Advanced Energy Perspectives

House Energy Bill Turns Partisan but Gives Utility Software-as-Service a Boost

Posted by Dylan Reed and Arvin Ganesan

Oct 8, 2015 12:00:00 PM

    

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Straight out of August recess, Congress wasted no time to making national headlines. The District was abuzz with votes on the Iran nuclear deal, a visit from Pope Francis, and a potential government shutdown – which the surprise resignation of Speaker John Boehner helped to avert. Despite all the attention of these events, the House Energy and Commerce committee continued its efforts to enact sweeping energy legislation. As predicted, however, the committee turned once-unanimous agreement into a mostly party-line vote.

That said, there are aspects of the House bill and its approval by the committee worth noting. Here are our top three takeaways:

Rate recovery for cloud-based software services - A little-known provision of the bill allowing utilities to get rate recovery when procuring cloud-based software services could be a boon for advanced energy companies. But what does this mean? If a utility purchases operational software on a physical disk, it is considered a capital expense, on which it can earn a rate of return, which drives the utility’s profitability. Currently, federal law does not require a utility to receive rate recovery for purchase of cloud-based software, which is considered an operating expense. A small change in law like this can help bring parity to markets for technologies and services that are software-based – a growing part of advanced energy offerings.

Backward approach to reliability - Several of the measures included in the final bill seek to maintain electric reliability primarily by using conventional energy technologies. Specific provisions on reliability include a requirement for utilities to factor how to maintain reliable generation into integrated resource plans, a reliability analysis any time a federal agency issues a rule on the electric generation sector, and a capacity market provision that promotes conventional energy over technologies like demand response and energy efficiency. As our previous posts have demonstrated, pitting advanced energy technologies against reliability is a false dilemma. The bill should be amended to reflect the role advanced energy technologies can play in making the electric power system more reliable.

Breakdown of bipartisan support - Once thought to be a bipartisan deal, the bill quickly turned into a measure that the majority of Democrats voted against. Chairman Fred Upton (R-MI) indicated during markup that he hoped the bill had broad enough support to make it to the president’s desk. Ranking Member Frank Pallone (D-NJ) dismissed that notion rather quickly, arguing that the bill doesn’t do enough on climate. While it is possible a compromise could be worked out with the Senate after the bill passes the House, AEE continues to think that chances of success are small.

Congress has not forgot about tax extenders either. Majority Leader Mitch McConnell (R-KY) has begun to consider the Finance Committee’s bill behind closed doors, and there is some indication that House leadership has expressed interest in passing an end of the year deal including a multi-year extension of the investment tax credit (ITC).

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Topics: Federal Policy Update

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