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AFI Energy and Transportation Committee

This letter was sent to members of the Senate Committee on Energy and Natural Resources
and Senate Leadership.

 July 23, 2001

The Honorable Jeff Bingaman
Chairman, Committee on Energy and Natural Resources
703 Hart Senate Office Building
Washington, DC 20515

Dear Chairman Bingaman:

The National Conference of State Legislatures' (NCSL) is pleased to take this opportunity to comment on S.597, S.389, S.352, and other legislation before the Senate Energy and Natural Resources Committee. NCSL provides these comments as the only national organization of state or local government elected officials that has a current and comprehensive national energy policy. Over the past year, NCSL's Energy and Transportation Committee and Environment Committee updated the organization's National Energy Policy. The NCSL Committee membership consists of state legislators from across the country and both political parties. Therefore, be assured that the following comments represent a bipartisan, balanced and topical approach to national energy issues facing the U.S. The policy was initially approved unanimously at our December 2000 meeting.

NCSL's primary positions on the energy legislation before the Senate Energy and Natural Resources Committee are as follows:

NCSL supports proposals set forth in S.597 and S.389 to address electric transmission constraints and capacity concerns within the interstate electric system. NCSL believes federal efforts to relieve transmission constraint problems at the interstate level will ultimately help states and regions as they address their individual intrastate transmission constraint concerns.

NCSL strongly opposes proposals to create federal eminent domain authority to obtain rights-of-way for electricity transmission lines. NCSL understands the need to improve and increase the capacity of the electric transmission grid to reduce constraints, improve reliability of the system, and promote open and competitive access for wholesale electricity markets. Many state legislatures have been or are engaged in reforming and streamlining siting procedures for energy facilities, including transmission lines. There are sound and important reasons for keeping this authority at a state level or possibly placing it at a regional level with state participation and consent. Transmission lines have a much greater visual, land use and land value impact then gas pipelines and can raise serious environmental concerns and issues in their siting. State level processes have allowed for meaningful citizen participation in facility need and siting decisions, promoting public understanding and support for new energy facilities, including new transmission

lines and the taking of private property when required, as necessary to provide affordable and reliable power supplies. Obviously NIMBYism is a concern in this area and with a restructured electric system that is more regional and national in nature we need improved mechanisms to facilitate timely siting and construction of necessary new transmission facilities. However to ensure broad and sustained public support, such mechanisms must ensure that new facilities, especially when eminent domain power is involved, are in fact necessary and represent a least cost approach to the problem, such as by evaluating alternatives including congestion pricing, new generation siting options including distributed generation, and demand-side responses. NCSL policy states that "state created regional mechanisms like interstate compacts and regional reliability boards designed to address transmission reliability and other regional energy issues should be facilitated by Congress." We are interested in exploring the possibilities for such regional mechanisms, that might include some regulatory authority and that could complement the work of FERC, RTOs, ISOs (Independent System Operators), regional reliability organizations and state regulators. The federal government should allow and provide financial support for state efforts to continue to work together to resolve our energy challenges. NCSL strongly supports improved coordination and collaboration between state and federal government in energy policy and infrastructure issues, but we strongly oppose unilateral federal preemption of state siting and eminent domain authority over transmission.

NCSL supports the following provisions in S.597:

1. Establishment of programs for improving electricity capacity and access, including a public benefits fund, consumer protections and environmental disclosures, assuming such programs could be adopted or used voluntarily at the state level.
2. Title II provisions supporting regional coordination of state energy policies and energy intrastructure planning.

NCSL will strongly oppose any expansion of FERC authority to include intrastate transmission jurisdiction. NCSL will also strongly oppose the creation or exercise of federal eminent domain authority in siting electric transmission lines. Such authority would be a direct preemption of important and traditional state authority.

NCSL strongly supports aggressive federal promotion of energy conservation and efficiency. NCSL policy states that the "federal government must maintain and increase its commitment to cost effective energy conservation and efficiency while maintaining adequate and reliable supplies." NCSL has expressed its concern about the administration's reduction of efficiency standards for air conditioners and encourages the Congress to reverse that decision and increase efficiency standards for other appliances.

In addition, NCSL strongly supports the following provisions in S.596:

1. Tax deductions for increasing energy efficiency in non-residential buildings;
2. Tax credits for 10-30% of investments in renewable energy technologies and energy efficient property used in business;
3. Incentives for new energy efficiency residential construction, including manufactured housing and certain incentives for modifications to existing housing;
4. Credits for the manufacture of high efficiency clothes washers and refrigerators;
5. The creation of the "Federal Energy Bank," which would finance Federal energy efficiency projects. However, NCSL recommends using a percentage of that funding to pay for energy efficiency projects at the state level as well; and
6. Authorizing energy efficiency research programs and research program funding for fossil energy, renewable resources and nuclear energy, and for programs considered fundamental to energy science.

NCSL supports the following provisions in S.389:

1. Tax incentives and credits for energy efficient business property (i.e. combined heat and power, solar equipment, geothermal equipment, etc.); and
2. Tax incentives and credits for energy efficient improvements at existing homes, construction of new energy efficient homes and energy efficient appliances.

NCSL strongly supports the continued development of renewable energy sources and technologies as an environmentally benign energy source that can help diversify the nation's energy mix and reduce U.S. dependence on foreign oil.

