Energy Policy Act of 2003-Conference Report-Continued

ENERGY POLICY ACT OF 2003-CONFERENCE REPORT-CONTINUED

Ms. COLLINS. Mr. President, I rise to express my strong opposition to the conference agreement on the Energy bill we are debating today.

Our Nation needs a balanced energy policy that will increase supply, decrease demand, reduce our reliance on foreign oil, and protect our environment. Unfortunately, the Energy legislation before us fails to strike this necessary balance. In fact, it would be poor energy policy, poor environmental policy, and poor fiscal policy. It favors special interests, it contains billions of dollars in wasteful subsidies, and it fails to promote energy conservation. It would be bad for Maine's electricity consumers, it would be bad for Maine's manufacturers, and it would be bad for Maine's environment.

I am very disappointed that the renewable energy provision that I coauthored with Senator Bingaman was not included in the final version of this legislation. This provision would have required that 10 percent of our electricity come from clean, renewable energy sources by the year 2020. A majority of the Senate conferees voted in favor of this proposal, but unfortunately the House voted to remove it, thus passing up an important opportunity to increase fuel diversity, decrease natural gas prices, and reduce greenhouse gases.

This legislation would do very little to reduce our dangerous and increasing reliance on foreign fuels. The United States is nearly 60 percent reliant on foreign oil, and this number is projected to increase in the coming years, reaching as high as 70 or even 75 percent in the next decade to 15 years.

Senators LANDRIEU and SPECTER and I joined to offer an amendment to the Senate Energy version that directed the President to devise a plan to save 1 million barrels of oil per day by the year 2013. We did not dictate how that should be done. It could be done by increasing fuel efficiency standards for our trucks and cars. It could be done by moving toward more energy-efficient appliances. There are many ways that goal could be accomplished.

Not surprisingly, our amendment enjoyed widespread support in the Senate. In fact, it passed by a vote of 99 to 1. Inexplicably, the conferees voted to drop that provision from the final bill.

This legislation also contains numerous wasteful and very expensive subsidies, including a 5-billion-gallon ethanol mandate that will subsidize corn production in the Midwest at the expense of higher gas prices in New England. Ethanol is more expensive than gasoline. It is difficult to transport, it is of dubious value to the environment, and it does little to reduce our reliance on foreign fuels. In fact, studies show that it takes about 4 gallons of oil to produce 5 gallons of ethanol. If the goal were to reduce reliance on foreign fuels, we would be much better off increasing automobile fuel economy standards or mandating other achievable efficiency improvements.

The liability waiver for MTBE manufacturers also does not belong in this bill. The gasoline additive MTBE is a suspected carcinogen and has contaminated a number of ground water supplies in my home State of Maine, and I know it is also a problem in the home State of the Presiding Officer.

In 1998, for example, a ground water system serving 5,000 people and operated by the Portland Water District was contaminated by MTBE. This incident cost the Portland water district $1.5 million. The liability provisions in this legislation will leave MTBE manufacturers with little incentive to help clean up contaminated water supplies. The likely result will be that municipal ratepayers will have to shoulder a majority of the cleanup costs.

The electricity title of this bill is particularly troubling to me because it is biased against the Northeast. Three months ago, the largest blackout in our Nation's history illustrated the fundamental flaws in a haphazard and poorly regulated electricity market.
Just today, the General Accounting Office, at my request, released a new report on electricity restructuring that analyzed the blackout and identified what steps should be taken to ensure greater reliability of the electric grid. Unfortunately, the recommendations that are in the GAO report fly in the face of what has been done in the legislation we are debating today.
Electricity regulators in the areas most affected by the blackout in the Northeast and the Midwest have stated that the Federal Energy Regulatory Commission, known as FERC, needs to move ahead with standardized electricity markets in order to improve the reliability of our markets. Since electricity flows across power lines without regard to State boundaries, we need clear and consistent electricity rules that apply to the entire Nation. Unfortunately, this legislation would actually prohibit FERC from moving ahead with standardized markets for another 3 years. I am astounded by that.

Earlier this year, many of us representing States in both the Northeast and the Midwest wrote to the conferees to share our views on the electricity issues that were being debated in the conference. We quoted our regulators on the impact of delaying these FERC rules. Specifically, we stated:

Our States feel strongly that any delay of SMD [the standard market design] hurts efforts to provide reasonably priced and reliable electricity to consumers and businesses. In fact, Ohio Governor Bob Taft, in testimony before the House Energy and Commerce Committee, stated that he believes that any delay would "impose an intolerable risk on the nation."

