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Now to the next point. The Senator from Louisiana said we have to diversify to keep prices lower. I have indicated the Department of Energy knows

[Page: S2170]  GPO's PDF

   But there is another point about diversifying; that is, if you are going to diversify, you need a reliable source. Certainly if the wind does not blow, you did not generate power on a windmill. If the Sun does not shine, you don't generate power from a solar power. If the water does not flow through a dam, you do not have hydropower. That is why the baseloads of the utilities is coal, nuclear, and gas. Those are available, they are reliable, and that is why for these renewables you always have to have backup, a storage battery, or a backup when it gets dark and the Sun does not shine or you have a drought and the water does not flow or the wind does not blow.

   The third point is renewables would create jobs. I know my colleagues would agree exploring in ANWR would create more jobs than windmills. That is evident.

   The fourth argument is renewables are better dispersed and are clean. Nuclear is clean, too. Hydro is clean. But I don't see a big rush for hydro or nuclear power.

   With respect to dispersal, it is interesting that the chart the Senator from North Dakota exhibited yesterday showed the renewable fuels dispersed all over the country, but each one is conglomerated in a particular area.

   For example, solar is obviously going to be produced best in the Southwest. Hydro is best produced in the Northwest. Wind power, interestingly, is produced best in North Dakota, South Dakota, and Oklahoma, as I recall. The geothermal was in certain other areas. If you are not in one of those areas, and since wind is the only economical source of producing the power, you are out of luck; you will have to import credits; you will have to buy credits from the place it is produced and your customers get nothing for that. They do not get electricity; they just get credits. The electricity company gets credits so the owners do not go to jail or pay a big fine.

   The bottom line with respect to the arguments made, and they have been made by others as well, the renewables have some very limited potential, if they are highly subsidized, which is what we are doing, and we have extended the subsidy for them, and we are all for doing that, but you cannot count on renewables in any significant percent unless you are willing to pay a very high price,

   and unless you are willing to discriminate against some regions of the country, that is to say, unless you are willing to force the electric consumers in one part of the country to pay a lot more than the electric consumers in another part of the country. That does not make sense to me as a national energy policy.

   Unless there is someone on the other side wishing to speak, I yield 7 minutes to the Senator from Alaska.

   The PRESIDING OFFICER (Mr. NELSON of Florida). The Senator from Alaska.

   Mr. MURKOWSKI. Mr. President, I ask how much time remains on our side?

   The PRESIDING OFFICER. Seventeen minutes.

   Mr. MURKOWSKI. I wonder if I can take 7 minutes.

   Mr. KYL. Yes, 7 minutes.

   Mr. MURKOWSKI. Mr. President, I would like to follow up a little bit on the Senator from Arizona, Senator Kyl. He has mentioned an awful lot about cost. I think we need to address this in specifics.

   Let's assume a utility must purchase the credits. Let's assume we have a utility that generates no new renewables. They make that decision. Let's take the hypothetical utility. I am going to be specific. I am going to take one that we can identify and we have the information relative to the cost.

   Let's assume retail sales are a billion kilowatt hours. What we would have to do is to take 10 percent of the renewable portfolio standard that is in effect times 10 because we are looking for a 10-percent renewability. That means roughly 100 million kilowatt hours of renewable--that is 10 percent of a billion--times 3 cents per kilowatt hour. That is $3 million for renewable credits. That $3 million would be passed on to the ratepayers.

   Let's take an actual utility. I hope the delegation from Wisconsin is here because the Wisconsin Electric retail sales for the year 2000 were 3.173 billion kilowatt hours, times 10 percent renewable portfolio standard; that is, 317 million kilowatt hours, times 3 cents per kilowatt hour, which is $9.5 million for renewable credits. That is what they are going to go out and buy if, indeed, they do not develop renewables. Whether they make that decision or not, the point is it is going to cost their consumers. It is going to cost their consumers $9.5 million. What is that going to amount to, to the average consumer? What is the ratepayer going to pay in Wisconsin? He is going to have a 5-percent increase. I do not think it is fair to suggest, by any means, that somehow these renewables are going to just come on.

   I ask unanimous consent we have printed in the RECORD a letter from a group that happens to support specifically the Kyl amendment. They want to support the modified language in the Kyl amendment in order to mitigate and eliminate the harmful economic consequences for the renewable fuels portfolio mandate.

   I also ask unanimous consent a letter from the Florida Public Service Commission be printed in the RECORD.

   There being no objection, the material was ordered to be printed in the RECORD, as follows:

   SENATE COMMITTEE ON ENERGY

   AND NATURAL RESOURCES,

   Washington, DC, March 5, 2002.
Hon. FRANK H. MURKOWSKI,
U.S. Senate,
Washington, DC.

