Federal Legislative Updates
Outlook for 2012
The House returned on January 17 and the Senate returned on January 23, following their winter recess, and the President gave his annual State of the Union address on Tuesday, January 24 (see details below).
The President is expected to release his FY13 budget request on February 13, instead of February 6. By the law, the budget is supposed to be sent to Congress on the first Monday in February. However, the Administration, which is statutorily obligated to meet the strict spending caps agreed to with Congress in last August’s negotiations on the debt ceiling, needed extra time to revise its FY13 budget request accordingly.
Most in Washington expect the second session of the 112th Congress to be much like the first: legislative gridlock and political messaging aimed at the 2012 elections. Battles over the deficit and federal spending are expected to continue as both parties posture for the 2012 elections.
Republicans and Democrats alike think that passage of a longer term payroll tax extension is “must do” legislation and, as such, it may become a Christmas tree onto which numerous legislators try to hang their favorite ornaments. Energy issues, in general, are expected to be “wedge” issues - used by both parties to stake out positions they hope will help them get votes in November.
Obama Highlights Energy Production and Clean Energy in Address to Congress
On Tuesday, Jan. 24, President Obama gave his third State of the Union (SOTU) address to a joint session of Congress.
Stealing a page from the GOP playbook, Obama called for an “all of the above” energy strategy “that develops every available source of American energy.” “This commitment includes the safe and responsible production of our oil and natural gas resources. Today, American oil production is at the highest level in eight years, and last year we relied less on foreign oil than in any of the past 16 years,” he said.
In his speech, President Obama laid out a “Blueprint for an America Built to Last,” underscoring his commitment to oil and gas exploration, but also stressing the need to “double-down” on clean energy in the United States. The Blueprint calls for safe shale gas development and increased natural gas transportation, as well as additional R&D through the Advanced Research Projects Agency-Energy (ARPA-E), a clean energy standard (CES), clean energy tax incentives for manufacturing and renewable development, opening public lands for private renewable development, and committing the Navy to secure “cost neutral” renewables.
Continuing a theme he sounded last year, the President admitted that some rules are “outdated, unnecessary, or too costly,” and said he has ordered every federal agency to “eliminate rules that don’t make sense.”
On January 13, President Obama announced plans to restructure and consolidate several government agencies. In a separate speech from the White House, Obama focused on several offices within the Commerce Department he believes are duplicative. He said he would combine
several trade and economic development offices into a single entity to help businesses thrive, and will move the National Oceanic and Atmospheric Administration from the Commerce Department to the Interior Department. He asked Congress to give him the authority he needs to achieve these consolidations, but does not plan to submit such legislation himself. Although the idea of reducing the size of the federal government is popular with Congressional Republicans, it remains to be seen whether they will provide any direction or assistance on this initiative.
To review a copy of President Obama’s SOTU speech, click here.
NE Senators Call for Grid Reliability Oversight and Additional FERC/NERC Review
On December 13, a bipartisan group of Senators, including Sens. Jeanne Shaheen (D-NH), Richard Blumenthal (D-CT), John Kerry (D-MA), and Scott Brown (R-MA), sent a letter to Senate Energy and Natural Resources Committee Chair Jeff Bingaman (D-NM) and Ranking Member Lisa Murkowski (R-AK) calling for an “oversight hearing to review the adequacy of our nation’s reliability standards as soon as possible.” The letter was sent following a snowstorm in New England last October, and Hurricane Irene in late summer, which both left millions in the Northeast without power.
In the letter, the NE Senators said “We think it is timely and prudent to determine the effectiveness of these standards in protecting consumers and businesses so that we can begin the process of improving electric reliability in our communities. Our concern stems from recent storms and the appearance of a regional downward trend in electric reliability.”
They noted that in October, the snowstorm left more than two million Northeast utility customers without power, “including 315,000 in New Hampshire, 830,000 in Connecticut, and 672,000 in Massachusetts.” They also noted that, “In addition to last month’s snowstorm, hundreds of thousands of customers have been without power in our states at various points over the past two years following extreme weather events such as Hurricane Irene.”
One month earlier, Sens. Shaheen and Kelly Ayotte (R-NH) called for a review of national reliability standards in a November 3 letter to the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation, noting that electric reliability seems to be declining. The two New Hampshire Senators said, “Three separate major outages in the past two years alone have affected hundreds of thousands of customers in New Hampshire, sometimes for as long as a week.”