He went on to say:

We urge you to reject proposals to further delay FERC's ability to address issues which have a direct effect on the cost and reliability of electricity, for millions of our constituents.

Mr. President, I ask unanimous consent the letters we sent to the conferees be printed in the RECORD at the conclusion of my remarks.

The PRESIDING OFFICER. Without objection, it is so ordered.

(See exhibit 1.)

Ms. COLLINS. Mr. President, in view of our urging the conferees to not interfere with FERC going ahead with these commonsense and necessary regulations, you can imagine my disappointment to discover that this bill, in fact, delays these regulations by FERC for 3 years.

I am also very troubled by the subsidies for pollution control equipment for some of our Nation's dirtiest powerplants. Why should taxpayers pay for pollution control technologies for 40-year-old coal-fired powerplants that were grandfathered under the Clean Air Act? Recently, when three advanced natural gas plants were built in Maine, these plants installed state-of-the-art, advanced pollution control technologies without any subsidies, without being subsidized by the American taxpayers. The cost of this technology was borne by electricity consumers in the State of Maine and other States in the Northeast. The cost of electricity from the oldest coal-fired powerplants has long been subsidized through exemptions from the pollution controls mandated by the Clean Air Act. To further this subsidy by authorizing billions-billions-of taxpayer subsidies for the dirtiest plants makes no sense at all, and it will have the effect of continuing to ensure a disparity in the price of electricity between regions in which pollution and other costs are subsidized and regions such as ours, in New England, which are not the beneficiary of these subsidies. That is not fair. It is not fair to our taxpayers, and it is not fair to our electricity consumers.

I am further disappointed by the inclusion of language in the electricity title which will undercut the nationwide development of clean power generation. This language, which is known as the participant funding language, effectively negates the benefits of the combined heat and power provisions that Senator Carper and I worked so hard to include in this bill. The participant funding language actually creates a disincentive for clean energy generation by allowing monopoly utilities to shift the costs of transmission upgrades onto clean power generation, such as combined heat and power-the cogeneration plants.

This provision is particularly harmful to our manufacturers, many of whom use combined heat and power to generate products and jobs.

The last thing we need in this country is another disincentive for our manufacturers. In the Northeast in particular, manufacturers are already struggling to cope with high electric rates. The last thing we should be doing is shifting more of the costs on to them.

The legislation would also increase greenhouse gas emissions, waste natural gas and other already scarce fuels, and harm air quality.

The bill's failure to address climate change is yet another disappointment. It seems a near certainty that greenhouse gas emissions will increase by hundreds of millions of tons under this legislation. Yet the entire climate change title has been stripped from this bill. If we are going to spend billions of dollars on oil and gas and coal projects that will increase greenhouse gas emissions, then at least we should determine whether such an increase in emissions could cause an abrupt and potentially dangerous change in our climate.

Unfortunately, the abrupt climate change provisions that I authored were also omitted from the final version of the bill.
In summary, this bill does not offer the balanced energy policy that America needs. It does not do enough to increase energy efficiency or renewable energy. It does not promote conservation. It does not protect our environment. It does not give FERC adequate authority to provide reliable electricity markets. And it will not reduce our reliance on foreign oil.

I cannot in good conscience vote in favor of ending the debate on this legislation, and I call on my colleagues to take a close look at the provisions of this bill. I believe as they delve into this bill they will realize that it is fundamentally flawed and should be rejected.

In doing so, we would save the taxpayers some $80 billion, and we would signal our support for a more balanced energy policy for this Nation.

I yield the remainder of my time.

EXHIBIT 1

U.S. SENATE,
Washington, DC, July 25, 2003.

Hon. PETE V. DOMENICI,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, Washington, DC.

Hon. JEFF BINGAMAN,
Ranking Member, Committee on Energy and Natural Resources, U.S. Senate, Washington, DC.

DEAR CHAIRMAN DOMENICI AND RANKING MEMBER BINGAMAN: We are writing to urge you to continue our nation's efforts to move toward competitive wholesale electricity markets that will benefit consumers and businesses. National competitive markets, where multiple buyers and sellers can negotiate bargains and pass cost savings along to consumers, are the best approach to the challenges facing the electricity industry.

We would like to bring to your attention a number of issues addressed in the electricity title of the Senate Energy Bill (S. 14) that have implications for residents and businesses in the Northeast-Midwest region.

