Efficiency to be first piece of Senate energy package, potentially complicating water heater bill

By Nick Juliano | 03/20/2015 07:23 AM EDT

The Senate Energy and Natural Resources Committee is expected to begin assembling its wide-ranging energy legislation as soon as next month with a markup focused on energy efficiency — one of four titles expected to be included in a final bill.

But that approach may spell trouble for a narrower campaign to convince Congress to act within the next few weeks to adjust a Department of Energy rule that rural utilities say would prevent them from expanding popular energy-savings programs that require the use of extra-large water heaters.

A House subcommittee yesterday heard testimony on the issue and found broad support among utilities, appliance manufacturers, environmentalists and lawmakers on both sides of the aisle to tweak the efficiency standard for water heaters to protect future demand-response programs, but legislation that would do that remains stuck. The legislation was the product of years of behind-the-scenes negotiations among outside stakeholders, including General Electric Co. and the National Rural Cooperatives Association, and it has won overwhelming support in previous votes of both the House and Senate (E&E Daily, Feb. 12).

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"This is as close as we can get to unanimous support on any utility-industry issue," Steven Koep, utility sales manager for Vaughn Thermal Corp., a leading water heater manufacturer, said during yesterday’s hearing at the House Energy and Commerce Subcommittee on Energy and Power.

The primary roadblock is in the Senate, where Sens. Rob Portman (R-Ohio) and Jeanne Shaheen (D-N.H.) introduced a narrow bill combining the water heater fix with separate legislation that would establish a voluntary "Tenant Star" program to encourage energy efficiency in leased buildings. Sources have said conservative Republicans, including Sen. Ted Cruz (R-Texas), have objections to the Tenant Star provision that is blocking quick action on the package — which passed 94-5 when it was added as an amendment in January to the since-vetoed Keystone XL bill.

Other obstacles may remain.

Shaheen said "a number of people" are holding up the bill, but she did not know who or why they were objecting. Some sources involved in the process have suggested Democrats may drop the Tenant Star piece or find something to replace it with for the sake of adjusting the water heater rule before it takes effect April 15. But Shaheen said she was not pursuing that path.

"I’m looking at how to get that whole piece done because it all makes sense, and it all has bipartisan support, and a couple of people should not be holding it up," she told E&E Daily in a brief interview yesterday. "It’s the same problem we’ve had with the efficiency legislation since day one: You’ve got somebody who has a personal agenda who’s holding it up. Well, that’s not acceptable."

The broader Shaheen-Portman bill has faced no shortage of struggles in the four years since it was first introduced. Previous efforts to bring it to the floor have been abandoned after demands for controversial amendment votes, including one attempt from Sen. David Vitter (R-La.) to hold the efficiency bill hostage in an effort to force a vote on Obamacare.

With Senate Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska) teeing up efficiency as the first title of a comprehensive energy bill — with a markup likely during the next congressional work period — chances of enacting a narrow fix before the April 15 deadline are fading. Murkowski said she is growing frustrated at pervasive gridlock in the Senate and that it has been difficult to find a vehicle for even noncontroversial legislation.

"I think we’re trying to find something that we may be able to advance it on," Murkowski told E&E Daily. Her voice dropping to a whisper, she added, "We haven’t been advancing very much lately, can I just say that?"

A Democratic Senate aide yesterday pointed to "the overall malaise of this place" as a key barrier to moving any legislation.

Tensions are likely to remain high in the Senate, which has been locked in a bitter fight over abortion language included in a bill to combat human trafficking. And next week will not help matters with the arrival of a marathon vote-a-rama on the budget resolution that will provide both parties opportunities to score political points with a series of votes on nonbinding amendments touching a variety of hot-button issues, including climate change and energy development.

After the vote-a-rama, Congress adjourns for a two-week recess. When they return, senators are expected to begin fleshing out the efficiency title to an energy bill.

Shaheen and Portman this month reintroduced their broader energy bill, which will be a key component of the committee’s work (E&E Daily, March 11). But there is lingering disagreement between the sponsors and Murkowski over whether the Shaheen-Portman bill should move on its own or as part of a larger package.

Staffers and outside advocates are brainstorming other proposals that could be added to the mix, and details on the final package are expected to emerge sometime after recess. Shaheen said her staff was exploring proposals related to combined heat and power and distributed energy, among other areas. Sen. Chris Coons (D-Del.) said he was planning to soon reintroduce his legislation to expand the popular master limited partnership tax break to renewable and efficiency companies and hoped to see it become part of a broader energy bill this year.

Murkowski said she and Sen. Maria Cantwell of Washington, the committee’s top Democrat, are still collecting feedback through a series of listening sessions they and aides are holding with outside stakeholders. More sessions are scheduled next week and in the senators’ home states during the recess that will follow, after which they will begin refining the ideas into proposed legislation.

"We’re kind of letting [the listening sessions] play out first before we do the sorting," Murkowski said in a brief interview yesterday. "That’s why we’re talking about going to efficiency first — our sense is it seems there’s more areas of consensus on the efficiency side than in the other three areas."