• Mission & Governance
• Services Overview
• How to Get Involved
• Standing Committees
• NCSL Foundation

• Issue Areas: A-Z
• State-Federal Relations
• NCSL Standing Committees
• News from D.C. and the States

• About State Legislatures
• Elections, Campaigns & Redistricting
• NCSL's StateConnect Directory
• Web Sites

• Online Guide to NCSL Services
• Staff Sections and Networks
• Meetings & Professional Development
• Staff Directories

• Meetings Calendar
• Online Registration
• Meetings Home Page
• Legislative Summit

• Bookstore
• State Legislatures Magazine
• NCSL's StateConnect Directory

Energy Electric Utilities

Energy Newsletter

A Quarterly Review of Energy Policy and Activities in the State Legislatures

March 2006
Vol. 2, No. 1

To read portable document format (.pdf) files, you must install Adobe Acrobat Reader.

(printer-friendly version)

Coal Gasification
Price Gouging Update
Home Heating Update
Electricity Restructuring: Rate Cap/Freeze Expirations
Washington Legislature Moves Forward with a Renewable Fuels Standard
Federal Energy Activity Moves on Numerous Fronts

Upcoming Events

Coal Gasification

Coal is the fuel of choice for many of the nation’s power plants.  A new power-generating technology, coal gasification, allows for cleaner and more efficient use of this abundant resource by processing coal into a gas instead of burning it.  The gas can be used in much the same way as natural gas to generate electricity.  Gasification can help address air quality concerns that traditional coal plants face and also bring jobs and economic opportunity from increased coal production and operation of the plant itself.  A similar process—liquefaction- turns coal to liquid that is useful in chemicals and alternative transportation fuels.  Like other new technologies, gasification and liquefaction are somewhat more expensive than their established competitors.  Many legislatures—including Illinois, Indiana, Minnesota, Ohio, Pennsylvania and Texas—have enacted tax incentives and other enticements to build gasification or liquefaction plants or to help convert older plants to the new technology.

On March 9, 2006, Wyoming Governor Dave Freudenthal signed legislation creating the newest state incentive program for construction of gasification or liquefaction plants.  Construction investments will be exempt from excise tax sales and use tax.  Although some were concerned about the state revenue loss from the tax breaks--$9.3 million to $62.4 million per plant—the potential benefits of attracting the plants helped the bill to pass by comfortable margins in both houses.

Price Gouging Update

Since the last NCSL Energy Newsletter, several states have considered price gouging legislation. Following the hurricanes in 2005, much of the price gouging legislation seen across the country related solely to gasoline prices. Now, however, states are looking at price gouging of other commodities, especially energy commodities such as natural gas and heating oil.

In Vermont, proposed legislation sought to protect consumers from excessive increases in the prices charged for petroleum products, heating fuel products and electricity after abnormal market disruptions and to set requirements for pre-buy contracts for home heating oil or liquefied petroleum gas.

Some bills cover commodities that are "necessary to life," and consequently include energy commodities. A Colorado price gouging bill, " ... Prohibits price gouging for goods or services upon which a person’s life depends."

Most price gouging legislation prohibits the act during a declared state of emergency. Legislation in New York, however, suggested removing the "declaration of emergency" from a price gouging law to make it illegal at all times, not just during emergencies.

Opponents of price gouging legislation attest that the market succeeds in regulating the pricing of scarce goods during an emergency. In Arizona, attempts to pass price gouging legislation have been unsuccessful for three years due to such opposition.

NCSL Price Gouging Legislation Web site:  http://www.ncsl.org/programs/energy/PGLeg.htm

Home Heating Update

On March 20, President Bush provided an additional $1 billion in federal low-income heating assistance funding for FY 2006, just as many states find they are running out or have exhausted their previously allotted funding. States have seen significant increases of applicants for energy assistance this year, mainly due to rising heating costs. A portion of the new federal funding will be distributed to the states in the form of block grants; the remainder will be used at the president’s discretion for emergencies.

Since the beginning of the winter heating season, state funding boosted federal energy assistance. In March, the Wisconsin Legislature added $6 million to the state’s energy assistance program. The funding will help low-income utility customers deal with 30 percent increases in heating costs.

Also in March, Colorado authorized $20 million for the state’s energy assistance program. As part of the measure, the energy assistance program received a $7 million earmark for each of the next three years to avoid the need to rush energy assistance bills through the legislature each January. The bill includes an additional $19 million for low-income energy efficiency programs. The funding comes from an oil and natural gas well severance tax fund.

Electricity Restructuring: Rate Cap/Freeze Expirations

Twenty-three states and the District of Columbia have "deregulated"—or restructured—their electric industries. The main reasons for deregulation were to make electricity generation competitive and offer lower prices to consumers. To control rates while competition grew, many states instituted temporary rate caps, freezes or reductions. Some of these controls have expired or are set to expire in several more states. Concern is growing over what will happen to rates because competition has not appeared to drive down residential customers’ rates in a free market, as expected.

