Power Politics

Power Politics

Oct 01 - Electric Perspectives

WHAT DO THE MAJOR PRESIDENTIAL CANDIDATES HAVE TO SAY TO THE ELECTRIC UTILITY INDUSTRY?

Electric utilities offer to millions of citizens and businesses a necessary, reliable, and beneficial service: They provide fuel for economic growth, and their thousands of employees and shareholders live and work in nearly every American community. National policies regarding such issues as boosting reliability and making infrastructure investments, assuring a reliable and affordable range of fuel options from which to generate electricity, managing environmental responsibilities, and the regulation of electricity markets have an effect on the nation as a whole-and also, in a very direct way, on utility stakeholders and their communities.

That's why Electric Perspectives asked Republican presidential candidate George W. Bush and Democratic candidate John F. Kerry to describe the key industry-related policies they would pursue if elected president in 2004. Here's how they responded.

George W. Bush

Clean, reliable, and independent energy sources are vital to our economy and our security. To protect the environment and the health and safety of our citizens, our policies must be both energy- efficient and environmentally sound. I have adopted a number of balanced policies to cut harmful powerplant emissions. These policies protect the environment, encourage conservation, improve public health, help keep electricity prices stable, create new markets for clean coal technologies, encourage development of alternative fuels, and ensure continued economic growth.

I proposed, and the Congress should pass, comprehensive energy legislation that will help secure our nation's energy future. As the blackout in the eastern United States last August demonstrated, we need to modernize and expand our electricity grid. We must establish mandatory and enforceable reliability standards for electric utilities to lessen the likelihood of transmission grid failures and blackouts. We can encourage new investment in transmission and generation facilities by repealing the Public Utility Holding Company Act and providing increased rates of return on new transmission investments. Finally, we can remove barriers to new transmission by improving Federal siting and permitting processes.

My administration promotes public policies that support, not restrict, fuel diversity. The proposed energy legislation addresses all forms of energy, including coal, natural gas, nuclear, and hydro and other renewables. The U.S. economy requires such fuel diversity, because no individual fuel can meet all our nation's electricity needs. Ultimately, market forces should decide which fuels can appropriately meet consumer demands as well as meet the nation's environmental goals.

In 2002, I announced the Clear Skies Initiative, the most aggressive presidential initiative in history to reduce powerplant emissions. It would reduce emissions of sulfur dioxide (SO^sub 2^), nitrogen oxides (NO^sub x^), and mercury by 70 percent when fully implemented. Clear Skies and my diesel emission programs will ensure that most of the United States will meet new, tough air quality standards. Clear Skies would provide easy-to-follow, market-based rules that give plant managers flexibility, certainty, and an incentive to reduce emissions further, faster, and cheaper than current law.

Clear Skies builds on the most successful program of the Clean Air Act-the market-based acid rain trading program-and sets a mandatory emissions cap that cannot increase even as new powerplants come on line. By establishing a long-term, billion-dollar market for clean coal technology, Clear : Skies also creates a strong incentive for the private sector to develop and install the newest technologies.

Clear Skies replaces the cycle of endless litigation with rapid and certain improvements in air quality. The pollution caps in Clear Skies were set with the twin goals of helping communities meet health-based air quality standards without significantly increasing consumers' electricity bills and of allowing manufacturers to grow businesses and create jobs.

Over the next four years, I will continue to press Congress to enact Clear Skies. But until Congress acts, I am using existing authority to reduce powerplant emissions. My administration has proposed the Clean Air Interstate Rule (CAIR). Similar to Clear Skies, CAIR will cut emissions of SO^sub 2^ and NO^sub x^ from powerplants in the eastern half of the United States by nearly 70 percent by 2015, the largest cuts in more than a decade.

CAIR uses a market-based, cap-and-trade system to reduce emissions, to provide companies with flexibility in meeting new emissions targets, and to create incentives for companies to make early reductions. Still, CAIR maintains the existing regulatory structure of the Clean Air Act, with its overlapping programs and bureaucratic complexity. Many of the reforms necessary for achieving certainty and simplicity and maximizing environmental benefits can only be achieved through legislation, which is why it is critical that Congress pass Clear Skies.

In conjunction with CAIR, my administration has proposed the first-ever reduction in mercury emissions from powerplants. Our proposal will cap mercury emissions by 70 percent when fully implemented. Mercury regulation should be technologically achievable, protect public health, and ensure a level playing field for all coal types in providing low-cost, reliable electricity.

I will also continue to press for New Source Review (NSR) improvements, which have longstanding bipartisan support in Congress. These improvements are now blocked by misguided lawsuits. When implemented, the NSR reforms would remove obstacles to investments in newer, cleaner, more efficient production processes and make the Clean Air Act work better to protect public health.

All these proposals will help states meet the new, more stringent health-based air quality standards. Coupled with my landmark rule to eliminate almost all sulfur from off-road diesel engines and to cut dramatically the sulfur content of off-road diesel fuel, my clean air agenda will result in healthier air, a cleaner environment, and a stronger economy.

