Advocate Summary

Issue:  PURPA repeal
Advocate:  Office of Senator Tom Carper (D-DE) - Jim Reilly
Date of Interview: 7/10/02

Basic Background
Just in the way of background, Senator Carper was not originally on the Energy Committee, last year when there was a switch, when Senator Jeffords switched parties they added one member to the committee and it was him, so he came on last July. He looked at a number of his, what was it that he saw as priority on the Energy bill as a governor and as congressman he had always been interested in energy efficiency. 

This was a victory for Carper, it’s actually the only amendment that he was successful with during the energy bill. But even back home, in the hometown newspaper, it’s not something that people are going to pay a lot of attention to, it doesn’t play well in the media. 

We did not know we would win. When it came up for the vote, this is god’s honest truth, we’re sitting there and the Senator leans back and says how are we going to do on this, and I said well to be honest with you if you get 48 you should feel good and he said I think you’re right. Because this is not one that we had spent a lot of time on, it came up very quickly, it was on a day where there was kind of a pause and they were looking for people to offer amendments and he said well why don’t we do this one, and we had not really prepped and we had not told the opponents or supporters that it was about to happen, we gave them about ten minutes notice because we had only gotten twenty minutes notice that the leadership wanted us to go forward. So all of the sudden it happened and we were successful. I think a lot of people came down, some of the members had never heard of the issue they didn’t have a lot of time to study it and they came down looked at who offered it, a fairly centrist Democrat and a moderate Republic, it had pretty broad support from the groups so it was one that they felt that it was a good deal. 

Prior Activity on the Issue 
[No specific activities mentioned but he noted that the Senator was always interested in energy efficiency]

Advocacy Activities Undertaken
When we were looking at a number of issues as part of the energy bill a group came to us that operates co-gen and pointed out that they were concerned that they might not be able to operate co-gen under the proposed language in the Senate. So we took a look at that and it seemed like they had a case. What was intended in the Energy bill, as was originally proposed was to streamline PURPA, it was not intended to shut down co-gen operators but it would probably have that unintended consequence. One of the major co-gen sectors is the chemical industry, Delaware is home to a number of chemical companies, DuPont and Hercules, are two large operations and they were among those who made the point that this was something that they were concerned about. They were saying co-gen is twice as efficient in generating electricity as a traditional generator, and we are at a point in this country of a real shortage of electricity, and it made sense to retain co-gen in the mixture. So that’s how we got started with that. We talked to two other industries along the way, including the refining industry, the paper industry, and we talked to some environmental groups – NRDC and Environmental Defense who had also recognized that co-gen was a good tool when used properly. Some of those groups had also talked to some other Republican senators, Senator Collins they approached her on the pulp and paper side of things up in Maine, who was also aware that co-gen produced electricity and if they had to replace that that could be a problem. There are groups for all the industries, for chemicals there is the American Chemistry Council, for the pulp and paper I think it’s called the American Pulp & Paper Association and then there are individual companies like Mead. 
	This was not an issue that the Senator put at the top, he kind of carries a top five list of priorities, welfare reform, Amtrak, he has a couple key issues he spends a lot of his personal time on, this was not one of them. However he was interested in seeing this go forward. At the same time we were working on this amendment we were also working on one on fuel efficiency, which was an even higher priority, he spent a lot of time on that. The organizations and companies and associations that were interested in this did a lot of the leg work, getting support.  The groups got all the numbers and stuff together, EIA did a lot. They are very good at what they do when a group wants something, so they provided us with a lot of background we didn’t have to go dig it out. 

