Union Tribune

September 1, 2003

Long-stalled energy bill has new life


WASHINGTON Blackouts in the Northeast and Midwest. Dire warnings of a looming natural gas shortage. Price spikes at the pump.

All have combined to give new momentum to long-stalled energy legislation that lawmakers are to take up when they return tomorrow from a monthlong recess. Negotiators will try to reconcile different versions of the legislation passed by the House and Senate.

Though hurdles remain particularly regarding electricity, oil and gas drilling and conservation major players in the debate are cautiously optimistic that a wide-ranging energy bill will reach President Bush's desk. It has been more than two years since Bush laid out a blueprint that relied heavily on expanding domestic energy production from coal, oil, natural gas and nuclear power.

"I think there are a lot of reasons the bill can pass this year when in the past it didn't," said Monte Shaw, a spokesman for the Renewable Fuels Association.

The association represents makers of the gasoline additive ethanol, who stand to gain a large new market for their product under the legislation.

"There's definitely a lot of pressure to do a bill," said Tyson Slocum, energy research director for Public Citizen, a consumer group that opposes the legislation.

Republicans control the House and Senate and are eager to pass a bill, but they will have to attract Democratic support, particularly in the Senate.

The legislation, which would be the first comprehensive energy policy to pass Congress in more than a decade, could have major implications for California motorists. The state's air quality and electricity market are still feeling the aftershocks of the 2000-01 power crisis.

Some California officials have warned that the legislation could drive up gasoline prices in the state and leave the door open to the kind of price manipulation energy companies engaged in during the power crisis.

"What we have is a bill that ignores what happened to us in California," Democratic Sen. Barbara Boxer said during a debate on the issue.

Others dispute that, saying the legislation would balance new energy production with conservation measures and promotion of renewable resources.

"We as Californians want and demand more progress toward clean air, clean water and renewable resources. At the same time, though, we're a great consumer of energy. We got what we needed in this bill," said Rep. Darrell Issa, R-Vista, a member of the House Energy and Commerce Committee.

Just before adjourning for the summer recess, the Republican-controlled Senate suddenly broke a logjam and agreed to pass an old version of the bill drafted largely by Democrats. That sent it to a Republican-dominated conference committee, where lawmakers will try to work out differences with a House bill that more closely resembles Bush's proposal.

Then came the nation's worst blackout, which plunged millions of people in eight states into darkness. Though the cause of the Aug. 14 power failure is still unknown, it quickly became part of the larger energy debate.

"Let's just say there's a greater sense of urgency with respect to our discussions with the Senate. We have always been confident of getting a bill passed this year, but clearly the blackouts . . . added significant momentum," said Ken Johnson, Republican spokesman for the House Energy and Commerce Committee.

At a minimum, lawmakers are expected to embrace mandatory reliability standards for the power grid.

Strong debate is expected on how much authority the federal government should have to oversee expansion and management of the grid.

"Electricity is going to be difficult. It always has been, it always will be," said Bill Wicker, Democratic spokesman for the Senate Energy and Natural Resources Committee.

Consumer groups are upset over provisions in the House and Senate bills that would repeal a Depression-era law known as the Public Utility Holding Companies Act, which puts limits on energy conglomerates.

Scrapping the law will invite a repeat of the Enron Corp. scandal and leave power markets more vulnerable to price manipulation, critics say.

"The repeal of PUHCA would leave America with a few unrestrained power giants controlling our energy system, which would make California and the recent blackouts seem mild compared to the deregulated future politicians have in store for us," said Doug Heller, senior consumer advocate at the Foundation for Taxpayer and Consumer Rights in Santa Monica.

Repeal advocates counter that the law is outdated and an impediment to competition in the power market.

"To the extent that PUHCA does anything today, it is in frustrating transactions in corporate control that bring efficiency and consumer benefits," said Robert Michaels, an adjunct scholar at the National Center for Policy Analysis, a conservative research group.

The House and Senate rejected proposals to specifically outlaw a list of energy trading practices that Enron and other companies used to manipulate prices in California.

The Senate bill would give the Federal Energy Regulatory Commission authority to review some energy company mergers and require it to limit wholesale power prices when market prices are deemed unjust or unreasonable. The House bill would outlaw bogus energy sales known as "round-trip" trades, establish new power market reporting rules and increase criminal penalties for wrongdoing by energy companies.

Another provision of the House and Senate bills that has drawn the ire of California officials would require gasoline sold nationwide to contain a certain percentage of "renewable fuels." The requirement is expected to double sales of ethanol, a gas additive derived from corn.

Opponents say the requirement will drive up gasoline prices in California and other states far from the ethanol industry's Midwestern production base and could make smog problems worse in the summer because ethanol is more volatile in warm weather.

"Clearly the ethanol provisions are bad news for California," said Richard Katz, energy policy adviser to Gov. Gray Davis. "If the Bush administration insists on the ethanol mandate, we expect prices in California to go higher than they already are."

The ethanol industry disputes those concerns, saying it is prepared to provide adequate supplies wherever they are needed and that weather patterns, population growth and a proliferation of sport utility vehicles were more to blame for Southern California's recent smog woes than increased ethanol use.

"The rail and the water transport are absolutely there to get the ethanol where we need it," said Shaw of the Renewable Fuels Association.

The House and Senate also will revisit long-running disputes about oil and natural gas drilling. The House bill would allow drilling in Alaska's Arctic National Wildlife Refuge, while the Senate bill contains no provision for that.

A plan to take an inventory of oil and gas reserves off the coast of California and other states where drilling is now banned is not contained in either bill. But Senate Republicans, who had succeeded in getting the measure in an earlier bill, could try to revive it.