In response to the letters, staff from NRECA and Morgan Meguire met with the energy staff for Sen. Shaheen, to provide specific details regarding NHEC’s response rate during both storms, which were quick given the severity of both weather related incidents.
Specifically, NRECA and Morgan Meguire stressed that the issue did not appear to be a NERC/FERC reliability standards issues, but instead weather-related, and concerns about how utilities activated their utility Mutual Assistance Groups. Sen. Shaheen’s staff said his office is talking with Committee staff about a possible hearing, and would ensure that the consumer-owned utilities’ story would be told.
HHS Releases $863 million in LIHEAP Funds
On January 19, the Department of Health and Human Services (HHS) announced it was releasing more than $863 million in Low Income Home Energy Assistance Program (LIHEAP) funds, made available by the recently-passed FY12 omnibus appropriations bill.
The $863 million in regular block grant funds is in addition to the $2.6 billion released since October 2011. Including the newly released funds, grantees will receive a total of $3.4 billion in LIHEAP block funds for FY12, HHS said in a release.
FY12 totals for New England include: Connecticut: $79.5 million; Maine: $39.9 million; Massachusetts: $132.7 million; New Hampshire: $26 million; Rhode Island: $23.2 million; and
Vermont: $19.5 million.
Tax Panel Estimates $178 Billion for Public Municipal Bonds
On January 17, the Joint Committee on Taxation (JCT) released its annual tax expenditure estimates that showed the loss of revenue to the U.S. Treasury to be $177.6 billion (over 5 years) for public-purpose municipal bonds. Separately, the National Conference of State Legislatures (NCSL) urged President Obama and Congressional leaders in a January 18 letter to “go big” on federal deficit reduction and rely on two reports – by the Bowles-Simpson commission and the Bipartisan Policy Center – that proposed curtailing or eliminating the tax exemption for new municipal bonds.
The 2011-2015 estimated tax expenditures were $54.5 billion for private-activity bonds, $24.4 billion for direct-pay bonds including Build America Bonds (BAB), and $1.8 billion for tax-credit bonds, according to the report. However, 2010 legislation permitted four types of bonds to be issued in either the direct-pay (including CREBs) or tax-credit mode.
All muni-related tax expenditures with the exception of tax-credit bonds increased from JCT’s previous five-year estimates. The biggest increase in the tax expenditures for 2011-2015 was for BABs, which was $18.1 billion compared to $12.0 billion for 2010-2014.
However, as Congress considers tax reform and debt-reduction measures, two commissions, lawmakers, and the President have proposed to curtail or eliminate tax exemption for municipal bonds. Many Capitol Hill insiders believe major tax legislation will not be dealt with until a post-2012 election “lame duck” session, or later, but municipalities still remain concerned.
Audit of DOE Smart Grid Grant Program Shows Cyber Security Flaws
The DOE Office of the Inspector General (IG), Office of Audits and Inspections, issued a report on the Department’s management of the Smart Grid Investment Grant (SGIG) Program, citing flaws in nearly a third of the grant recipients’ ability to meet the agency’s cyber security requirements.
The SGIG program provided $3.5 billion in grant funding in 2009, as part of the Recovery Act, to facilitate the installation of state-of-the-art information technologies and, ultimately, improve grid reliability and enable consumers to reduce the amount of energy used. DOE awarded all of its available grant funds, which covered only 50 percent of each project’s, to 99 recipients, with awards ranging in value from $397,000 to $200 million.
Under the grant program, DOE required applicants to submit cyber security plans that, at a minimum, describe their approaches to detecting, preventing and recovering from a breach. The Inspector General’s report said that 36 of 99 cyber security approaches submitted as part of the grant application lacked one or more required elements. “In our review of security plans, we noted that the plans did not always include sufficient information related to risk assessments and/or other important elements, and that they did not fully address many of the weaknesses initially identified by the Department,” it reported. Moreover, the IG’s review found instances in which DOE approved plans that did not include “a number of security practices commonly recommended for federal government and industry systems.”
The IG found that a number of these issues were a result of trying to get the program up and running too quickly, and wanting to get the grants disbursed to help create jobs as quickly as possible. The report also highlighted a number of positive actions DOE has undertaken in administering the program, but made several recommendations that, if fully implemented, they believe should help improve DOE’s ability to effectively administer and monitor the SGIG program.