Future Advocacy Activities Planned
It’s not going to be easy in conference. The House bill does not have a similar provision. The chairman of the conference committee, Mr. Tauzin, of Indiana comes from a district that has a lot of co-gen, a lot of it and has indicated an interest in this, that’s a good thing. Of the senate members of the conference committee, in the full senate the votes was 60 to 39, in support of it, if you look at just the people on the conference  committee, there are 10 in support of it, so we have a one vote positive, and we just don’t know where we are in the House. Senator Carper and Senator Collins sent a letter to the conferees just reminding them of what this amendment was, reminding them of the vote in the Senate and encouraging them to retain language in the Senate when they go to conference. So there are a couple of things that could happen. The electricity provision in the energy bill are so controversial, it is possible that the conference will just drop that entire title, we’ll get an energy bill without any electricity provisions in it, then we’re done. There is also a real challenge, I mean we won in the Senate, do you go and make a big stink about it in which case the opposition gears up that much more, or do you just kind of lay low. We are still looking at both strategies. The industries that are going to benefit from it are already working it, they’re working it on the House side particularly. And a kind of final key piece there is the administration, in the president’s energy policy plan, issued last May, they set out a goal of increasing the amount of co-generation, doubling it by 2015. Doing away with PURPA is certainly an impediment to that and we make the case that if you want to achieve this goal of doubling co-gen on the national level you should accept our language. And if we can get the House leadership on the conference committee to get a message from the administration, that the administration supports this that could be very important. Right now the EPA, in discussions with them, I think recognize the efficiency of co-gen, and they’d like to support it, so that’s a good thing. That the president’s plan specifically mentions co-gen, that’s a good thing. The Department of Energy is still kind of on the fence about it, there are some folks there that are opposed to it, there are some folks there that are for it. There’s a group called the Federal Regulatory Energy Commission who recognizes that this is a good thing. They’re concerned about making sure there’s enough power on the grid and are we building enough power plants and that kind of stuff. This is one thing that they say hey we’ve already got all these power plants. Right now in the country co-gen provides nine percent of the total electricity in the country, almost all of that is used up in factories. If you start shutting those down you’re going to have to add another 9 percent to the grid, the power has to come from somewhere.  

We have not heard the utilities game plan. They did pretty well, they did really well, and now they are working on perfecting some of the things where they didn’t do so well and so I don’t know how long their list is but I think this is one of their things. They probably feel that, since it’s not part of the House bill and it doesn’t have administration support yet, that they have a shot at throwing it out. And when you look at the vote, 10 to 9 on the Senate side, if they could just swing one or two senators on the conference committee, it would make sense that any lobbying group or industry that’s worth their weight would be trying to do that. I think we will stay in, we’ll stick with it till the end. And there’s some things we could do, work with the electric utilities and still protect a lot of these co-gen units. 

Key Congressional Contact(s)/Champions
Senator Collins on the Republican side, and Senator Carper on our side, Senator Jeffords chairman of the Senate Environment committee was supportive and Senator Leiberman and Senator Specter were interested, and Senator Corzine from New Jersey. 

Targets of Direct Lobbying
None mentioned.

Targets of Grassroots Lobbying
Not applicable. 

Coalition Partners: Names/Participants
One of the major co-gen sectors is the chemical industry, Delaware is home to a number of chemical companies, DuPont and Hercules, are two large operations and they were among those who made the point that this was something that they were concerned about. They were saying co-gen is twice as efficient in generating electricity as a traditional generator, and we are at a point in this country of a real shortage of electricity, and it made sense to retain co-gen in the mixture. So that’s how we got started with that. We talked to two other industries along the way, including the refining industry, the paper industry, and we talked to some environmental groups – NRDC and Environmental Defense who had also recognized that co-gen was a good tool when used properly. Some of those groups had also talked to some other Republican senators, Senator Collins they approached her on the pulp and paper side of things up in Maine, who was also aware that co-gen produced electricity and if they had to replace that that could be a problem. There are groups for all the industries, for chemicals there is the American Chemistry Council, for the pulp and paper I think it’s called the American Pulp & Paper Association and then there are individual companies like Mead.

And the Chamber of Commerce, they were supportive the other group that benefited from this was steal, the steal industry, so it had pretty widespread support. And from members all around the country. Co-gen is big in the South, the Southeast they use tons of it in the Northeast so we had a geographic spread. And some auto, and again, that wasn’t really our intent. There are different size co-gen facilities, the big ones, Dow chemical – their power plant is large enough to run a medium sized town and they’re using it just to produce whatever chemical they are working on. If you’re something like a hospital which uses natural gas to produce steam and then use steam to heat the building, and then that steam comes back to a power plant and they use that steam to turn a turbine to produce electricity, that makes them qualified for co-gen, heat and power, but those small player we weren’t really talking to them, they were going along. They may very well have weighted in with some of the members but we didn’t work with them. 