Delay of Standard Market Design-S. 14 and the proposed substitute amendment delays the implementation of the Federal Energy Regulatory Commission's (FERC) standard market design until July 2005. Electricity markets have outgrown state boundaries. We are writing to express our concern with the proposed delay of standard market design and the provision to make participation in regional transmission organizations voluntary. The delay has serious implications for residents and businesses in the Northeast-Midwest region and throughout the nation.

A standard market design would streamline the wholesale electricity industry, encourage transmission investments and move the lower 48 states toward a more competitive electricity market. Congested power lines, which are the result of the current electricity system, cost customers and businesses throughout the United States billions of dollars each year, whereas competitive wholesale power markets could deliver billions of dollars in economic benefits.

Schwab Capital Markets detailed the importance of standardized markets to increasing investment in our nation's transmission grid and electricity generation.

Testifying before the House Subcommittee on Energy and Air Quality, Christine Tezak with Schwab states: "We believe that capital will be less expensive for all market participants if FERC continues (and is permitted to continue) its efforts to provide reasonably clear and consistent rules for this business . . . Schwab WRG continues to view continued efforts to move forward with the restructuring of the electricity industry to be the best investment environment for the widest variety of participants in the electricity marketplace-whether they provide generation, transmission, distribution or a combination of these services-and most importantly, the most likely to provide sustained long-term benefits to consumers." Further, Ms. Tezak stated:
"Congress needs to decide whether or not it still believes in the 1992 Energy Policy Act. Today, Congress is becoming an increasing part of the reason capital is hard to attract to this business. Congress is calling for FERC to slow down, Wall Street is frustrated FERC won't move faster."

S. 14 makes participation of federal utilities in Regional Transmission Organizations voluntary. Federal taxpayer dollars were used to develop and maintain Federal power marketing agencies such as the Tennessee Valley Authority and Bonneville Power. The energy generated by these facilities should benefit all Americans. TVA and Bonneville should be required to participate in RTOs so communities throughout the United States have access to the power generated at these Federal facilities.

The Energy Bill must put national interest above the interest of a few vertically-integrated utilities that want to maintain regional monopolies. We encourage you to support standardizing electricity markets and prevent further delay of these efforts.
Participant Funding-S. 14 and the proposed substitute amendment directs FERC to establish rules to "ensure that the costs of any transmission expansion interconnection be allocated in such a way that all users of the affected transmission system bear the appropriate share of costs." The language requires FERC to fairly align the costs and benefits of transmission upgrades, a judgment that can include a consideration of relevant local factors. This is not only the most equitable approach but also the one most likely to ensure that transmission development will keep pace with growing electricity demand.
Combined Heat and Power-S. 14 currently contains the "Carper-Collins" language which keeps in place incentives to operate combined heat and power facilities until true competition exists in electricity markets. This language retains, for a limited time, the provisions of the Public Utility Regulatory Policy Act (PURPA) which require utilities to provide back-up power and buy electricity from qualifying combined heat and power facilities. As soon as competitive electricity markets are established, these requirements are repealed. Since combined heat and power saves energy, reduces greenhouse gas emissions, increases energy independence, and is good for the competitiveness of American manufacturing, we urge you to retain such provisions.

We urge you to complete the work Congress started with the Energy Policy Act of 1992 to provide reliable, low-cost electricity to customers. Please stand strong against pressure to reverse court on Congress' efforts to establish better working, competitive markets, and to continue working towards competitive electricity markets.

Sincerely,

Jack Reed, Olympia J. Snowe, Edward M. Kennedy, Arlen Specter, Susan M. Collins, Debbie Stabenow, Frank Lautenberg, Carl Levin.

U.S. SENATE,
Washington, DC, September 22, 2003.

Hon. PETE DOMENICI,
Chairman, Senate Energy Committee,
Washington, DC.

Hon. JEFF BINGAMAN,
Ranking Member, Senate Energy Committee,
Washington, DC.

DEAR CHAIRMAN DOMENICI AND RANKING MEMBER: As the Conference Committee on the Energy Policy Act of 2003 continues its deliberations, we would like to bring to your attention an issue of great concern to us.

We believe the Energy Bill must set forth a policy that will complete the work that Congress started with the Energy Policy Act
of 1992. The vision of Congress and President George H.W. Bush in 1992 was to transition our nation's electricity industry to competitive wholesale power markets. The vision of today's Congress should be to complete the transition to competitive markets by allowing the Wholesale Power Market Platform (WMP) of the Federal Energy Regulatory Commission (FERC) to move forward.

