Energy and Utility Update February 13,2004

CAC Energy and Utility Update
February 13, 2004

Federal Energy Legislation (Now - S. 2095)
After attempts by Senate Republican leadership to amend a truncated, but still lousy, version of the federal energy legislation to the transportation bill failed, Senate Republicans have apparently opted for filing a new bill to be presented in about two weeks.

The new bill (S. 2095) was released today. However, an analysis has yet to be completed. Bill proponents most likely scaled back subsidies and eliminated the MTBE (methyl tertiary butyl ether) provisions, which blocked lawsuits from begin filed against the producers of MTBE. (MTBE, remember, is the gasoline additive which has contaminated ground water in every state.)

Proponents tried the same approach with the ill-fated attempt at amending the transportation bill. However, fiscal conservatives still balked when subsidies were reduced from $31 billion to $14 billion. Many want to stick with the Bush Administration figure of $8 billion. The coal provisions remain unchanged. So the bill will, on a smaller scale, support the status quo instead of moving to cleaner, more reliable and cheaper forms of energy. The legislation will also contain a repeal of consumer protections and rollbacks of air quality laws. As such, the legislation still should be defeated.

Senate Republicans will also have to deal with House Republicans who insist on having the lawsuit-blocking MTBE provisions in the law. On the other hand, a MTBE amendment protecting manufacturers from lawsuits could theoretically show up somewhere else. Undoubtedly, there will be extensive negotiations occurring between now and when the bill is voted on in the Senate.

In terms of Indiana's U.S. Senators, Richard Lugar has supported the bill from the beginning. Evan Bayh, on the other hand, opposed the legislation primarily due to the presence of the MTBE provisions. Now it is unclear what Senator Bayh will do. However, minority leader Daschle said that he could deliver 6 Democrat votes if the MTBE provisions are deleted.

Senator Bayh seems to be very eager to support the ethanol provisions in the legislation that will ostensibly help improve the financial position of farmers. However, a recent study conducted by the sugar industry suggests that due to the Central American Free Trade Agreement corn prices will drop by 21% over the next 8 years. To the contrary, the proponents of the energy bill purport that corn prices will rise 45% due to provisions in the energy legislation to mandate an increased usage of ethanol in gasoline. Moreover, Brazil is currently exporting ethanol to California despite a 54-cent-per-gallon U.S. ethanol import tariff. The free trade agreement will likely accelerate the volume of such exports, to the coasts at least. In addition, the ethanol industry is predicting a 20% increase in ethanol use each year for a number of years. So why subsidize ethanol at all. What would really be annoying is if the ethanol subsidy in the energy bill (actually a subsidy to ADM, the largest producer of ethanol in the United States) is in response to the Central American Free Trade Agreement.

Senator Bayh also believes that the Public Utility Holding Company Act, which created a very stable utility industry for decades but was weakened in 1992 which, in turn, contributed to the near financial collapse of the energy industry, is antiquated. CAC's response is that as long as white collar crime isn't obsolete, neither is PUCHA.

Please contact Evan Bayh and urge him to vote against the new version of the energy bill. It just subsidizes the status quo and puts consumers at risk. His number is 202-224-5623.

Please contact Senator Richard Lugar and urge him to reconsider his vote. He can be reached at 202-224-4814

2004 Indiana General Assembly

Net Metering (HB 1212 - pro-consumer)
Representative Ryan Dvorak (D-South Bend) filed HB 1212 to direct the Indiana Utility Regulatory Commission to allow net metering up to 2 MW. Net metering allows a customer to install wind, solar or, in the case of this bill, fuel cells and get the retail rate minus customer charges for the energy. Utilities say that they have safety concerns. But the real reason for their concern is losing control over how electricity is produced and delivered and the economics of net metering.

The bill passed the House 92 to 1. It is now before the Senate Utility and Regulatory Affairs Committee. A hearing has yet to be scheduled for the bill. Please call your State Senator at 800-382-9467 and urge him/her to support HB 1212.

Merchant Power Plants (SB 95 - pro-consumer)
Merchant power plants are not paid for by ratepayers (directly anyway). They are the result of the federal government deregulating the wholesale electricity market. Independent power companies build them to sell to power to utility companies or to marketers. The legislation closes a potential loophole in the law and provides for a process to determine if these plants should be approved by the Indiana Utility Regulatory Commission. It passed the Senate 48 to 0.

SB 95, filed by Beverly Gard (R-Greenfield) is now before the House Commerce and Economic Development Committee. The chair of the committee, Dan Stevenson (D-Highland), refuses to hear the bill because he's mad at CAC. It seems ten years ago CAC published his voting record with respect to a very bad piece of legislation (SB 637) which partially deregulated the electric and gas utility industry in Indiana. Win Moses (D-Ft. Wayne) filed 4 or 5 amendments to help improve the bill, but Rep. Stevenson voted against every one of them.

Please call your State Representative at 800-382-9842 and urge her/him to ask Rep. Stevenson for a hearing and vote on the bill.

Sustainable Energy Institute (HB 1338)
This bill is designed to create a statewide energy efficiency/renewables program in Indiana. It didn't get a hearing in the House Commerce and Economic Development Committee because the chair of the committee (see above) is mad at CAC for publishing his votes on a bill ten hears ago.

NO BAD BILLS
Two bad pieces of legislation, including an SBC bill, were pulled early in the session.

Rate Cases
Vectren
There will be a hearing at the Regulatory Commission on Tuesday, February 17 to discuss a settlement that Vectren, CAC, and the Office of Utility Consumer Counselor have signed off on. The idea is to create an energy efficiency program administered by a third party (in other words, not Vectren) in Southern Indiana Gas and Electric Co. territory (Evansville and surrounding counties). CAC views this as a trial run to a statewide program administered by a Sustainable Energy Institute.

SBC
CAC, the Office of Utility Consumer Counselor, IURC staff and SBC reached a settlement agreement on local calling. The price of basic local service will be capped for 3 years. There may be increases in custom calling features, such as call-waiting and call-forwarding. SBC must continue to meet high quality of service standards and pay fines if it does not meet those standards. No party is allowed to support legislation to undo the settlement. Residential customers will continue to receive one free directory assistance call per month through June 2007. In addition, qualifying low-income customers can have non-recurring charges, such as connection and disconnection charges, waived. Given past history with respect to SBC cases, this consumer victory was achieved in a relatively short amount of time.

Cinergy
All the evidence and hearings are complete in the Cinergy rate case. A decision by the Indiana Utility Regulatory Commission is pending. In the case, CAC argued that Cinergy is asking for too high a rate of a rate increase. Cinergy initially requested a $188 million rate increase. The Office of Utility Consumer Counselor initially estimated that Cinergy should be allowed only an $18 million rate increase.

NIPSCO
CAC appealed the decision by the Indiana Court of Appeals to affirm the IURC decision to approve an anti-consumer settlement entered into by the OUCC and NIPSCO. CAC expects a ruling by the Supreme Court to accept transfer or not sometime in March.

The settlement, rejected by CAC, allows NIPSCO to overearn to the tune of $110 million per year and to keep an additional $300 million which should be returned to ratepayers.

IPL
CAC, IPL, and the Office of Utility Consumer Counselor are working on an agreement to expand IPL's energy efficiency program. Hopefully, startup will begin this spring.

Go to Energy Issues Index