Other Participants in the Issue Debate
[See secondary arguments – independent utilities were effected but not involved]

Ubiquitous Argument(s) and Evidence
The main argument was the efficiency argument,

Secondary Argument(s) and Evidence
The main argument was the efficiency argument, we did not shift the focus as all but others did. Some other folks made the case that, other supporters, that the existing PURPA provisions were need for fair competition in the existing market which are not yet deregulated. They said that without those, if they were to lose those PURPA provisions they would be unable to provide back up power. These industries need two things that PURPA provides. One, is the ability to, when they’re generating excess power on their site, they need to be able to get rid of that power. Let’s say they are burning natural gas on site to produce steam to produce their chemical process, sometimes they might be burning more steam then they can actually use on site, so they have to get rid of some of that electricity, they need to be able to put that out on the grid, PURPA allows them to do that. In the reverse sometimes their electric generator may be broken they still need to run their factory, so they need to be able to bring in backup electric power. Without existing PURPA regulations, it is difficult for them to be able to get those two elements in a regulated market. In a deregulated market they can go out shop for places to sell their own power and they can also shop for backup power. So they made the case at first, the actual plan was just to keep PURPA as is. That was not the best way to go, we thought that, in Delaware for example we are leaning toward a deregulated market and nationally that is the goal, so we were more comfortable with saying “ok once we get to the deregulated market PURPA should go away, but until then there needs to be some standards, that was kind of the balance we made when the PURPA people came to us. We were more interested in saying “once there are market forces in place it would go away but until then it should stay. 

There’s a thing going on right now in the electric industry – there are a number of independent generators out there. For example in Delaware and to some extent in Pennsylvania, you used to have in a traditional system the generating plant and all the wires going out to all the houses, and that was all owned by one company, today you see a company that sold its generator to an independent generating company and the utility now just buys power from somebody and sells it to you. These independent generators, in some cases, benefit from PURPA. They were coming and trying to get involved in this debate, that was not our intent. They happened to be helped by PURPA, it is not Senator Carper’s intent to retain PURPA provisions for those independent generators, because getting back to the original PUPA provision, it deals with co-generation. The way he looked at it was, lets say you have a DuPont plant and they’re generating steam and that kind of stuff, ninety percent of the power they generate they use at that plant, that’s very efficient and maybe give or take 10 percent they either send out to the grid or take in. That’s the definition of the co-gen facility and they are therefore eligible for these PURPA provisions. There are facilities that generate electricity and maybe only use five percent on their plant and send 95 per cent out on the grid and they do that, just to qualify for the PURPA provisions and they are basically just exploiting that loop hole. We have no interest in encouraging that, they are not efficient machines, it’s a whole different system. We were in this because the vast majority of these are on site and they just need that little bit of surplus margin when they need it and that is most of the big generators. That group pretty much stayed quite, I think they tried to raise that as an issue, you know “this is great for us” we said look “you’re going to get killed by these other utilities because they hate you if you start getting up there and saying oh we like this – you’re going to sink this, we’ve got a shot at winning this right now so you better keep your mouth shut” and they did. So in the end they came out ahead but it was not our interest in helping them, it’s fine that they got helped but we weren’t trying to bring them along. 

Targeted Arguments, Targets, and Evidence
None mentioned.

Nature of the Opposition
With the utilities there’s two factions, or sectors. One is the traditional utilities, the monopoly type groups that own generation and transmission. They are strongly opposed to it. 

The chair of this committee and there were ranking members who did not support what we were doing. They felt that it was time that PURPA was a law written in the thirties that it has outlived its usefulness, that we should be moving toward deregulated markets anyway, and once you have deregulated markets PURPA won’t be necessary. We just differed on that point, whether you should retain PURPA for a little while until those deregulated markets are in place. They did not strongly object, and I’m not sure why. One, is that utilities weren’t really aware of what we were up to, they had a lot of other things they were worrying about, the energy bill was massive in terms of the number of substantial issues that were in it. I’m not sure how close they followed this. We were contacted by all the major utility groups, EEI which is the big mama of utilities association, as well as our local utilities. But in the end we still felt that this was, from an efficiency standpoint, one that outweighed their concerns that they’d have to charge a little bit higher rates or something. 