   DEAR SENATOR MURKOWSKI: We are writing to express our deep concern over the economic impact of the renewable electricity portfolio mandates contained in the Substitute Amendment (the Energy Policy Act of 2002) to S. 517. This renewable portfolio standard would require that 10 percent of all electricity generated in 2020 must be generated by renewable facilities built after 2001. The renewable portfolio standard would become effective next year, and the amount of renewable generation required would increase every year between 2005 and 2020. While we believe that renewable sources of generation should have an important, and growing, role in supplying our electricity needs, the provisions contained in the Substitute Amendment was not reasonable and cannot be achieved without causing dramatic electricity price increases. This in turn would have the unintended consequence of reducing the competitiveness of American businesses in the global economy and, thereby, reducing economic growth and employment.

   Today, according to the Energy Information Administration, non-hydro renewables placed in service over past decades make up only about 2.16 percent of the total amount of electricity generated in the United States. However, even this modest existing renewable capacity will not count under the Substitute Amendment toward satisfying the renewable portfolio requirement. Generally, under that Amendment, renewable facilities that can be used to meet the 10 percent minimum must be placed in service in 2002 or thereafter. Therefore, compliance with the Substitute Amendment's 2.5 percent renewables mandate for 2005 would require doubling the amount of non-hydro renewables that we now have in just three years--even though it took us more than 20 years to get to where we are today.

   In addition, because the Substitute Amendment requires that 10 percent of all electricity generation, not capacity, must come from renewables, vast numbers of renewable electricity-generating facilities will have to be built. Wind energy, perhaps the most promising non-hydro renewable technology, operates effectively only between 20 percent to 40 percent of the time. Solar is also intermittent. Therefore, the actual amount of newly installed capacity needed to generate enough electricity to meet the Daschle Amendment's requirements could well exceed 20,000 megawatts by 2005. To put this into context, according to the American Wind Energy Association, we currently have less than 5,000 megawatts of installed wind capacity in the United States.

   Simply imposing an unreasonably large, federally mandated requirement to generate electricity from renewables will not guarantee that enough windmills and other renewable facilities can be built on schedule; that the wind (or sun or rain) will cooperate; or that the generating costs will be as low as would be the case from a more diverse, market-dictated portfolio of conventional, as well as renewable and alternative fuels. If retail suppliers do not comply with the mandate, they would face a 3 cent per kilowatt hour civil penalty. Some way suggest that this penalty would operate as a ``cap'' on the inevitable run up of electricity costs under the Amendment. Even if this penalty were effective at limiting skyrocketing electricity costs--and experience with similar ``penalties'' indicates that it will not--the penalty still would constitute an almost doubling of current wholesale electricity prices

[Page: S2171]  GPO's PDF

   The Federal Government's past record in choosing fuel ``winners and losers'' is dismal. The Powerplant and Industrial Fuel Use Act of 1978, which prohibited the use of natural gas in electric powerplants and discouraged its use in many industrial facilities, was essentially repealed less than a decade later when its underlying premises were conceded to be wrong. While holding back the use of natural gas, the Federal Government spent billions of dollars attempting to commercialize ``synthetic fuels,'' including oil shale and tar sands, with little to show for its efforts.

   While we believe that the Federal Government has an important role to play in encouraging the development of renewable and other energy technologies, we are troubled when that role turns to mandates and market set-asides for one particular fuel or technology. Mandates and set-asides usually don't work, and create unintended consequences far more severe than the underlying problem being addressed.

   For these reasons, we respectfully request that you support efforts to modify the language in section 265 of the Substitute Amendment to S. 517, in order to eliminate or mitigate the harmful economic consequences of the renewable fuels portfolio mandate.

   Sincerely,
Adhesive and Sealant Council, Inc.,
Alliance for Competitive Electricity,
American Chemistry Council,
American Iron and Steel Institute,
American Lighting Association,
American Paper Machinery Association,
American Portland Cement Alliance,
American Textile Manufacturers Institute,
Association of American Railroads,
Carpet and Rug Institute,
Coalition for Affordable and Reliable Energy,
Colorado Association of Commerce and Industry,
Edison Electric Institute,
Electricity Consumers Resource Council,
Independent Petroleum Association of America,
Industrial Energy Consumers of America,
International Association of Drilling Contractors,
Interstate Natural Gas Association of America,
National Association of Manufacturers,
National Lime Association,
National Mining Association,
National Ocean Industries Association,
North American Association of Food Equipment Manufacturers,
Nuclear Energy institute,
Ohio Manufacturers' Association,
Oklahoma State Chamber of Commerce & Industry,
Pennsylvania Foundry Association,
Pennsylvania Manufacturers' Association,
State of Florida Public Service Commission,
Texas Association of Business and Chambers of Commerce,
U.S. Chamber of Commerce,
Utah Manufacturers Association,
Westbranch Manufacturers Association.

--

   PUBLIC SERVICE COMMISSION,

   CAPITAL CIRCLE OFFICE CENTER, 2540 SHUMARD OAK BOULEVARD,

   Tallahassee, FL, March 18, 2002.
Re: Energy Legislation (Substitute Amendment 2917 to S. 517)
Hon. BILL NELSON
U.S. Senator, Washington, DC.