Illinois is considering HB 5766, which would extend its statewide rate freeze from January 2007 until 2010.

In Maryland, rate caps expire in July for many consumers; rates may increase by about $740 per year for the average homeowner. The legislature may block a large, controversial merger between Constellation Energy and FPL in Florida that some legislators feel may keep rates high. Legislators are considering several options, including phasing in the rate jump over several years.

Virginia has delayed rate cap expiration from July 2007 until 2011. However, Virginia utilities can increase rates if the cost of fuel goes up; In 2007, the rates of the major power provider could increase by as much as 20 percent to cover these fuel costs.

Rate caps also are slated to expire on May 1 for 292,000 customers of Delmarva, Delaware’s largest single provider. Some estimate that rates could go up an average of 59 percent as a result. One bill underconsideration would limit Delmarva’s rate hikes to 5 percent per month and would provide many consumers with temporary bill-paying assistance of $10 to $25 per month. Other bills being considered in Delaware would encourage energy-efficient appliances or call on power companies to create long-term plans for keeping rates low.

Washington Legislature Moves Forward with a Renewable Fuels Standard

Through a bipartisan effort, the Washington Legislature passed a renewable fuels standard that is awaiting the governor’s signature. Senate Bill 6508 mandates fuel dealers to sell 2 percent biodiesel out of total diesel sales and 2 percent ethanol out of total gasoline sales.

The 2 percent requirements for biodiesel and ethanol will act as a baseline—the law is designed to boost the use of biofuels as the state’s capacity to grow and produce biofuels increases. The standards eventually increase to 5 percent for biodiesel and 10 percent for ethanol.

In addition to establishing market access for ethanol and biodiesel in the state, the bill includes a number of incentives for in-state fuel crops and production facilities. Supporters of the legislation expect it will result in an influx of jobs, additional farm income, and relief from concerns about oil prices and global warming. The legislation becomes effective in 2008, following meetings of an advisory committee that will help the Department of Agriculture develop rules for implementation.

Federal Energy Activity Moves on Numerous Fronts

On March 8, 2006, in a move to open a portion of the Outer Continental Shelf (OCS) to new oil and gas leases, the Senate Energy and Natural Resources Committee approved S. 2253 by a 16-5 vote. S. 2253, which would open 2.9 million acres of Lease Area 181 located in the eastern Gulf of Mexico to oil and gas drilling, is sponsored by Senate Energy Chairman Pete Domenici (N.M.). It now faces major obstacles, including a promised filibuster by Sen. Bill Nelson (Fla.) a long-time opponent of new drilling off the Florida coastline, who plans to object to any move to consider the bill on the floor of the Senate. In addition, senators from Gulf Coast states have introduced a bill to ensure 50 percent of royalty revenue from oil and gas production in Lease Sale 181 go to Alabama, Louisiana, Mississippi and Texas. It is their intent to offer the bill as an amendment or substitute to S. 2253 when it reaches the floor. Sen. Mary Landrieu (La.), who supports increased exploration in the Gulf, voted present during the Senate Energy Committee’s action on S. 2253 because the underlying bill does not include state revenue sharing. Sen. Landrieu is joined by Florida Sen. Mel Martinez (FL) in leading opposition to S. 2253 unless two concessions are met: greater protection for Florida’s coastline, and a larger share of offshore oil and gas royalties for coastal producing states. The Senate cannot take up the bill without first obtaining the 60 votes necessary to end a filibuster.

On the horizon: House action on FY 2007 budget resolution to begin after the St. Patrick’s Day recess. . . . Congressional review of the President’s FY 2007 budget request to continue with hearings in both the House and Senate. . . . Senate Energy Committee to host Climate Change Conference on April 4, 2006. . . . Further legislative action on OCS, oil refineries, price gauging, LIHEAP and other programs likely.

For more information, contact Tamra Spielvogel at (202) 624-8690 or tamra.spielvogel@ncsl.org.

Upcoming Events

April

ENERGY NEWSLETTER Published quarterly by the National Conference of State Legislatures, 7700 East First Place, Denver, Colorado 80230, (303) 364-7700. FAX: (303) 364-7800 William T. Pound, Executive Director Funding support for this publication is provided by the U.S. Department of Energy. Any opinions, findings or conclusions in this publication are those of NCSL staff and do not necessarily reflect the views and policies of the U.S. Department of Energy. NCSL ENERGY PROGRAM The NCSL Energy Program focuses on a number of issues and answers information requests dealing with state actions on energy policies, new energy technologies, potential effects of federal energy regulation on states, upcoming NCSL meetings on energy issues, NCSL publications on key issues, and legislation. Contributors to this issue: Kate Burke, Jennifer DeCesaro, Christie Rewey, Tamra Spielvogel Layout and design: Alise Garcia.

 Energy Newsletter page

 Energy Publications

Visitor counts for this page.