CFTC Finalizes Business Conduct Rules with Safe Harbor for Dealers
On January 11, the Commodity Futures Trading Commission (CFTC) finalized its external business conduct rules, which govern the business practices to which swap dealers and major swap participants must adhere when trading with “special entities” such as state and local governments, including municipal utilities.
Congress included a provision to protect municipalities and other “special entities” from abusive practices, after at least one city declared bankruptcy due to its swaps position after the market downturn. Municipal utilities and others weighed in on the CFTC’s proposed rule with concerns that stringent requirements on their counterparties could make it difficult for them to engage in swaps at all.
The modified rule would ease some of the restrictions, including allowing swap dealers to rely on special entities to verify their own advisors (rather than independently verifying that the special entity has an advisor.), It would also provide a legal “safe harbor” for swap dealers who make clear that they are not recommending that their special entity clients enter into specific swaps and are not acting as an advisor to that entity. In turn, the special entities must verify that they are relying on their own internal advisor, who is bound to act in the entity’s best interest, and not on the swap dealer. Special entities may also request scenario modeling for their swaps.
The final rule passed by a vote of 4-1; Commissioner Sommers dissented because she felt the changes did not go far enough to ensure special entities would be able to trade. A fact sheet on the final rule is available here.
House Agriculture Reports Dodd Frank Changes
On Jan. 25, the House Agriculture Committee reported six bills to amend the Dodd-Frank Act. The measures all passed by bipartisan voice vote.
At the start of the hearing, Chairman Frank Lucas (R-OK) said they would not discuss items outside of the committee’s jurisdiction, so they would address agriculture-related provisions only. Lucas said that the bills do not make dramatic changes to Dodd-Frank, but instead are “balanced proposals that ensure the legislation is implemented in the manner Congress intended.” Lucas is hoping to win support from Committee Democrats for the bills.
Despite this overture, Ranking Member Collin Peterson (D-MN) acknowledged that the Chairman has the votes to advance the bills, but encouraged the Committee to hold off on acting until regulators, at the Commodity Futures Trading Commission (CFTC) completed the rulemaking process. Peterson offered an amendment, agreed to by voice vote, to each bill that would allow the CFTC to move ahead with their rulemaking to ensure that the Commission would not have to start the process over if any of the legislation passes.
The bills approved include:
- H.R. 1840 – To require the CFTC to assess the costs and benefits of proposed actions;
- H.R. 3527 – Protecting Main Street End-Users from Excessive Regulation. Clarifies the definition of swap dealer to ensure that energy and agriculture end-users are not misclassified and subject to costly new regulatory requirements;
- H.R. 2682 – Business Risk Mitigation and Stabilization Act. Ensures end-users can continue to use derivatives to manage business risks without being subject to costly margin requirements;
- H.R. 2779 – Provides clarification that inter-affiliate transactions, when the parties to the transaction are under common control, are not to be regulated as swaps;
- H.R. 3336 – Small Business Credit Availability Act. Ensures banks and farm credit institutions can continue providing interest rate swaps for customer loans without being classified as swap dealers;
- H.R. 2586 – Swap Execution Facility (SEF) Clarification Act. Prohibits regulators from requiring a minimum number of participants to receive or respond to quote requests. It also prohibits regulators from limiting the means of interstate commerce that market participants can use to execute swaps and prohibits the agencies from requiring a SEF to delay quotes for any specific period of time.
Consumer-owned utilities, which have been working with the energy end-users’ coalition, is particularly pleased to see H.R. 3527, H.R. 2682 and H.R. 1840 advance.
DOE Releases BRC Nuclear Report
On Jan. 26, the DOE’s Blue Ribbon Commission (BRC) on America’s Nuclear Future issued its final report on nuclear waste management, which warned that current U.S. nuclear waste policies threaten to strand about 65,000 metric tons of spent nuclear fuel at more than 70 reactors. The report’s recommendations come in the midst of an impasse between Congress and the White House over the shuttered Yucca Mountain repository.
In a letter from the BRC to Secretary Chu attached to the report, the panel said “This nation’s failure to come to grips with the nuclear waste issue has already proved damaging and costly. It will be even more damaging and more costly the longer it continues.”
