Yet Another Energy Policy

Dec. 19, 2007

There is an ongoing attempt in Congress to create yet another federal energy policy; yet, the one passed in 2005 has hardly been implemented. The details of this one are not firm because the House and Senate versions are different from each other and will need to be reconciled in a conference committee. In addition, the President does not like much of either version and has said that he would veto the final bill unless several provisions are changed more to his liking. Apparently, among the contentious issues are mandating higher fuel-efficiency targets for auto mileage for the first time in 30 years, supporting the production of ethanol as a substitute for gasoline, and requiring that more renewable fuels be imposed upon electric utilities. All of these measures would impact your bottom line (as well as the profits of oil and gas producers, and so their lobbying efforts have been heard and accepted by the White House). The Senate failed to overcome a threatened filibuster by a 59-40 vote, but passed a watered-down version that goes back to the House. Under the Senate rules of filibuster, there is zero possibility that any bill that is not acceptable to the President will get to his desk; it might be useful to review the filibuster rule for your understanding.

According to its description posted on Wikipedia, “filibuster” has roots going back through British, Spanish, French, and Dutch origins. The filibuster is a tactic used by the minority party in the Senate to defeat bills and motions by prolonging debate indefinitely. A filibuster may entail long speeches, procedural motions, and an extensive series of proposed amendments. In effect, it tables the bill by talking it to death and stops any action toward a vote. Its history is pretty interesting.

The U.S. Constitution, (Article I, Section 5) authorizes the Senate to make its own rules of conduct. Presently, there are 44 of them. During the very first session in 1789, the Senate adopted a rule to “move the previous question” to end debate and proceed to a vote. This rule was abandoned in 1806 after arguments posed by Aaron Burr. Because the Senate created no alternative mechanism for terminating debate, the filibuster became an option for delay and blocking of floor votes almost immediately, but it remained only a theoretical option until 1841. Then, the Democratic minority tried to block a bank bill favored by the Whig majority by using this parliamentary tactic. In 1917, a new rule allowing for ending a filibuster and proceeding to vote by “cloture” was adopted by the Democratic Senate at the urging of President Woodrow Wilson. From 1917 to 1949, the requirement for cloture was two-thirds of those voting. After a series of filibusters led by Southern Democrats in the 1960s over civil-rights legislation, the Democrat-controlled Senate revised its cloture rule in 1975 so that 60 Senators were required to limit debate.

Since Senate Democrats presently possess only a bare majority of 51 votes, it takes nine Republicans to vote for cloture to end debate and move a bill to a full Senate vote. Obviously, the President controls the Republicans. While rules of the Senate may be suspended by “unanimous consent,” neither party has been willing to relinquish its right to filibuster the opposition. The present 110th Congress broke the record for filibuster cloture votes, topping 70 as of Nov. 15, 2007. So, the filibuster (or the threat of a filibuster) remains an important political tactic that allows a minority party to prevent legislation of any kind since a vote in the Senate is required to pass all bills. The end result of this brief digression is that no energy bill is likely to get to the White House without the approval of the President, which leads to an interesting question: What other energy-policy options are there?

I am glad you asked. It turns out there is such a plan. The Environmental Protection Agency (EPA), one of more than 100 so-called independent agencies that report directly to the White House, has released its latest report for the ongoing National Action Plan for Energy Efficiency Vision for 2025. It was developed by an ad-hoc committee composed of 100 organizations among energy stakeholders chaired by Marsha H. Smith, commissioner of the Idaho Public Utilities Commission and president-elect of the National Association of Utility Regulatory Commissioners, along with James E. Rogers, chair, president, and CEO at Duke Energy. It is more than amazing that 100 divergent groups could reach an agreement in this report, while the U.S. Senate is stymied on energy policy by political maneuvering to the point of deadlock. The co-chairs state in their introduction: “This vision outlines what we consider [to be] 10 key implementation goals, as well as the steps we need to take to achieve them. It is a framework for changing our course on energy efficiency.” (The full, 82-page report is available online.)

A key difference between the Congress and EPA plans is that the latter seems to allow more for regional differences in energy markets and also to rely more on states, divided into five regions, to make the necessary government interventions. As the name implies, the EPA plan also emphasizes conservation and energy savings rather than changes in the supply infrastructure. It also makes provision for valuing the reductions in energy usage in terms that can be translated into capital gains for all stakeholders based on new financial models yet to be developed. This feature is important as it tends to remove or at least mitigate the emphasis on reduced profits resisted by suppliers in the Congressional plan.

The report cites these benefits to its recommendations: “Customers across the residential, commercial, and industrial sectors would have ready, uniform access to comprehensive energy-efficiency services across the country. These services would bring a range of efficiency improvements to homes, buildings, and facilities, and reduce customers’ bills below what they would have been without these programs. Customers would also have clear information on the cost of energy and increased awareness of their total energy use. In addition, new, efficient appliances and other equipment will help to control the peak demand of utility systems and give large customers greater flexibility in how they manage and control their own operations to reduce energy use, reduce costs, and increase their own competitive positions. New homes and buildings would meet up-to-date energy codes … By 2025, the energy system would focus on providing energy services rather than energy supply, energy providers would see energy efficiency as an important business area, a vibrant energy-efficiency services industry would be in place, there could be greater reliance on clean distributed generation, and the system would be modernized to facilitate appropriate price signals and digital communication, analysis, and system control. It would be very different in terms of how consumers receive and value energy services.” Sounds good, doesn’t it?

The problem, as I see it, is one that plagues most government programs. There is a big gap between planning and implementing. The EPA study group recognizes that many existing federal energy programs and all the states would need to be focused toward a common objective – something that has proven to be daunting in the areas of Homeland Security and intelligence. Managers of existing programs, such as the EPA ENERGY STAR® program for efficient appliances, would need to subordinate their organizations to the larger whole. Organizations that do not presently cooperate with each other would need new connections and communications channels. Money that is channeled separately to different agencies may need new forms of appropriations.

Unfortunately, the EPA’s solution for such problems is yet another plan. It is titled National Action Plan for Energy Efficiency and was issued in July 2006. That was a year ago. (Since it is 216 pages long, you just may want to read the executive summary.) Its stated goal is “to create a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities, utility regulators, and partner organizations … Bringing more energy efficiency into the nation’s energy mix to slow demand growth in a wise, cost-effective manner – one that balances energy efficiency with new generation and supply options – will take concerted efforts by all energy market participants: customers, utilities, regulators, states, consumer advocates, energy service companies (ESCOs), and others.” I hope you get the picture, because this is an example of circular reasoning. You end up right where you started because everyone wants to protect their own interests.

The bottom line is that energy efficiency is likely to begin and continue in your own organization – or not – no matter what government does. In free capitalism, demand always drives supply. When building owners and managers can calculate the financial benefits are worth the investments in implementing the best energy-efficient technology available in new-building construction as well as energy reduction in existing buildings, it will get done. Until then, Washington may produce yet another energy policy that fills up many pages, which are likely to be most highly valued by the people who write them.

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