Wholesale power markets remain the best approach to optimizing our country's energy resources by increasing generation efficiencies, stimulating investment in new technologies and infrastructure, providing greater choice in energy sources, especially in renewable power, and passing cost savings onto consumers. Wholesale power markets have naturally grown into regional bodies, spanning multiple state boundaries. The recent blackouts that impacted many of our states clearly illustrate the regional nature of our electricity grid. Events that occur in one state have impacts in other states.

Moreover, while we respect the need for certain regional variations among power market structures, we firmly believe that any Energy Bill should not harm those regions of the country that want to move forward with efforts to bring the benefits of competitive power markets to consumers. Accordingly, we urge the passing of an Energy bill that will appropriately reflect the physical and business realities of the electricity business by allowing the FERC to implement its WMP.

The FERC's Standard Market Design proposal and subsequent Wholesale Power Market Platform are the logical and necessary responses to the problems experienced by nascent regional wholesale power markets. WMP seeks to standardize market rules while adhering to regional variations and allows FERC to oversee the process of Regional Transmission Organization (RTO) formation and participation. The timely implementation of WMP is critical in achieving the efficient, seamless, and non-discriminatory wholesale power markets that will optimize our nation's energy resources. Delay will only serve to further injure much needed investment in generation, transmission and demand response facilities that are the foundation of our nation's economic well-being.

The health of our state economies depends upon the free flow of interstate commerce governed at the federal level to ensure consistent, clear and fair laws over state lines. Similarly, vibrant competitive power markets rely on the free flow of electrons through state and regional boundaries. To the extent there is a standard set of rules, states with either competitive retail markets or vertically-integrated utility service will benefit in terms of greater efficiencies, greater reliability and reasonably priced electricity that our homes and businesses need.

Furthermore, a delay in the implementation of the SMD rulemaking will only serve to add uncertainty to potential investments in our energy infrastructure and negate years of progress made in the rulemaking process by the FERC, state commissions and market participants alike. Consider the testimony of Christine Tezak of Schwab Capital Markets before the House Subcommittee on Energy and Air Quality: "Congress needs to decide whether or not it still believes in the 1992 Energy Policy Act. Today, Congress is becoming an increasing part of the reason capital is hard to attract to this business. Congress is calling FERC to slow down, Wall Street is frustrated FERC won't move faster."

Specifically, we believe that an energy conference report should:

Support FERC's Efforts to Promote Competitive Wholesale Markets-Our states feel strongly that any delay of SMD hurts efforts to provide reasonably priced and reliable electricity to consumers and businesses. In fact, Ohio Governor Bob Taft in testimony before the House Energy and Commerce Committee stated that he believes that any delay would "impose an intolerable risk on the nation". We urge you to reject proposals to further delay FERC's ability to address issues which have a direct effect on the cost and reliability of electricity for millions of our constituents.

Promote Regional Transmission Organization (RTOs)-Effective, well-functioning regional transmission organizations and independent system operators are necessary for the creation of well-designed, competitive regional markets. The Electricity Title should not disrupt existing regional markets nor stall their development in regions that want to develop them. RTOs and ISOs are a key to effectively managing the increasingly interstate flow of electricity and are critical to the success of electricity restructuring. Increased participation in RTOs will help address the structural problems in our grid that created conditions for the recent blackout. RTOs will help our nation improve our ability to respond to problems in the grid by having an effective regional "traffic cop" with a reliability mission to manage any future incidents. They will also help improve the climate for investment in transmission infrastructure to enhance the reliability of the grid in the first place.

We urge you to complete the work Congress started with the Energy Policy Act of 1992 to provide reliable, low-cost electricity to consumers. Please stand strong to continue the efforts of Congress to establish well-functioning, robustly competitive wholesale power markets while creating a federal policy that would bring much needed certainty to our nation's energy sector.

Thank you for your consideration of these comments and we look forward to working with you to ensure the Electricity Title respects the difference among regions while moving forward with efforts to bring the benefits of competitive power markets to all American consumers.

Sincerely,

Rick Santorum, Jack Reed, Olympia J. Snowe, Edward M. Kennedy, Lincoln D. Chafee, Thomas R. Carper, John Cornyn, Jon S. Corzine, Arlen Specter, Frank Lautenberg, Barbara A. Mikulski, Mike DeWine, Joseph R. Biden, Jr., Carl Levin, Susan M. Collins, Paul S. Sarbanes, Peter G. Fitzgerald, Debbie Stabenow, Evan Bayh, Richard G. Lugar.