The BRC’s recommendations include:
- Create a Congressionally chartered corporation to site, license, build and operate facilities for storing and disposing of spent fuel and high-level nuclear waste;
- Establish an adaptive, staged and consent-based approach for the corporation to choose sites and try to create partnership agreements with willing host states, tribes and local communities;
- Amend federal law to ensure the $27 billion Nuclear Waste Fund is accessible for the waste program, which is currently required to compete for federal funding and subject to budget constraints;
- Take immediate action to develop one more permanent geologic disposal facility, regardless of what happens with Yucca Mountain. The BRC said identifying and licensing such a site could take up to 20 years;
- Amend the law to facilitate creation of one or more consolidated storage facilities before a permanent waste-disposal solution is found. Siting and developing a consolidated storage facility could take five to ten years;
- Prepare now for eventual large-scale transport of spent nuclear fuel and high-level waste to consolidated storage and disposal facilities when such facilities become available;
- Support continued R&D of nuclear energy technology and for workforce development;
- Maintain a strong international presence and assist countries with developing nuclear programs. The U.S. should also help launch an international safety initiative to ensure nuclear power is being used in a safe manner.
Congressional Republicans were generally pleased with the recommendation to create the independent corporation outlined in the report. In a statement on the report released by House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Environment and Economy Subcommittee Chairman John Shimkus (R-IL), the two said, “In the wake of the Obama Administration’s mismanagement of Yucca Mountain, we agree with the commission that a new organizational structure must be put into place to manage our country’s nuclear waste.”
Nuclear energy stakeholders, including APPA, National Association of Regulatory Utility Commissioners, the Nuclear Energy Institute, the Nuclear Waste Strategy Coalition, National Rural Electric Cooperative Association, and Edison Electric Institute, and the Nuclear Energy Institute issued a joint statement praising the report and called on the Obama administration to act.
“After two years of fact-finding and intense study, the commission has officially endorsed a number of strategic used-fuel management initiatives that our members and other experts have long supported and that will reform and re-energize the country's high-level radioactive waste program,” the groups said.
Chairman Shimkus’ subcommittee will hold a Feb. 1 hearing on the report; witness list is pending. The Senate Energy and Natural Resources Committee is planning a similar hearing for Feb. 2.
Obama Nominates Clark to FERC; Sieminski to EIA
On January 24, President Obama nominated Tony Clark as FERC Commissioner, to fill the seat recently vacated by Commissioner Marc Spitzer. Clark previously served as a Commissioner to the North Dakota Public Service Commission, and most recently served as President of the National Association of Regulatory Utility Commissioners (NARUC). Sen. John Hoeven (R-ND) recommended him to Minority Leader Mitch McConnell (R-KY), who submitted Clark’s name for the Administration’s consideration.
The President also nominated Adam Sieminski to be the Administrator of DOE’s Energy Information Administration (EIA). Sieminski is currently the chief energy economist for Deutsche Bank, where he has served since 2005. Prior to that, he was the director and energy strategist for Deutsche Bank’s global oil and gas equity team. If confirmed, Sieminski would take over for acting administrator Howard Gruenspecht.
Spitzer Joins DC Firm
On January 4, the law and lobbying firm Steptoe and Johnson, LLP announced that it has hired former Federal Energy Regulatory Commissioner Marc Spitzer as a partner in its energy practice.
“As the electric industry is in a state of transition, with FERC leading the way on a number of public policy initiatives, Marc’s tenure as a FERC commissioner, where he garnered a sterling reputation as a team player, will be an invaluable resource to our clients as they address new challenges in the industry,” said Steptoe Chairman Roger E. Warin.
Spitzer was nominated by President George W. Bush to serve as a FERC commissioner in 2006. Prior to joining FERC, he served six years as a commissioner on the Arizona Corporation Commission, responsible for regulating utilities in the state, and served as chairman from 2003-2005. Beginning in 1993, Spitzer also served eight years in the Arizona State Senate, including as Majority Leader.
EPA Online Tool to Track Water Pollution
EPA has released a new online tool to allow the public to search for data on water pollution discharges. The data can be sorted by location, industry sector, company and pollutant.
Earlier this month, EPA published its online tool to search greenhouse gas emissions, with power plants listed as the largest emitters in 2010.
Lori J. Pickford
Executive Vice President
Morgan Meguire, LLC
1225 I Street, N.W.
Washington, D.C. 20005
202-661-6196
202-661-6182 (fax)
lpickford@morganmeguire.com)
www.morganmeguire.com |
