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Crafting the Energy Bill

by Tom Detzel, The Oregonian staff
The Oregonian, October 2, 2003

WASHINGTON -- It began in the panic of an energy crisis, with power prices in California, Oregon and elsewhere in the West hitting stratospheric heights.

Two years later, another crisis -- the blackout in the Midwest and Northeast -- may have provided a new national energy policy the final push it needs to overcome a mountain of regional and partisan obstacles in Congress.

Now, Republican leaders in a House and Senate conference committee say they are close to producing a final energy bill, putting President Bush on the brink of achieving one of his most controversial and far-reaching policy goals.

A victory is far from certain. Democrats plan to filibuster the bill if it contains Bush's plan to drill for oil in Alaska's Arctic National Wildlife Refuge.

And because of disputes about electricity provisions, tax breaks and ethanol production, Republican negotiators said Wednesday they won't be able to finish work on the bill before a scheduled recess next week, as they had hoped.

When a bill does emerge, it's likely to spend as much as $18 billion on tax breaks and subsidies aimed mainly at the oil, gas, coal and nuclear industries.

Bush and most Republicans embrace this tilt toward fossil fuels and energy production. Democrats and some GOP moderates say the bill skimps on conservation, renewable energy, global warming and consumer protection.

The partisan split extends to the Northwest.

"The incentives put into this bill, coupled with a lot of other things, are going to make this a production-oriented bill, and that's good for the country," said Sen. Larry Craig, R-Idaho, one of the House-Senate conferees.

But Sen. Ron Wyden, D-Ore., also a conferee, said Republicans seem intent on pushing an outdated policy while freezing out consumers, who have borne the brunt of sharp increases in gas and electricity prices the past few years.

"There's not a whole lot of 'there' there, so to speak, for the Northwest," Wyden said. "From a national perspective, the country really needs a fresh approach. This bill is really a tribute to yesteryear."

Rewriting hydropower rules

Craig had a hand in drafting a key part of the bill for the Northwest, a rewrite of the licensing process for hydroelectric dams.

The hydropower industry has long complained about the power of federal wildlife agencies and states to mandate fish ladders, special stream flows, screening and other conditions as part of the licensing process.

Licenses are granted on a 30- to 50-year basis, and renewals are the best chance for fish-friendly fixes. In the next 15 years, 211 licenses will expire. Altogether 114 renewals are pending at the Federal Energy Regulatory Commission, which issues licenses and by law must accept state and agency conditions.

Craig's language changes that. Power companies would get the right to offer an alternative condition or fishway and have their alternative accepted over others if it costs less and adequately protects fish and wildlife.

Companies also would get the right to a "trial-type" hearing on disputed facts. And agencies would have to give "equal consideration" to the effect of license conditions they impose on flood control, navigation and energy supply.

Critics say the bill would create a preferential new right for dam operators and add more red tape and delay with more hearings.

"It carves out a huge loophole in favor of the industry and creates a process that's really unprecedented," said Andrew Fahlund of American Rivers, a conservation group.

But Craig said the changes are needed to correct an imbalance that has allowed states and federal agencies the power to force costly conditions on dam operators at the expense of energy output, recreation and commerce.

The issue also has a parochial dimension for Craig.

Thirty licenses in the Northwest will expire by 2019, including Idaho Power's three-dam Hells Canyon complex on the Snake River on the Oregon-Idaho border. The dams, which provide two-thirds of the company's hydro output, block all migration of salmon and steelhead into historic upriver ranges.

Fighting power grid plans

The August blackout added spark to a regional fight over electricity and the Federal Energy Regulatory Commission's vision for a seamless national trading grid for wholesale power.

Politicians, utilities and state regulators in the Northwest and South want the bill to temporarily block the commission's plan, known as "standard market design."

The five-member commission wants to require utilities to join regional transmission organizations that would operate the grid and maintain open access to high-voltage lines. The idea is to improve reliability and enable competition in wholesale power markets that would lower ratepayer bills.

Merchant energy suppliers and utilities in the Northeast and Midwest are backing the commission, but in the Northwest and South, utility officials say it is pushing a "one-size-fits-all" plan that would lead to higher, not lower rates.

They are also distrustful of the commission, which for months refused to impose sharp price caps during the Western electricity crisis of 2000 and 2001.

"What does it mean to go to FERC?" said Marilyn Showalter, a Washington state regulator and leading opponent. "In our state we're paying rates on average 50 percent higher than before the Western energy crisis -- $1 billion a year."

Northwest lawmakers in both parties object to the commission's market design. Wyden has called it "economic poison" for the region. Craig backs a delay, and the White House said last month that the regional organization participation should be voluntary.

Opponents are getting a push back from lawmakers in states hit by the blackout, who argue that the regional organizations would help make the grid more reliable. Twenty senators and 28 House members sent conferees a letter backing the commission.

The Bonneville Power Administration, which owns and operates about 75 percent of the Northwest's high-voltage transmission grid, is already voluntarily working with eight investor-owned utilities on a regional organization.

Provisions stir objections

Other electricity provisions also are controversial. For instance, Oregon is among states objecting to House-passed language that gives the commission "backstop" authority to site transmission lines if deemed in the public interest.

"The states have never been a problem," said David Stewart-Smith of Oregon's Office of Energy. "It's a red herring to suggest that the reason we have a problem of transmission is that the states have somehow been recalcitrant."

Another dispute centers on proposed repeal of the Public Utilities Holding Company Act, a 1935 law that regulates utility mergers and ownership so that power companies can't use ratepayer funds to subsidize other businesses. To compensate, Republicans would give the commission new authority to review utility mergers and books, but Wyden and other Democrats want stronger consumer protections.

"After Northwest consumers have taken this huge pounding as a result of all the Enron sleight-of-hand, the lesson is clear," Wyden said. "You can't afford to take off the reins and say we'll let the marketplace take care of everything."

Democrats also complained that Republicans had cut language, backed by 53 senators, requiring electric utilities to eventually produce 10 percent of their power from wind, solar, biomass and other nonhydro renewable sources.

Bill could speed gas pipeline

The Northwest also could benefit from language to speed construction of a natural gas pipeline from Alaska to Canada. Analysts say the $20 billion pipeline could help supply dozens of gas-fired generating turbines that will be needed in the long term to supply the Northwest's electricity needs.

Craig also secured a plum research project for the region: $1 billion to develop an advanced nuclear reactor that would produce electricity and hydrogen, which has potential as a clean fuel source of the future.

Critics say the Idaho project is another example of billions in energy industry pork that has been stuffed into the bill.

"You're not going to get any environmental benefit if in producing hydrogen you're producing tons and tons of nuclear waste," said Anna Aurelio, national legislative director for the Oregon State Public Interest Research Group. "Right now, this bill has become a love fest for every special-interest lobbyist."

Tom Detzel
Crafting the Energy Bill
The Oregonian, October 2, 2003

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