Ubiquitous Argument(s) and Evidence Articulated by the Opposition 
There are a couple of arguments they have, one is, they would rather be selling that electricity to these companies in the first place so they see it somewhat as lost sales. They also have a valid issue that on the topic of the need to get rid of surplus power, often that is happening in the middle of the night – the factory’s boiler is still running and they are producing excess power, so they have surplus power to send out on the grid, no one else is using power at that time either and the utility doesn’t want to take that excess power. They might want that power at 4 o’clock on July 4th when it’s a hot day, but they don’t want it at two in the morning, when the way the grid works you can have too much power. So that was one of their concerns. They also argued about the price they have to pay for that surplus power. There’s a debate over should it be a market price, that utility should buy that power at whatever it is, that should be the same price that they pay the co-gen operator, should they charge the co-gen operator the same price it would cost the electric utility to generate their own power, those are all just pennies apart so it’s not a lot of money. But there was debate over the rules of how that stuff was paid for. There was really no discussion about the backup power, because that’s really no big deal, the utilities are actually happy with the way it works because they can kind of stick it to the co-gen operators. Let’s say you are a co-gen operator and you may need back up power only one day a year, utilities will write you a contract that says sure we’ll give you that but you’re going to pay a hundred times more per megawatt hour for that then a normal person, and they kind of write this crazy contract and put some pressure on the co-gen operators. So that’s the big utilities. 

Secondary Argument(s) and Evidence Articulated by the Opposition
They also made the argument that hey, we’re going to deregulation anyway, these co-gen units don’t need PURPA, if they want to sell – this was the argument, depending on how you read the law currently we are in a federally deregulated environment and any power generator can go out and find somebody to buy their power in reality however to get your power to a buyer sometimes you have to go across another person’s grid. Say you are in Pennsylvania and you find a buyer in Kentucky but you have to go through Ohio to get it there, they can say, whether it’s true or not, sorry our grid us full, we can’t carry anymore electrons on our wires right now, and you therefore are effectively blocked from getting rid of your power. In a fully deregulated market it would make it much harder for them to throw up that argument – sorry our grid is full, they would have to basically move your power or prove their grid is full. So utilities say “oh you can move your power just find a buyer and move it”  the co-gen guys have tried that and on many occasions they’ve been told the grid is full and what happens then is the power goes out onto the grid, they just don’t get a dime for it. Which is a problem because you can have too much energy on the grid. 

Targeted Argument(s) and Evidence Articulated by the Opposition (and Targets)
None mentioned.

Described as a Partisan Issue
No. 

Venue(s) of Activity
Senate Energy Committee

Action Pending or Taken by Relevant Decision Makers
It’s not going to be easy in conference. The House bill does not have a similar provision. The chairman of the conference committee, Mr. Tauzin, of Indiana comes from a district that has a lot of co-gen, a lot of it and has indicated an interest in this, that’s a good thing. Of the senate members of the conference committee, in the full senate the votes was 60 to 39, in support of it, if you look at just the people on the conference  committee, there are 10 in support of it, so we have a one vote positive, and we just don’t know where we are in the House. 

Policy Objective(s) and Support for/Opposition to the Status Quo
Working to pass an amendment to the energy bill that would sustain PURPA regulations until a completely deregulated energy market is established. 

Advocate’s Experience: Tenure in Current Job/Previous Experience
Senator Caper was a newly elected Senator we came here in January of 2001, and I came down with him on that point and I helped him on three issues areas, energy, environment and agriculture, he happens to serve on two committees the Energy committee and the Environment committee so I’m working with him on those policy areas. Prior to that I was his fund raiser during his Senate campaign and prior to that I was here in the Senate with the Commerce committee and I handled environmental work on that committee. 

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