CLIMATE:

Power companies lie back as push begins for Senate bill

Some of the country's largest electric utilities were among the most enthusiastic supporters last month when Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) rolled out their climate and energy bill.

"This is a historic achievement," proclaimed Tom Kuhn, president of the Edison Electric Institute (EEI). Standing nearby were the heads of three major power companies: FPL Group, Duke Energy Corp. and Public Service Enterprise Group Inc.

But several weeks later, utility industry officials have largely stayed clear of the spotlight on lobbying for the plan that would place mandatory limits on their greenhouse gas emissions, which contribute about a third of the nation's annual total.

Their silence worries environmentalists and others who face a shrinking window to pass legislation this year and are throwing millions of dollars into their own last-ditch ad campaigns aimed at swaying swing-vote senators.

"If the utilities really want to put their money where their mouth is, there's a lot more they can be doing to help push us forward," said Margie Alt, executive director of Environment America. "I hope they do as much as we're doing to get this to happen."

Electric utilities first went public about the need for a legislative solution on climate change back in 2008, when George W. Bush was in the White House. Fueled by concerns over a new Democrat-led Congress and the prospect of U.S. EPA and state-based climate regulations, the industry started making the case for a long-term price signal on carbon.

EEI, the trade group representing investor-owned utilities, played a critical role alongside some of its member companies in driving last June's passage of a House climate bill. And the industry got many of its demands met in the Kerry-Lieberman proposal unveiled last month, including valuable allocations that help compensate customers for otherwise higher energy prices and pre-emption of both existing state climate laws and future EPA rules.

"Overall, it's hard to walk away from a bill that essentially provides a political solution to address what was asked for substantively," said Mark Menezes, an industry attorney at Hunton & Williams and a former Republican counsel to the House Energy and Commerce Committee.

Wait and see

Still, the industry continues to send mixed signals about just how much it wants Congress to pass a climate bill.

While EEI and a few of its member companies were at the Kerry-Lieberman bill rollout, the trade group hasn't organized a coordinated fly-in since Dec. 1, 2009, when CEOs came to Washington for face-to-face lobbying sessions with lawmakers.

Several utility industry sources explained that the uncertainties over whether President Obama and Congress can really accomplish anything this year on climate change are driving the latest round of complacency. In particular, officials are doubtful of the Senate bill's chances of notching the all-important 60 votes after Sen. Lindsey Graham (R-S.C.) abandoned negotiations with Kerry and Lieberman in April over a separate political spat involving immigration.

"There's no clear path on what the congressional leadership is going to make time for before the elections," Menezes said. "The industry is willing to go along with a reasonable plan to get it done. But they don't believe it's their responsibility to engender the grass-roots effort necessary to get climate change enacted."

"We've always said we want to be in it," said Tom Williams, a spokesman at Duke Energy. "I don't see that changing, certainly. As to when and how, we just got to see where it's going to go. Is it going to go straight to the floor? Or to various committees? We will wait until that's determined and then weigh in as that path is set out."

Duke was among a handful of big power companies that did join more than three dozen other businesses -- including FPL, General Electric Co., American Electric Power, AES, National Grid, NRG Energy, Constellation Energy, PG&E Corp., DTE Energy, PNM Resources and Exelon Corp. -- last week with a letter to the White House and Senate leaders urging passage of a comprehensive climate bill.

Jim Connaughton, an executive with Baltimore-based utility Constellation Energy and former President George W. Bush's top environmental adviser, said part of the slowdown also comes from the sheer size of the nearly 1,000-page Senate proposal and the ongoing number crunching at U.S. EPA, the Energy Information Administration and beyond.

"Everyone is in a position of regrouping as they're evaluating the bill and waiting to see both the external and internal analysis," he said. The EPA data are expected to be released next week, and EIA's figures by the middle of the month.

Dan Lashof, a climate change expert with the Natural Resources Defense Council, said he's concerned the utility industry is sitting on the sidelines at a critical juncture in the Senate debate as Democrats try to count votes and the White House makes its push for the proposal with a connection to the Gulf of Mexico oil spill.

"I don't think the implications of the spotlight that the spill has put on this issue has been fully internalized in some of these companies who got very pessimistic about the prospects when Graham walked away from the table," Lashof said. "I think they need to really understand the politics are changing for a different reason than what they were expecting."

Power plant-only approach a 'possibility'

Ultimately, the utility industry may end up being the sole focal point of the Senate climate bill.

In their proposal, Kerry and Lieberman want limits first on power plants starting in 2012, followed six years later with restrictions for heavy manufacturing. Transportation emissions would face their own emission caps, but the industry cannot participate in any trading with the other industrial sectors.

But in the hunt for 60 votes, key players on and off Capitol Hill are talking about legislation that just puts limits on the utility sector (Greenwire, May 28). Last week, Graham floated the idea as a way to sidestep the thorny political fight over transportation emissions, which critics are poised to label a "gas tax."

"We do need to price carbon to make nuclear power and wind and solar and some alternative technologies economically viable," Graham said. "On the transportation side, maybe you can reduce emissions without a cap. I don't know. But you need to put a price on carbon in the power production area at a minimum to jump-start these other technologies."

While Graham's comments aren't reflected in any legislative text, a handful of utility industry officials say they won't knock down the idea, either. A cap-and-trade plan for them makes the most sense, given the industry's history implementing the 1990 Clean Air Act provisions on acid rain. And among all regulated sectors, power companies are the most in need of certainty as they look to make significant new investments over the next several decades.

"It's a possibility," said Duke's Williams of the power plant-only approach. "We're still pushing for a comprehensive plan. But we've we said before, it if it comes down to that, we'd certainly support it."

Connaughton said he, too, sees reasons for the industry to accept a plan focused on the power industry, especially considering the number of federal regulations already on the books to improve the nation's fuel economy standards, including some concepts he helped formulate while working in the White House.

"I'm confident people will begin to reconcile various components of the mandatory approach and various components of a incentive-based approach and zero in on the gaps," Connaughton said. "It's very important to EEI that whatever is done is economywide. And now folks are looking at what exactly that means."

"It'd be logical when you recognize what's already on the books," Connaughton added. "What we're really looking for is more cost-effective approaches."

EEI's Brian Wolff last week said the power plant-only approach has "not been baked at all." And Kerry warned against fiddling with his carefully constructed "puzzle."

"Every time you take one piece away, you make it more expensive for the other pieces to do it alone," he told reporters recently. "And if you take certain pieces away, there's no money to be able to help people transition and cushion for it."

But power company CEOs who have been on the sidelines in recent weeks are sure to discuss the idea when they meet June 13-16 in Hollywood, Fla., as part of an EEI-sponsored annual convention.

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