By the OGJ Online Staff

HOUSTON, Feb. 23, 2001—Sen. Frank Murkowski (R-Alas.), the Energy and Natural Resources Committee chairman, plans to introduce legislation Monday to reduce imported U.S. oil dependency from the current 56% to less than 50% by 2011.

Much of the legislation deals with electric power issues.

The legislation is expected to influence the energy policy program that President George W. Bush’s administration is preparing. Vice-Pres. Dick Cheney is heading a cabinet task force drafting that plan.

Most of Murkowski’s bill will be referred to his committee, but key portions of it will go to the finance and environment committees. The Senate failed to act on a similar Murkowski bill last session.

A draft of Murkowski’s bill was circulated on Capitol Hill last week, and includes numerous provisions dealing with electricity:

• The bill creates an industry-run organization overseen by the Federal Energy Regulatory Commission (FERC) that sets enforceable rules for the interstate transmission grid. The measure is very similar to the bill passed unanimously by the Senate last year. Changes were made to the Senate-passed bill to incorporate subsequent consensus agreements.

• The bill prospectively repeals the Public Utility Regulatory Policies Act requirement that utilities purchase power at full avoided cost. It does not affect existing power purchase arrangements.

• The measure allows electric utilities to diversify without running afoul of Public Utility Holding Act restrictions. The language is the same as that reported by the Senate Banking Committee in the 106th Congress.

• It clarifies that action to continue or expand operation of emission-free electricity sources should be recognized under the state implementation plan as control measures, providing access to existing and future economic incentive programs that prevent and control air emissions.

• It amends the Federal Power Act to change the process used by the FERC to issue licenses and license renewals for hydroelectric facilities. It creates a new Sec. 32 of the Federal Power Act which would require federal agency participants to consider and document economic impact when setting conditions for licensing or license renewal. It ensures any such conditions are limited to those that directly address environmental considerations at the lowest possible cost. It requires scientific review of proposed conditions and the opportunity for expedited administrative review of conditions if desired by the applicant. And it sets a 1-year deadline by which a consulting agency must file proposed licensing conditions with the FERC.

• The bill creates a new Sec. 33 of the Federal Power Act, which confirms the FERC’s lead agency role in environmental reviews of hydroelectric projects, and sets limits on environmental reviews conducted by consulting agencies. It requires FERC to set deadlines on opportunities for input on environmental reviews by federal, state, and local agencies. It requires FERC to investigate the feasibility of a separate licensing procedure for small hydroelectric projects, and report to Congress. FERC must define the term “small hydroelectric project” to include all projects with generating capacity of 5 MW or less.

• The bill allows a 10% tax credit for expenses incurred from installation on coal-fired power plants of emission control systems for one or more air pollutants. Creditable expenses are limited to the first $100 million spent at each existing power plant.

• It provides a tax credit of $0.0034 cents/kw-hr for production of electricity from a coal-fired power plant converted from conventional to clean coal technology. It allows a 10% tax credit for qualified expenses towards the construction of a new power plant using advanced clean coal technology, or the retrofitting and repowering of an existing conventional power plant with new advanced clean coal technology. Those facilities would be exempted from New Source Review under the Clean Air Act and from emissions control requirements for 10 years after the date when first placed in service. It provides a variable tax credit of $0.0005-$0.0120 cents/kw-hr for production of electricity from a coal-fired power plant using advanced clean coal technology.

• It reclassifies electric power generation facilities and transmission infrastructure as eligible for 7-year depreciation to foster investment in new electric power supply.

• It establishes a 10% investment tax credit for purchase of distributed power (fuel cells, micro-turbines, wind, solar). It allows a15% tax credit, to a maximum of $2,000, for installation of residential solar and wind energy equipment. Tax credits would be reduced by amounts funded by federal, state, or local grant programs

• The bill modifies existing tax credits for electric vehicles to vary between $4,250 and $42,500, depending on gross vehicle weight and performance characteristics.

