Washington (Platts)--26Oct2009/1009 am EDT/1409 GMT

US Senate Environment and Public Works Committee Chairman Barbara Boxer late Friday released a revised version of a climate change bill that would largely mirror free emission allowance allocations contained in legislation approved in late June by the House of Representatives.

The measure released Friday fills in a number of blanks left open when Boxer, a California Democrat, and John Kerry, a Massachusetts Democrat, introduced their so-called Clean Energy Jobs and American Power Act (S. 1733) on September 30.

Boxer's committee is scheduled to begin three straight days of hearings on the bill Tuesday and may begin voting on the measure as early as next week with a goal of passing a bill by the Thanksgiving Day holiday.

In a statement released Friday night, Boxer called her offering "another milestone as we move to a clean energy future, creating millions of jobs and protecting our children from dangerous pollution." The Senate bill would require the US to cut greenhouse gas emissions, or GHG emissions, 20% below 2005 levels by 2020, tougher than the House target of a 17% cut by 2020. Both measures call for an 83% cut in GHG below 2005 levels by 2050.

Boxer, as she had promised earlier, stayed close to the House language in deciding how free emission allowances would be distributed.

According to bill language released on Friday, the revised Senate bill would give away 35% of total allowances created under a cap-and-trade program to the electric power sector, with 30% of total allowances going to regulated electric utilities. Merchant coal generators and other independent power producers would receive 5% of total allowances. The free allowances would begin to phase out starting in 2026 and end entirely after 2030.

The Senate measure also mirrors House provisions that would provide 0.5% of total allowances to local distribution utilities, including rural electric cooperatives.

In addition, the revised Senate bill would grant regulated natural gas distribution utilities 9% of allowances -- identical to the House bill -- while home heating oil and propane consumers would receive 1.5%.

The Senate bill again followed the House's lead in providing free allowances to energy-intensive industries, which lawmakers worry would be put at a competitive disadvantage under a cap-and-trade program. The Senate measure, like the House bill, would provide 4% of all allowances to steel, cement and aluminum makers, in 2012 and 2013. The percentage of free allowances would then increase to 15% in 2014 and 2015, before declining.

Oil refiners would receive 2.25% of the bill's allowances starting in 2014 and ending in 2026 under the Senate bill, unchanged from the House proposal.

Further, the Senate bill would give away allowances to help utilities install carbon capture and sequestration technologies, help states fund energy efficiency and renewable energy projects and conduct energy research and development the federal level.

Both House and Senate bills would set aside a portion of allowances to establish a reserve pool of allowances that would be made available if allowance price rises high enough. The House bill would place 2.7 billion allowances in the strategic reserve representing 2.1% of total allowances, while the Senate measure would put 3.5 billion allowances in a market stability reserve, representing 2.7% of total allowances.

The House bill sets the minimum reserve price of $28 (in constant 2009 dollars) in 2012 and that price would rise at a real rate of 5% through 2014. Starting in 2015, the minimum reserve price would be set at a rate of 60% above a 36-month rolling average of that year's emission allowance. The Senate bill sets the minimum reserve price at $28 (in 2005 dollars) in 2012, rising at a real rate of 5% through 2017, then rising at a real rate of 7% thereafter.

--Jean Chemnick, jean_chemnick@platts.com