NCSL supports the following provisions in S.596 regarding renewable energy:

1. Authorization for credits of 15-30% of the installed cost of certain residential renewable and fuel cell property for use in dwelling units;
2. An increase in the tax credit rate and extension of the credit to alternative resources including solar, biomass, municipal solid waste, geothermal, landfill gas and steel cogeneration. A similar provision is included in S.389 as well; and
3. A requirement that electric suppliers provide net metering services for certain onsite generators and payment for excess energy supplied to the grid. Many state legislatures have enacted laws providing for net metering, often as part of electric industry restructuring. Federal legislation should grandfather such state actions and not preclude state measures to promote net metering, such as allowing the retail sale of net energy production within the same distribution area without incurring transmission charges.

NCSL strongly supports congressional efforts to mitigate the impacts of high energy costs on low-income consumers by strengthening the LIHEAP, Weatherization Assistance and State Energy Programs. Over the past decade, utility companies have reduced the provision of weatherization and other demand-side management energy programs increasing the need for additional federal and state assistance. NCSL believes federal and state commitments to these programs should ensure that critical energy supplies are affordable for all Americans.

NCSL strongly supports S.352 that proposes the following:

1. An increase to $3.4 billion in annual LIHEAP funding for fiscal years 2001 through 2005;
2. An increase in the eligible poverty level to 200% for receiving LIHEAP funds from a state;
3. An increase in federal funding for Weatherization Assistance to $310 billion for fiscal years 2001 through 2005; and
4. Extension of federal funding for State Energy Conservation Grants through 2005, as opposed to 2003, and an increase to $75 million in funding.

As part of a balanced national energy policy, NCSL supports federal assistance and incentives to boost production of domestic energy sources in an environmentally sound manner. NCSL policy also states that "the federal government should work with the states to prevent any increase in interstate and international transportation of air pollution that may result from increased electricity generation."

NCSL supports the following provisions included in S.596 and S.389:

1. S.389's requirement that DOE report to Congress annually on progress to reduce U.S. dependence on foreign oil to less than 50% by 2010. This report should account for production, conservation and energy efficiency contributions to any reduction in dependency on foreign oil;
2. S.596's requirement that EPA and DOE recommend national or regional measures to streamline fuel specifications while maintaining air quality standards;
3. S.596's facilitation of regional coordination of issues pertaining to transportation, storage and distribution of oil and refined petroleum products through DOE technical assistance and annual conferences. NCSL believes it is vital that state legislators be included in these regional discussions;
4. S.596 and S.389's order to direct the DOE to implement the "Power Plant Improvement Initiative", a 50% cost-share demonstration program for new or retrofit technologies that increase efficiency and reduce emissions. Federal funds should come from unobligated clean coal technology program dollars;
5. S.389's establishment of the Office of Spent Nuclear Fuel Research to carry out R&D on the treatment, recycling and disposal of high-level nuclear radioactive waste and spent nuclear fuel. NCSL's National Energy Policy states, "Assuming concerns regarding plant safety, and the transportation, storage and disposal of nuclear waste can be resolved, nuclear power may be an option of a national energy plan. A federal government program for the long-term treatment and disposal of high-level radioactive waste, funded by the generators of the waste, should be pursued with the highest priority given to eliminating generation and transportation of waste and to the safety and technical suitability of storage or disposal sites. Such a program should be developed in full consultation with all of the affected states. The nuclear power plant licensing process for future plant construction must be improved to ensure both public input and timely decisions, and federally standardized nuclear power plant designs should be established";
6. S.596's provisions for counter-cyclical tax credits for marginal oil and gas wells during periods of very low oil prices and crude oil and natural gas development credits for domestic development drilling and enhanced recovery work during periods of low oil prices;
7. S.596's provision to allow full expensing of home heating oil and propane storage facilities;
8. S.596's establishment of a production tax credit based on efficiency for each kilowatt generated for the first ten years of operation of the qualifying clean coal technology; and
9. S.596's establishment of an investment tax credit of 10% of the qualifying clean coal technology costs for newly installed equipment or re-powering of existing facilities;

NCSL urges Congress to strengthen and improve CAFE standards for all automobiles and light duty trucks, including sport utility vehicles and minivans, while recognizing the significance of economic costs on various segments of the population including rural areas. NCSL would oppose any effort to weaken or reduce CAFE standards or negligibly increase these standards given rising gasoline prices and the need to reduce U.S. dependence on foreign oil.

NCSL further supports tax credits for the purchase of fuel-efficient vehicles. With the escalation of gasoline prices across the country, such tax credits and other incentives for new hybrid fuel cell vehicles and other fuel-efficient vehicles will help consumers purchase these vehicles that use less gasoline and save money in the long-run.

NCSL supports the following provisions in S.597 and S.389:

1. An exception to HOV passenger requirements for alternative fuel vehicles;
2. A DOT and DOE requirement to implement policies to cap petroleum use in light duty vehicles at no more than 5% above the 2000 level by 2008; and
3. Tax credits for hybrid motor vehicles, 50% credit for the cost of alternative fuel and electric vehicles, business credits for alternative fuels sold at retail, and credits for installation or extension of alternative fuels refueling stations (all in S. 389).

I am hopeful that the Senate will follow the path state legislators traveled to achieve bipartisan consensus on comprehensive national energy policy. NCSL looks forward to collaborating with you in this endeavor and we strongly support developing mechanisms to bring representatives of the legislative branch of state governments into energy policy planning on a continuing basis. Should you have questions or require further information, please contact Eileen Doherty, Committee Director, Energy and Transportation at (202) 624-8687 or eileen.doherty@ncsl.org.

Sincerely,

Senator Clifton Below
New Hampshire State Senate
Chair, NCSL Committee on Energy and Transportation