electricity trading. Under the leadership of President George W. Bush's energy adviser from Texas, Patrick Wood III, and continuing policies initiated by the Clinton White House, FERC has been seeking to establish fair and transparent markets, so that electricity prices will be reasonable, all players will have equal access to the grid, transmission investments will be made where they are most needed, and overall reliability will be furthered.

Right down to the wire, however, some lobbyists were trying to slow or stop FERC's efforts to get all transmission organizations to adopt the "standard market design" it proposed in July 2002. The point of this market model is to ensure that all organizations are playing from the same book, so that problems do not arise along the ragged edges of regional transmission organizations, as seen (in all likelihood) in the eruption of the August blackout.

But powerful vertically integrated utilities in the Southeast and Northwest have opposed the proposed market design, and so have some state utility commissioners, jealous of their powers. As a result, at various stages of the legislative game, language was inserted into energy drafts allowing parties to stall on implementation of the plan.

The art of the possible

As for the various sections of the bill providing research dollars and other kinds of help to promote energy development and energy efficiency, readers may judge for themselves whether Congress' work was adequate or inadequate. The law almost certainly will not allow drilling in the Arctic National Wildlife Refuge, the hot-button issue that stalled it repeatedly and almost killed it even at the very end. Nor will it require U.S. drivers to buy more fuel-efficient cars, or pay more for electricity in order to make the grid more reliable or fuel use less polluting.

The bill does contain a lot of subsidies, and among those espousing free-market principles, wrath is specially reserved for the big handouts that Democrats representing farmers built into the bill for gasohol—vehicle fuel made from a mixture of petrol and ethanol extracted from maize, to put it in British English. In defense of ethanol proponents, it may be said that one person's subsidy is another's visionary key to securing the nation's energy independence, cleaner local environments, and a stable world climate.

The U.S. energy bill has a little for everybody, without too much for anybody in particular, within a framework of no new taxes or otherwise deeply unpopular measures. Thus, it makes no attempt to close the loophole in Corporate Average Fuel Economy (CAFE) standards, which allow the immensely popular sport utility vehicle to be classified as a light truck. Just as emphatically, it declines to follow the lead of countries like Germany, Denmark, and Sweden, whose publics have demanded effective action to reduce greenhouse gas emissions but without greater reliance on nuclear energy; their legislatures have enacted laws taxing energy use or carbon emissions and guaranteeing purchase of any energy made from renewable sources.

Arguably, Germany's law requiring utilities to buy at fixed prices electricity produced by wind turbines and solar cells has done much more to spur technology development than throwing R&D dollars at research organizations ever will. Don't hand out free euros hoping somebody will come up with something useful, say the Germans; come up with something useful, and we promise we'll buy it.

But here in the United States, at present, there is no national consensus that global warming is an urgent problem requiring concerted action. As for energy independence, everybody's dirty little secret is that the country can never be truly independent of foreign energy supplies, and even if it somehow could, its inseparable friends in Europe and Japan will never be.

So, in the final analysis, the 2003 U.S. energy bill is just that, the 2003 U.S. energy bill. It's what's possible, here, now.