   DEAR SENATOR NELSON: The purpose of this letter is to let you know that the Florida Public Service Commission has major concerns with the 400-page Substitute Amendment currently being addressed by the Senate. It is extremely preemptive of State Commission authority. If legislation moves forward, we ask that it provide a continuing role for States in ensuring reliability of all aspects of electrical service-including generations, transmission, and power delivery services and should not authorize the FERC to preempt State authority to ensure safe and reliable service to retail customers. Also, we support the Kyl amendment on the renewable portfolio standard.

   In particular, our concerns are:

   (1) ELECTRIC RELIABILITY STANDARDS

   The substitute amendment would limit the States' authority and discretion to set more rigorous reliability standards than the Federal Energy Regulatory Commission (FERC) over transmission and distribution. In fact, the Substitute Amendment appears to provide no role for States at all on transmission reliability. Yet, the Florida Legislature has carefully set out statutory authority for the FPSC over transmission.

   If legislation moves forward, Congress should expressly include in the bill a provision to project the existing State authority to ensure reliable transmission service. We note that the Thomas amendment passed. The amendment appears to strengthen state authority. In that regard, the amendment is better than the overall bill under consideration. Our interpretation is that the amendment will not restrict state commission authority to adopt more stringent standards, if necessary.

   (2) MARKET TRANSPARENCY RULES

   This section is silent on State authority to protect against market abuses, although it does require FERC to issue rules to provide information to the States. State regulators must be able to review the data necessary to ensure that abuses are not occurring in the market.

   (3) PUBLIC UTILITIES REGULATORY POLICY ACT (PURPA )

   The FPSC supports lifting PURPA's mandatory purchase requirement, but States should be allowed to determine appropriate measures to protect the public interest by addressing mitigation and cost recovery issues. Thus, we do not support preempting State jurisdiction by granting FERC authority to order the recovery of costs in retail rates or to otherwise limit State authority to require mitigation of PURPA contract costs. States that have already approved these contracts are better able to address this matter than the FERC.

   (4) FEDERAL RENEWABLE PORTFOLIO STANDARDS

   This requires that beginning with 2003, each retail electric supplier shall submit to the Secretary of Energy renewable energy credits in an amount equal to the required annual percentage to be determined by the Secretary. For the year 2005, it will be less than 2.5 percent of the total electric energy sold by the retail electric supplier to the electric consumer in the calendar year. For each calendar year from 2006 through 2020, it shall increase by approximately .5 percent.

   The Secretary will also determine the type of renewable energy resource used to produce the electricity. A credit trading system will be established. While a provision is established to allow states to adopt additional renewable programs, we continue to have concerns. Thus, we strongly support the Kyl amendment which provides some flexibility to the States.

   The FPSC believes that States are in the best position to determine the amount, the time lines, and the types of renewable energy that would most benefit their retail ratepayers. This particularly true in the case of States without cost-effective renewable resources. A one-size-fits-all standard will likely raise rates for most consumers.

   (5) CONSUMER PROTECTION

   The FPSC is concerned with language in Section 256 that requires the State actions not be inconsistent with the provisions found in the bill. While the FPSC favors a strong consumer protection measures, preempting States by Federally legislating retail consumer protections is not necessary. States are better positioned to combat retail abuses. States are partners with federal agencies in these efforts to ensure consumer protection.

   The critical role of State Commissions in the analogous area of implementing the Federal Telecommunications Act provision against slamming (the unauthorized switch of a customer's primary telecommunications carrier) serves as a good example. The Federal Communications Commission saw the benefit of having State Commissions carry out the anti-slamming program. State Commissions are simply better situated and have a more in-depth understanding of the abuses in the consumer protection arena. As a result, Florida's slamming rules are actually more strict and provide better remedies to the consumers than the FCC rules. We would like to retain the ability to take similar steps in the energy area if warranted.

   It is our understanding that there are now 100-200 amendments. We are in the process of reviewing all of them. In the meantime, please call us with questions on them. We appreciate that your staff has been in frequent contact with FPSC staff.

   In conclusion, we request that you take these points into consideration as energy legislation progresses. Please do not hesitate to call if we may be of further assistance.

   Sincerely,

   Lila A. Jaber,
Chairman.

   Mr. MURKOWSKI. I might observe, the State of Florida is in company here with a lot of other corporations. Nevertheless, I think what we have is people who are suggesting that, indeed, we have not examined sufficiently the ramifications of just what this mandate is.

   It has worked, in my opinion, with the States. Fourteen States have mandated renewables. It is working. Now we are coming out and saying one size fits all.

   In my State, if I want to have biomass, I am left out in the cold because I do not have anything but timber on public land. But it says in here that unless it is slashing, I can't even use waste from mature logs that happen to be harvested. I can't use the bark, can't use the sawdust, unless there is an amendment to this. Maybe we can get over that.

   There is not an awful lot of thought that has gone into this. In my opinion, it has been an effort to try to accommodate various concerns. Yes, renewables are good. We ought to really have

[Page: S2172]  GPO's PDF

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