News Analysis

 

 

But offers no relief for summer-giving Democrats a bone to pick.

President Bush's national energy policy, released May 17, takes a comprehensive long-term approach, by mixing conservation and green power incentives with plans to expand fossil fuel production and construction of new power plants. In spite of that mix, however, the proposal promises to have its critics-from both inside and outside Washington.

Dwight Allen, communications and utilities director, at Deloitte Research, suggests that in some ways the Bush proposal may be on target, but warns that the President faces an uphill battle to turn some of them into reality.

"I think Bush has a tremendous challenge ahead of him in getting his package approved," says Allen. Thomas E. Capps, chairman and CEO of Dominion, offered comments in the same vein: "The administration is saying the right things. Now we've got to see if it has the political will."

The Bush plan talks of a "national grid," calling on the secretary of energy to examine the benefits of such a concept by Dec. 31, and to identify transmission bottlenecks and the measures needed to remove them. The plan also calls for legislation to develop such a national transmission grid, in part by granting authority to the government under the doctrine of eminent domain to gain rights-of-way for transmission lines, similar to current rights-of-way authority for the construction of natural gas pipelines. According to Allen, some of those initiatives go against the grain of the Republican ideal of decentralized government, a factor that may play to Bush's disadvantage within his own party. State governments, for instance, used to having control over many of these issues, might question such policies.

"His case doesn't have a clear focus to it," said Allen.

The free-market CATO Institute, meanwhile, has come out criticizing the proposal's emphasis on building new power plants. CATO Institute director of natural resource studies Jerry Taylor points out that the United States already "is currently experiencing a power plant construction boom," without any Bush Administration push for new plants. Let supply and demand dynamics solve the problems, says Taylor.

"It would certainly seem to be the case that there is a considerable amount of new construction that's going to be completed in the next 18 months or two years," agreed Allen. "But it's not the case that if you just sit back and let nature take its course and let that capacity come online, then it will necessarily cure the whole problem. I think it will reduce the urgency to some extent. But there are a number of other issues [such as] gaps and capacity constraints in transmission networks."

Public perceptions create another potential political hurdle, says Allen. As he puts it, the extent to which Americans are aware of any "energy crisis" stems largely from their familiarity with power problems out West. Those are near-term problems, while the proposal addresses long-term problems. And that plays perfectly into the hands of Democrats, he warns.

"I think what Bush is trying to do is come up with a program for improving the nation's energy situation, doing what he can do within the sphere where he does have responsibility, but meanwhile, the Democrats-and indeed some people in his own party-are going to be quick to point out that not a lot of that is going to have much of an impact by July 15 of 2001," Allen said.

The House Democratic Caucus Energy Task Force, in an apparent attempt at beating the Bush Administration out of the blocks, issued its own energy proposal a day earlier. A visible difference in the two proposals, in fact, is that the Democrats' plan, while looking at long-term issues, also addresses the near-term-a politically favorable approach. The Democrats' proposal calls on the Justice Department to investigate energy pricing and possible illegal price fixing. It also calls on Congress, "[s]ince the FERC and President Bush have repeatedly refused to act," to "return the West to just and reasonable cost-of-service based rates until March 1, 2003" through the passage of legislation already proposed, such as House Bill 1468, or Senate Bill 764, introduced by California Senator Diane Feinstein.

Yet the Democratic approach may carry risks as well. For instance, the Feinstein legislation would allow any state public utility commission (PUC) in the western energy market to prohibit any utility under its jurisdiction from selling energy outside its service territory if the PUC would have reason to believe that the sale would impair service by the utility within its franchised area. Presumably, such authority could justify a PUC order in Oregon, Idaho or Washington to bar local utilities from exporting hydroelectric power south to California, even though such power is essential to California.

At the American Gas Association, president and CEO Dave Parker offered both praise and criticism of the Democrats' counterproposal.

On one hand, Parker acknowledged that rising energy prices have hit pocketbooks hard in low-income households. "AGA strongly supports the Low-Income Home Energy Assistance Program [LIHEAP], and we endorse the House Democrats' call for increased supplemental funding for LIHEAP this fiscal year and for a $3.4 billion authorization for the program."

At the same time, Parker asked for more incentives for pipeline construction: "While we support the principles addressing incentives for natural gas production and [for] development of a new Trans-Alaskan pipeline, the Democratic plan does not go far enough to address access to natural gas resources or speeding up recovery of the capital costs associated with expanding pipelines."

Back at Deloitte Research, Dwight Allen sees other problems with a short-term focus on the current power emergency out West. As he explains, the Democrats' approach "implies that we know so much about the nature of the problem that with confidence we can say that by doing this and by doing that, even though we're interfering with the market, we know that we're doing the right thing. I think a lot of people argue that we don't have that kind of confidence."

The Next-Day Pundits

Gas vs. Coal? No Clear Victor: "Increased access to highly prospective federal lands, both in the Arctic and offshore regions, will be needed given the projected growth in North American natural gas demand ... On the other hand, incentives for increased use of coal and nuclear energy for power generation could potentially temper projected natural gas demand growth." -Robert Morris and Michael Schmitz, SalomonSmith Barney, May 18 Fuel Cells? More Spin than Win: "While the mere mention of fuel cells and microturbines in the National Energy Policy may be exciting to some observers ... we see more psychological benefit than fundamental or financial benefit to any of the powertech companies ... "Most PEM [proton membrane exchange] fuel cell companies will not have truly commercial products in any meaningful quantity for several years. Very few fuel cell vehicles will be available in the 2002-2007 timeframe, limiting the likely benefits of the tax credits to hybrid vehicles, which are available today." - Daniel Ford, Thomas O'Neill, Lehman Brothers, May 21. Pennsylvania? Far From Perfect: "Today President Bush will visit a hydroelectric facility in Pennsylvania ... stimulated in part by the report of the National Energy Policy Development Group [NEPCG], which claimed that Pennsylvania's model for electricity deregulation should be adopted across the nation. "If the members of the NEPDG had taken a look, they would have found that ... rates paid in Pennsylvania today are still considerably higher than those paid by residential consumers in states that have not yet restructured ... "Price caps ... for which the Bush Administration has special disdain, continue in place in Pennsylvania." -Mark Cooper, Consumer Federation of America, May 18 Speeding Up Permits? We'll See: "Our laws have become so restrictive in permitting and siting ... . That hasn't gotten better in the now almost 10 years since we completed Kern River Pipeline. "From the day we started until we completed construction was seven years. Six of it was taken up in obtaining the permits and one of it construction. It's that sort of issue that they're attempting to address." -Keith Baily, Williams, May 17 Ñ B.W.R.

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