• It extends the existing tax credit for production of electricity from renewable resources to include almost all biomass and agricultural waste, wood waste, municipal solid waste, landfill gas, geothermal, incremental hydropower, and steel cogeneration. It extends the credit for all qualified resources (including wind) to 2011.

• The bill would expand the Low Income Home Energy Assistance Program to $3 billion/year from $2 billion. It increases authorized emergency funds to $1 billion/year from $600 million/year. It also enlarges the Weatherization Assistance program which provides grants to low-income households to improve energy efficiency. State conservation programs would be given the goal of reducing energy use by 25% by 2010 compared to 1990 usage.

Nuclear programs
The bill directs funding of the Nuclear Energy Research Initiative (NERI) program at $60 million to continue funding for existing projects as well as new awards to address barriers to expanded use of nuclear energy.

It would implement follow-on R&D on advanced reactor concepts and fuel technology for earlier NERI projects that have completed the initial phase of research and judged to have high potential for success.

It would fund the Nuclear Energy Plant Optimization program at $10 million to continue public/private cost-shared R&D to manage the long-term effects of plant aging and improve reliability and productivity of the nation’s 103 operating nuclear power plants.

The bill said at $10 million/year, most critical R&D can be completed in 7 years, enabling the program to end.

It would fund the Nuclear Energy Technology Development program at $25 million to complete Generation IV activities and to develop an R&D roadmap that will guide development of advanced reactor designs. It authorizes $50 million/year for FY 2001-2015 to increase emissions-free generation at existing nuclear reactors by making incentive payments of one mill/kw-hr produced in excess of the previous year. Payments would be capped at $2 million/plant/year, for up to 15 years.

It authorizes $20 million/year to encourage existing nuclear reactors to make capital improvements directly related to improving efficiency of such facilities by at least 1%. Payments would be capped at 10% of the cost of improvement and no single facility could receive more than $1 million for improvements.

Electric power studies
The Interior Department and Army Corps of Engineers would study all dams and impoundments for additional hydroelectric production and report to Congress within 6 months. The study would look at efficiencies, cost reductions, and other improvements, including lease of power privilege.

The Nuclear Regulatory Commission must report within 6 months on the state of the nuclear industry, the potential for increased generation and production, and any improvements in licensing process.

And the Energy Department (DOE) must report annually on the availability and capacity of domestic generation to maintain the electricity grid, with evaluation of each region of the country on grid stability during peak periods. The study will propose actions to improve baseload generation and options to increase use of nonemitting sources and conservation.

DOE must report to Congress within 9 months on innovative financing techniques to encourage new electricity generation technologies.

The Energy Department must establish R&D cost and performance goals that can be achieved by 2007, 2015, and 2020 by existing and new coal-based generating facilities.

DOE would conduct a program of research and development, demonstration, and commercial applications of coal based technologies.

It also would conduct a power plant improvement initiative that will demonstrate commercial applications to new and existing plants of coal-based technologies that will advance the efficiency, environmental performance, and cost competitiveness beyond that of facilities in service or demonstrated to date.

Other reports
Federal agencies would have to inform the Energy Secretary prior to taking any action that could have a significant adverse effect on the supply or distribution of energy. DOE would prepare an annual report on all such actions, what mitigation was undertaken, and the short-, mid-, and long-term effects.

DOE would issue an annual report on U.S. progress toward less than 50% dependence by 2011, with recommendations on use of renewable energy, conservation, and increased production to meet goals

Each federal agency issuing rights-of-way for transmission lines or pipelines would report to FERC and DOE within 1 year on the ability of existing corridors to support new or additional capacity.

FERC would report to Congress in 6 months on additional legislation it needs to certify gas pipelines.

DOE and FERC would establish a task force to expedite and facilitate environmental review and permitting of interstate gas pipelines.

The Transportation Department would develop an R&D program to ensure integrity of natural gas and hazardous liquid pipelines.

DOE would launch a 5-year program of R&D to improve reliability, efficiency, and integrity of gas transportation and distribution pipelines.