Advanced Energy Perspectives

FEDERAL: Senate Finance Talks Energy Tax Reform, EPA Extends Comment Period, and No Review for Demand Response Ruling

Posted by Tom Carlson and Mark Mugerwa

Sep 18, 2014 3:09:49 PM

    

EPA-tax-reformAs Congress returned to session focused on passing a continuing resolution to keep the government funded through December 11, the Senate Finance Committee held a hearing on energy tax reform, the Environmental Protection Agency (EPA) extended the comment period on its proposed Clean Power Plan, and the D.C. Circuit Court of Appeals declined to review a ruling on a Federal Energy Regulatory Commission (FERC) demand response regulation.

 

Yesterday, the D.C. Appeals Court rejected FERC’s request for an en banc review of the court’s previous ruling to nix Order 745, which established regulations for compensating demand response providers in wholesale energy markets. AEE supported the call for a review of the ruling. Demand response is a critical component of advanced energy that saves consumers money and makes our electric power system more reliable and resilient. FERC has the option to appeal the case to the U.S. Supreme Court or revisit its rulemaking.

 

“It’s not the end of the world,” said Commissioner Philip Moeller, as reported by Politico. “Personally, I was sad to see [the rehearing request] denied because I did not want our commission to lose jurisdiction on demand response.” But Moeller said he thought states would embrace demand response programs. “I think if states are the ones now that have to procure demand response, it will be real money to real consumers and they will treat it responsibly.”

 

On Tuesday, EPA Acting Assistant Administrator Janet McCabe announced that the Clean Power Plan comment period would be extended 45 days to December 1 “in order to get the best possible advice and data to inform a final rule.” McCabe said the agency received “a number of requests from a variety of different stakeholders” to extend the comment period on its proposed rule to reduce carbon emissions from the electric power sector. These requests included a letter from 53 senators, including 10 Democrats, proposing a 60-day extension to the original 120-day comment period. Even with the extension, EPA is “still working towards a June [2015] deadline” to finalize the rule, said McCabe. Since the initial announcement last June, EPA has received 750,000 comments. In July, AEE testified in support of the Clean Power Plan as an “historic opportunity” to modernize our electric power system for the 21st century.

 

Before heading back to the campaign trail, Congress is expected to pass a continuing resolution to fund the government at fiscal year 2014 levels for the first six weeks of the new fiscal year, to prevent a shutdown on October 1. As AEE reported previously, significant energy issues, including extension of expired tax credits, will be put off until the lame duck session at the earliest.

 

But there was talk of energy tax reform on Capitol Hill yesterday, as the Senate Finance Committee held a hearing on “Reforming America’s Outdated Energy Tax Code.” At the hearing, both Chairman Ron Wyden (D-OR) and Ranking Member Orrin Hatch (R-UT) expressed support for extending a series of tax breaks that expired at the close of 2013. Hatch urged his fellow lawmakers “to set partisanship and political gamesmanship aside and get the extenders package across the finish line as soon as possible.” The committee approved an extenders package in April but it has yet to be taken to the Senate Floor.

 

In a statement, Wyden noted that while passing a tax extenders package is vital, “short-term extensions cannot put renewables on the same footing as the other energy sources in America’s competitive marketplace.” Rather, he said, “it’s past time to replace today’s crazy quilt of more than 40 energy tax incentives with a

modern, technology-neutral approach” that “takes the costs and benefits of energy sources into account.”

 

For his part, Hatch expressed support for an “all-of-the-above approach” to energy policy and urged his colleagues to “examine all existing tax provisions – including energy tax provisions – under President Reagan’s three criteria for tax reform: fairness, simplicity, and efficiency.”

 

At the hearing, the committee heard diverse perspectives on these and other energy tax issues.

 

Ethan Zindler, head of policy analysis for Bloomberg New Energy Finance, a market research firm, testified that the global energy sector is “in the midst of a fundamental transformation” due to “technological innovation, economies of scale, and yes, policy support coming from many nations around the globe, including most notably, China.” While the global market is moving forward, “inconsistent policy-making can impact the role the US plays in this change.” Zindler emphasized the importance of stable tax policy to the vitality of the U.S. advanced energy market, citing the production tax credit (PTC) for wind and the investment tax credit (ITC) for solar.

 

Norman Augustine, former CEO of Lockheed Martin Corp., shared insights based on the work of the American Energy Innovation Council, a group he formed with six other business leaders, including Bill Gates, founder of Microsoft, and Jeff Immelt, chairman and CEO of General Electric, both AEE member companies. Augustine called for “robust, public investment in energy technology and innovation” and “thoughtful tax policy” that encourages development and deployment of “domestic, clean, low emission sources of energy,” strives to be “technology- and energy source-neutral” and is “predictable, not subject to year-to-year renewals, but also not permanent.”

 

The committee also heard from former Senator Don Nickles, chairman and CEO of the Nickles Group, which represents energy companies including ExxonMobil, Exelon, and Koch industries. He argued against continuing the PTC for renewable energy and for preserving the intangible drilling costs deduction for oil and gas, which has been part of the tax code since 1913.

 

Finally the committee heard different perspectives on pricing carbon emissions.  David Kreutzer, research fellow for the Heritage Foundation, argued against putting a price on carbon. Gilbert Metcalf, an economics professor at Tufts University, made the case that “economic efficiency is best achieved by setting tax rates to align the private and social costs of producing and using energy.” Metcalf explained that a well-designed price on carbon would appropriately align the private and social costs of carbon emissions. He suggested that a “second-best” approach to pricing carbon would be to provide tax breaks to low-carbon energy options.

 

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Topics: Federal Policy Update

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