Policy Priorities

Federal Advocacy Update

The issues of central importance to our membership that have emerged from passage of the American Recovery and Reinvestment Act and the consideration of the American Clean Energy and Security Act of 2009 (ACES) center around the decision-making process of the states and local governments regarding utilization of the stimulus funding, the choice of existing delivery channels to funnel the money to institutional customers, the procurement requirements for allowing state and local governments to mix the allocated monies with private investment monies through ESPCs, passage of an Energy Efficiency Resource Standard (EERS), and the allocation of GHG allowances for energy efficiency.

American Recovery and Reinvestment Act (ARRA)

NAESCO has been working with a national coalition that consists of hundreds of environmental and energy efficiency groups, industry trade associations and major companies to try to make sure that the rules for these programs will facilitate the accomplishment of the goals of ARRA. The coalition's efforts were hampered when the Obama Administration announced in March that it would not permit lobbyists to talk or meet with any federal official on the subject of ARRA programs. For about six weeks, NAESCO and other coalition members were not permitted to talk to DOE program managers or even to attend public conferences where the stimulus programs were being discussed. The Office of Management and Budget (OMB) has now issued clarifying rules that somewhat ease the restrictions on lobbyists, and many organizations, including NAESCO, have restructured their advocacy efforts through federal filings to allow the organizations to communicate and meet with US DOE officials.

Another challenge is that DOE and OMB have not made the SEP plans available to the public. Neither agency has responded to direct requests from the national coalition to post the plans on the DOE or Recovery.gov websites. A few states have made their plans available on their own websites, but most states have not. A website created by a Seattle company - www.recovery.org - has provided access to county and city project data not available on the government websites. We expect a number of states will have public building ESPCs as major elements of their energy efficiency programs and that some will need help getting programs organized and implemented in the accelerated ARRA timeframe. We are in the process of establishing target counties and cities and have developed informational pieces about the added value of using ESPCs to disseminate stimulus monies for distribution.

American Clean Energy and Security Act of 2009 (ACES)

This legislation is currently under consideration in the House and combines two initiatives that had previously been separate: national energy efficiency and renewable energy resource standards (EERS and RES) and a national greenhouse gas emissions reductions policy (GHG). House Energy and Commerce Chairman Waxman on May 13th announced that the House had reached a compromise agreement on the major ACES issues which have dominated the policy discussions and focus of interest groups like ours over the last month. The bill was marked up on May 18th, with a floor vote anticipated in the next few weeks. EERS, RES and GHG reductions are also under discussion in the Senate but are being considered in separate pieces of legislation. We anticipate that Senate action on these bills will be delayed, as the Senate will first consider health care reform this summer, and then return to energy issues in the fall.

EERS and RES

The House compromise announced on May 13th specifies a combined 20% EERS and RES by 2020. This means that utilities must by that year procure a total of 15% of their energy from renewable sources (RES) and 5% from energy efficiency (EERS). If a state cannot meet the RES (Southeastern states have said that they lack wind resources), the Governor can petition US DOE to allow the reduction of the RES to 12%, and a simultaneous expansion of the EERS to 8%. This compromise EERS is substantially less than the 15% that NAESCO and the national coalition support.

The Senate discussion is at an earlier stage than the House deliberations. In the Senate, the RES and EERS are still being considered separately, and overall have less support than in the House. The coalition anticipates making a renewed push for a higher level of EERS in the Senate at the appropriate time.

GHG Reduction

The GHG provisions of ACES establish a national carbon cap-and-trade system in which the government issues a limited number of carbon emission allowances (in effect permits to emit CO2). The number of allowances is reduced each year to reach the target level of emissions in a future year.

The first major debate is about how the initial allowances will be distributed. In the current bill, 85% of the allowances will be given to industry and 15% will be auctioned. The Obama administration had proposed that all allowances be auctioned with proceeds used to fund a middle class tax cut. Industries (including utilities) that emit large amounts of CO2 argued that forcing them to purchase allowances at auction would increase the cost of energy in a recessionary environment and so they should be granted allowances at no cost. Democrats defeated a Republican amendment to ACES that would have required all allowances to be auctioned. Republicans argued that free allowance distributions to industry represent corporate welfare and will result in higher energy costs. Other groups that want to eliminate the bill's allocation of free allowances include a coalition of state regulators, public power entities, and consumer groups who believe that the value of those allowances will not be passed on to ratepayers in the form of lower energy costs.

Currently the legislation calls for energy-intensive, trade-exposed industries to receive 15% of allowances in 2014 through 2025 on a declining basis. The automobile industry will receive 3% of allowances from 2012 through 2017 and 1% of allowances through 2025 to support development of clean vehicles. Oil refineries will receive 2% of allowances through 2026. Only 15% of the total allowances would be auctioned and the proceeds distributed to help low-income consumers with rising energy costs. Beginning in 2026, any unallocated allowances will be auctioned and the proceeds returned to consumers on a per capita basis.

The House Energy and Commerce Committee eventually reported the American Clean Energy and Security Act of 2009 out of Committee by a 33-25 vote before Congress left for the Memorial Day recess. ACES amendments adopted include the creation of a "clean energy bank" to fund clean energy technologies that are seen as difficult to finance because of a higher risk profile and the establishment of a "cash for clunkers" program to encourage consumers to turn in old cars and purchase more fuel efficient vehicles.

The second major debate is about the use of the proceeds from the allowance auctions. NAESCO and the national coalition are urging that a substantial portion of the proceeds be invested in energy efficiency programs because EE programs produce CO2 emissions at a negative net cost. Consumer groups and advocates for low-income ratepayers insist that most of the proceeds should be rebated to ratepayers. Advocates for energy intensive industries would like to see a substantial portion of the proceeds used to help these industries defray the cost of implementing emissions reduction technologies.