CLIMATE:

Utilities press House panel for free allowances

Power company executives amplified their call today for free emission credits to comply with a House climate bill, calling their proposal an "elegant solution" ensuring the public won't face skyrocketing electric bills.

Representatives of the Edison Electric Institute, the American Public Power Association, the National Rural Electric Cooperative Association and the National Association of Regulatory Utility Commissioners urged the House Energy and Commerce Committee to set aside 40 percent of the proposed cap-and-trade program's allowances for free distribution to regulated local distribution companies (LDCs) within the electricity sector.

The utilities' position reflects a consensus among EEI members that would give credits to regulated companies that deliver electricity to households.

PNM Resources CEO Jeff Sterba said the institute's approach would "cushion the economic impact" of global warming legislation on electricity customers, especially low-income families and energy-intensive businesses and industries.

And Richard Morgan, a public utility commissioner from Washington, D.C., called the free allowance approach "an elegant solution to the problem of distributing allowances in the electric sector and providing for consumer assistance at the same time."

Calls for free allowances come amid an intense behind-the-scenes lobbying campaign to fill out what Rep. Ed Markey (D-Mass.), a lead co-author of the bill, today called the "nuts and bolts" of the House legislation. A new version of the bill -- with allowance language -- is expected before next week's scheduled markup in the Energy and Environment Subcommittee, though Markey and the bill's other co-author, Energy and Commerce Chairman Henry Waxman (D-Calif.), have not given any firm schedule for when that will be.

Both Democrats previously have favored a large auction of the emission credits, an approach backed by the Obama administration. Robert Greenstein, executive director of the Center on Budget and Policy Priorities, was the sole witness during today's hearing to raise his hand in support of a 100 percent auction.

Greenstein explained that auction funding could be used to help offset higher consumer costs via tax rebates to low- and middle-income Americans.

But acknowledging the political weight behind EEI's proposal, Greenstein today suggested a compromise that starts with free allowances for the electric utilities so long as they are also phased out at the same time that direct tax relief gets ramped up.

Safety valves, renewable electricity standards

Lawmakers also sifted through other key requests from the industry groups. Glenn English, a former Oklahoma Democratic congressman and the CEO of the National Rural Electric Cooperative Association, and Mark Crisson, the president and CEO of the American Public Power Association, suggested a "safety valve" price cap on emission credits to guarantee costs to industry.

The House draft does not include a price cap and is unlikely to get one, given widespread opposition from environmental groups.

English also recommended loosening the draft bill's emission limits (currently 20 percent below 2005 levels by 2020, and 83 percent cuts by midcentury) to match up with the availability of low-carbon energy technology. He also warned against calls to auction off the allowances, saying that approach would allow carbon traders the ability to influence energy prices.

"In just the last decade, we've had a technology bubble, an oil bubble and a housing bubble, not to mention the Enron fiasco and California's electricity crisis, each of which was least partially caused by speculators and manipulators trying to make a buck at the expense of consumers," English said. "Have we not learned our lesson?"

Addressing another component of the sweeping House legislation, Crisson took issue with the Waxman-Markey bill's inclusion of a nationwide standard seeking renewable energy production of 20 percent by 2020. The APPA chief said the limits should instead be 15 percent by 2020, and he suggested nixing the program outright once a cap-and-trade program is implemented.

"Enacting the two simultaneously will increase compliance costs for many," Crisson said. He also questioned the need for performance standards on industry in the draft bill, saying that provision would halt construction of any new coal plants beyond 2015.

Atlanta-based AGL Resources Chairman John Somerhalder, testifying on behalf of the American Gas Association, urged free allowances for natural gas utilities should Congress ultimately decide to include them in the legislation. He said AGA also backs carbon footprint labeling for home appliances and buildings.

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