The Bush administration has come up with the sort of energy policy one would expect of oilmen -- long on breaks for the energy industry and short on promotion of conservation, alternative energy sources and help for working people.
Congressional Democrats were closer to the mark with their own energy plan. They called for the government to hold down price increases for electric power, offer tax credits for energy-efficient homes, cars and businesses and spare environmentally sensitive areas from oil and gas exploration.
The Democrats also called for the Federal Energy Regulatory Commission to stop producers from charging "unjust and unreasonable wholesale prices.'' FERC would return to "cost-of-service-based rates'' until March 2003, which would limit wholesalers' profits. The D's also want FERC to order refunds of any unjust charges that have occurred already and are pressing the Justice Department to "assure that illegal price-fixing does not occur.''
Vice President Dick Cheney has ruled out price limits and federal investigations into allegations of price gouging by gasoline companies. The former Halliburton CEO, who headed up the secretive energy task force, belittled the role of conservation, which he said "may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy." Instead, he said, the nation should encourage oil exploration and build a new power plant every week for the next 20 years.
But utilities around the country say they have achieved remarkable successes by encouraging conservation. Timothy Egan of the New York Times wrote May 10 that city-run utilities in Sacramento and Los Angeles have avoided the rolling blackouts of the past few months by opting out of California's deregulation experiment and promoting conservation. "Over the last ten years, we have conserved enough energy to save us the equivalent of having to build one huge new power plant," Mike Weedall, a manager at the Sacramento Municipal Utility District, told Egan. "Instead, we like to say we built the conservation power plant."
Egan also found officials at big private utilities who said choosing conservation over big new power plants has paid off for them. Potomac Electric Power Co., which serves 600,000 customers in Maryland and the District of Columbia, has invested $360 million on conservation in the last 10 years and eliminated the need for at least two medium-sized power plants.
But Bush and Cheney have used the California deregulation debacle to promote energy policies that would benefit their allies in the fossil fuel and nuclear industries. The plan depends upon raising fears of an energy crisis. For example, the White House predicted severe power troubles ahead for New England, and New Hampshire in particular, but when Tom Oliphant of the Boston Globe looked into it, the director of New Hampshire's energy office said the state has plenty of supply and electricity prices are falling. An official at New England's Independent System Operator likewise said the region has a "reserve energy margin" of nearly 19% more than it needs.
Cheney's doomsday scenario apparently relied on a report by the North American Reliability Council, an umbrella group of the country's electric utilities. It failed to include at least 1,500 megawatts routinely available to New England under an agreement with a hydropower operation in Quebec.
"This is what happens when a secretive White House drafts a supply-fixated 'policy' from the bedrooms of the energy industry," Oliphant noted.
But private utilities in other parts of the country are picking up on the theme of "energy crisis." Alliant Energy of Cedar Rapids, Iowa, chose mid-May to close down three of its power plants for "repairs," cutting power to schools and large industrial customers in eastern Iowa as a taste of what could come if the Legislature fails to pass a bill favorable to private utilities. Coincidentally, the Legislature is preparing for a special session. In a crude corporate blackmail, Alliant threatened not to build another generating plant it has on the drawing boards unless the state grants it the breaks it demands, including deregulation of rates it passes through from wholesale generators (which would allow the same sorts of abuses of the ratepayers that are occurring in California).
The federal government, through FERC, should re-regulate wholesale generating companies. The debacle in California illustrates the error in trusting an unregulated market to cure utility excesses. California deregulated the wholesalers but not the retailers, so the energy holding companies transferred their assets to their wholesale operations and gouged the retailers, leaving the tax- and rate-payers to foot the bill. Energy corporations have made it clear that if they see an advantage they will take it. The government should not let them.
If private utilities are unwilling or unable to build new power plants or operate their old ones, states or the federal government should take them over. Public power, from the Tennessee Valley Authority to the Bonneville Power Administration, is one of the proudest legacies of the New Deal. Municipal or state-owned utilities typically are able to operate at less cost to the consumer than investor-owned utilities, if for no other reason than they are not required to show a profit. San Francisco will vote this November on whether to create a municipal utility district, and labor and consumer groups are promoting the establishment of a California Public Power Authority to provide adequate electric generating capacity. If necessary, they should use the power of eminent domain to take control of generating plants previously owned by the utilities to force power generators to lower their prices.
The government should not only promote alternative energy sources, such as wind, solar and renewable fuels, but also adopt regulations that mesh these systems with regional power grids. Wind turbines near our office in Storm Lake, Iowa, can generate more than 193 megawatts -- an amount that could light up every home in Des Moines. Expansion of the "wind farms" is limited only by the number of transmission lines to the power grid, but at a cost of approximately 3 cents per kilowatt hour -- and lower in some areas -- wind turbines are cheaper to operate than gas, coal or nuclear plants, according to Ken Hach of Clipper Wind Power, which operates 259 turbines in northwest Iowa. Windmills now supply about 1% of the national electrical supply, he said. With a little help that capacity could increase to 10%.
There is ample reason to doubt that there is even an energy crisis. David Whitman of US News & World Report wrote May 15 that the power plant industry already is in the midst of an unprecedented building boom, and is adding more than the plant a week Cheney called for. Last year, 158 new power units were completed nationwide, or three plants a week, according to the federal Energy Information Administration. The electricity industry already expects to build 1,453 new power units from 2000 through 2004.
Cheney's energy plan did include tax credits to help people buy hybrid gas-electric cars that get substantially better gas mileage than regular cars, but the only versions currently available are Japanese-made Toyotas and Hondas. American automakers aren't expected to debut their hybrid vehicles until 2003, and even then it's unclear whether they will be widely available. Meanwhile, the Bush administration is canceling a 2004 deadline for automakers to develop prototype cars that would get up to 80 miles per gallon. The federal government spent $1.4 billion on the research, in what some called "corporate welfare," but now that the technology is on the verge of being reached, the plans for a "supercar" are being set aside.
More oil and gas production is not going to solve our energy problems, particularly when refineries already are operating at capacity. The increase in the price of gas is attributable to the demand for gas-guzzling cars, particularly sport-utility vehicles. Oil companies and carmakers have worked hand-in-glove for years to sideline fuel-efficiency standards. The carrot has not worked so far; it's time for Feds to use the stick. -- JMC