The new proposal, the Comprehensive Electricity Competition Act, would require a minimum standard of 7.5% of renewables in the US electricity supply portfolio by 2010. The bill defines renewables as wind, solar, geothermal and biomass, but not hydropower.
Although the 7.5% RPS is lower than the 10% being sought by the American Wind Energy Association (AWEA) and the Sustainable Energy Coalition, it is expected to more than double the renewables that could be installed in America by 2015, from the 25,000 MW projected with no RPS to 55,000 MW if the Clinton bill is passed. It is also a great deal higher than the 5.5% RPS proposed by Clinton last year.
The thrust of the White House plan is to deregulate the country's entire $215 billion electricity market and allow consumers to choose their power suppliers by January 1, 2003. By injecting competition, the administration says it will save consumers $20 billion a year. Almost two dozen states have already started to open their electricity markets to competition, of which the most prominent is California. "States are leading the way, but it is a fact that federal action is vital to the success of these restructuring programs," says US Energy Secretary Bill Richardson. "Competition won't reach its potential without comprehensive federal electricity restructuring legislation."
Bone of contention
The bill does not guarantee utilities will be able to recover stranded costs-their yet to be covered investments of the past-which is bound to be a major bone of contention when the political debate starts in the US Congress. Instead, it will still be up to states to decide whether stranded costs should be recovered and how. It provides for states to add a fee to electricity sales, as long as it is with minimum impact on retail choice, is as low as possible and as long as the utility has taken all reasonable steps to mitigate the impact of the stranded costs. Most utilities say they would like to add some sort of surcharge to consumer bills. They argue that, since the market was regulated, they were forced to buy more expensive power than they would have.
The bill also suggests that a break on the surcharge be given to those who use distributed power for on-site electricity production, including wind and other renewables. The Federal Energy Regulatory Commission would also be given broad new powers to police the electricity market.
Unlikely this year
The White House is hoping to get the bill passed into law this legislative year, by the end of September. It is far more likely, though, that the legislation will take more time than that. Next year, much of the focus in Washington will be on the upcoming presidential and congressional elections and there is no assurance that the next president will be keen on an RPS.
"I see momentum," says AWEA's Randy Swisher, who was among those on the podium at the official launch of the proposal. But, he adds, "There are a lot of interests that are affected that have to be addressed." On the plus side, he points out that Richardson is a savvy political operator, and that several key members of Congress attended the unveiling.
The RPS is highly controversial amongst backers of traditional power. Opponents of the Kyoto Protocol, the treaty designed to cut global carbon emissions during 2008-2012, fear the bill is an attempt to ratify the treaty through the back door. "We all viewed mandates last year at 5% as impossible to reach," says a spokesperson from the office of Frank Murkowski, the pro-oil Republican Chairman of the Senate Energy and Natural Resources Committee. "Now they're trying to raise it higher this year." The Natural Gas Supply Association (NGSA), which represents natural gas drillers, also immediately blasted the administration's RPS. "An energy market that mandates one fuel over another will undermine the benefits of a competitive electric system and limit customer choice," says NGSA's Richard Sharples. "The Clinton plan will discourage electric companies from using natural gas, forcing them to use other, more expensive, renewable fuels," he says.
The US Energy Information Administration-which represents major energy companies including the oil giants such as Chevron and Texaco-has estimated that a 5% renewables mandate will cost consumers from $1.4 billion to $3.7 billion yearly between 2005 and 2010, according to Sharples. Natural gas distributors, represented by the American Gas Association, are, however, behind the White House proposal. Swisher cites figures from the same report-the EIA's 1998 Annual Energy Outlook-to make a different point, namely that a 10% RPS will still allow electricity prices to decline by 17% by 2010 from 1996 levels.