[BETA] Fortnightly

Noting the growing global demand for new sources of energy, Congress tailored the Energy Policy Act of 1992 (EPAct) to make U.S. public utility holding companies more competitive abroad. First, it eased the Securities and Exchange Commission review of U.S. investment in foreign energy facilities. Second, it sought to expand U.S. participation in foreign energy-related projects to include U.S. technology as well as investment dollars. In that regard, Congress structured EPAct to offer financial assistance for "design, construction, testing, and operation" of projects in foreign countries that use renewable, environmental, and clean-coal technologies manufactured in the United States. These environmental energy technology programs are intended to foster a new industry and help it compete globally.

Public utility holding companies can take advantage of the new rules under EPAct through intrasystem arrangements between associate companies. One associate company invests in a foreign exempt wholesale generator (EWG) or a foreign utility company (FUCO); the other manufactures environmental energy technology. The technology associate then transfers (that is, exports) the technology to the foreign EWG or FUCO. Although the intrasystem arrangement raises a number of regulatory wrinkles, the trouble of ironing them out might be well worth the effort for holding company associate companies.

Intrasystem arrangements offer a number of benefits. First, the EWG or FUCO may be eligible for financial assistance from the U.S. government because it uses environmental energy technology manufactured in the United States. Second, the technology associate may find the EWG or FUCO a good market for continued sales and related services. Third, using environmental energy technology may render the investment facility more risk averse to the environmental consequences of its energy production.

The governments of most of the Latin American and Caribbean countries have given priority to addressing environmental issues in their energy-related laws and regulations. As one commentator points out: "Countries with weak environmental laws or enforcement programs will be strengthening them. The environmental laws of other countries will offer many traps for U.S. companies doing business overseas. [U.S. companies] should not be reacting to developments, but should try to anticipate what will happen and formulate sensible courses of action."1

U.S. companies would be wise also to build environmental controls into their projects at the start to mitigate the environmental consequences of energy production-that is, resource depletion. Resources are depleted when used as inputs to energy production and as receptacles for the waste generated in that process. For example, at current consumption rates, the estimated technically recoverable U.S. natural gas resource base (an input to energy) will be depleted in approximately 65 years.2 Similarly, sulphur dioxide (SO2) emissions (waste produced by coal-fired generation) degrade air quality.

Environmental energy technology also answers the need to mitigate transboundary pollutants. SCECorp recently pulled out of the Carbon II project, a $1.8-billion coal-fired electric generating plant under construction in Mexico, in part because the plant was not expected to meet the Environmental Protection Agency's new source performance standards for SO2 and particulates. In this instance, clean-coal energy technology offers a potential solution.

Debate among international lenders centers on whether to increase conservation's prominence in