I have also proposed a global climate change policy framework premised on economic growth, incentives for advanced energy technologies, and accelerated research plans to advance hydrogen, nuclear, clean coal, and carbon sequestration technologies. I have established a national goal to reduce the greenhouse gas intensity of the American economy by 18 percent by 2012. The electricity- generating industry has come forward to contribute to the achievement of that goal through the Climate VISION and Climate Leaders programs and through its own technology research programs and investments in newer, more efficient capital.

John F. Kerry

Electricity is the lifeblood of the American economy. To keep that energy source strong, U.S. electricity policy must be based on several principles.

Reliability. Power disturbances in the United States have been estimated to cost up to $100 billion per year. The August 14, 2003, blackout, which affected approximately 50 million people in the Midwest and East Coast states, was the single largest outage in U.S. history, costing an estimated $7 billion. As a first step, Congress must adopt mandatory electric reliability standards legislation to ensure that all utilities and others using the grid comply with the rules necessary to help keep the lights on. If Congress fails to act this year, a Kerry-Edwards administration will make mandatory standards a first order of legislative business. We recognize, too, that important steps must be taken to improve the investment climate for expanding and enhancing our energy delivery system.

We also need to develop, with the assistance of a public private partnership, a "Smart Grid" that includes innovative technologies, such as advanced electronic transmission components installed across all regions, and a highly responsive, integrated power supply. This Smart Grid will reduce the cost of outages, strengthen the critical infrastructure of the economy, enhance the security of our electric power system, and foster new entrepreneurial innovation while increasing efficiency, productivity, and economic growth.

Affordability. The Federal government can and should promote an environment that helps the utility industry maintain affordable prices by promoting fuel diversity, encouraging a sufficient level of infrastructure investment in both generation and transmission, and ensuring that interstate electricity markets are functioning effectively.

The vast majority of new electric generating plants are fueled with natural gas. While gas will continue to be an important part of the electric generation fuel mix, sole reliance on a single fuel will cause prices to rise and endanger our energy security. I support policies that promote fuel diversity by encouraging the use of emerging renewable resources and clean coal technologies, expanding our supply of natural gas in an environmentally acceptable manner, and improving the efficiency of our existing gas, coal, nuclear, and hydroelectric plants to meet the demand for electricity. It is vitally important that we have adequate resources to fuel our growing economy.

It is also important that we have a more stable regulatory environment that will encourage sufficient investments i\n our grid infrastructure. Unfortunately, the last four years have been characterized by a stalemate between the Federal Energy Regulatory Commission (FERC) and state regulators. I believe that federal regulators should work hand-in-hand with, not against, state utility regulators to establish a proper regulatory climate that benefits consumers and sends clear signals as to what will be expected.

FERC also must play an important role by assuring both consumers and market participants that our electricity markets are free from manipulation and abuse. There is now abundant evidence that Enron and certain other electricity marketers engaged in illegal and unethical activities designed to artificially raise electricity rates in California and other parts of the West during 2001. As president, I will ensure that FERC has sufficient tools to prevent Enron-like companies from taking advantage of utilities and their customers ever again.

Environmental performance. I believe that America needs a national market for electricity from renewable sources such as wind, solar and biomass. I support an ambitious goal of producing 20 percent of our electricity from renewable resources by 2020. A national standard is necessary to encourage the market to respond by finding the most efficient and effective way of meeting this goal through a market-oriented credit trading system. We can help achieve the goal through research and development support, tax incentives, and addressing regulatory barriers to new investment.

I am also committed to developing and deploying new cleaner coal technology. Coal is an abundant domestic resource and will continue to play a significant role in our fuel mix. I believe we must invest $10 billion over the next decade (a fivefold increase) to help the transition from the current generation to more advanced coal-fired plants.

Clean air is not only an aesthetic issue-it's a health issue, as well. Under the Clean Air Act, electric companies have reduced powerplant emissions significantly, even while electricity use has grown. But there's more to be done. I believe that the Bush administration's proposed "Clear Skies" legislation would do too little to reduce sulfur dioxide (SO^sub 2^), nitrogen oxide (NO^sub x^), and mercury emissions. Moreover, it proposes nothing to combat climate change by addressing greenhouse gas emissions.

I will ask Congress to establish more aggressive caps to limit SO^sub 2^, NO^sub x^, and mercury emissions. Regarding carbon dioxide (CO^sub 2^), I applaud the electric utility industry's voluntary reduction and offset programs. To achieve greater results, I support the establishment of a cap-and-trade emissions reductions program for CO^sub 2^ and other greenhouse gases from all sources (not just utilities, as some have suggested), so that the power of the marketplace can be directed to encourage the most cost- effective reductions. Although these emissions reduction requirements will be significant, utilities will have the benefit of the certainty created by the adoption of legislation that provides firm targets and the ability to use market mechanisms to reduce emissions most cost effectively. I do not support the Kyoto greenhouse gas treaty as currently crafted, but I believe that we must reengage with the international community to craft an effective alternative that involves actions by both developing and developed countries.

CLEAR SKIES AND MY DIESEL EMISSION PROGRAMS WILL ENSURE THAT MOST OF THE UNITED STATES WILL MEET NEW, TOUGH AIR QUALITY STANDARDS.

FEDERAL REGULATORS SHOULD WORK HAND-IN-HAND WITH, NOT AGAINST, STATE UTILITY REGULATORS TO ESTABLISH A PROPER REGULATORY CLIMATE