Dec. 10 (Bloomberg) -- A lobbying blitz by some of the U.S.'s biggest utility companies is likely to strangle the most potent provision in energy legislation that's making its way through Congress.

Southern Co., American Electric Power Co. and other producers hired top Washington lobbyists, including Rudy Giuliani's firm, to help defeat a measure that would force them to boost electricity generated by wind, solar and other forms of renewable energy to 15 percent of the U.S. total by 2020. That's up from less than 2 percent today, and is a move the industry says would cost at least $67 billion.

The Senate failed on Dec. 7 to get the 60 votes needed to move the legislation, a day after the House of Representatives approved it. To get the bill to President George W. Bush's desk this year and steer clear of a White House veto threat, the Senate will probably have to pass a weakened measure.

``The lobbying effort led by Southern Co. is the principal obstacle to America unleashing a renewable-electricity revolution,'' says Representative Edward Markey, a Massachusetts Democrat who has led the fight for a federal standard on the new energy sources.

The legislation pits the utilities and oil companies against wind and solar-electricity producers, as well as venture-capital firms such as Kleiner Perkins Caufield & Byers, where former Vice President Al Gore is a partner. Those firms have made billions of dollars in clean-energy-technology investments, which would pay off if the bill becomes law.

Tax Increase

Atlanta-based Southern Co. and Columbus, Ohio-based American Electric Power are leading the opposition to the renewable-energy measure because they mainly operate in the Midwest and Southeast, where wind- and solar-power production lags behind the rest of the country. Oil and natural-gas companies object to the more than $13 billion in taxes that would be imposed on them -- levies that may also have to be scaled back to gain Senate passage.

``We're not opposed to renewable energy,'' says David Ratcliffe, chief executive officer of Southern Co. ``We are opposed to sort of a one-size-fits-all federal mandate that would be very difficult for us to achieve with any economic sense.''

Ratcliffe says his executives met with lawmakers including Representative John Dingell, a Michigan Democrat who heads the House energy committee, to seek a compromise. They asked that more forms of clean energy be added -- including nuclear power - -and that some states be allowed to ``opt out'' of the standard.

``All of that has been rejected out of hand'' by the Democratic leadership, Ratcliffe says.

More Than Exxon

Southern Co. has spent $7.26 million this year lobbying Congress, more than Exxon Mobil Corp. or General Motors Corp., according to the Washington-based Center for Responsive Politics. It hired such firms as Bracewell & Giuliani LLP, where Republican presidential front-runner Giuliani is a partner.

The Giuliani firm's involvement goes deeper: Scott Segal, a Bracewell lobbyist, is director of the Electric Reliability Coordinating Council, an industry group that focuses on air- quality issues and includes Southern Co., Progress Energy Inc. and other utilities.

``Advocates for the renewable-portfolio standards have a tough road ahead of them to get the votes in the Senate,'' says Segal, who adds that his firm also represents renewable-energy companies on other issues.

Giuliani's campaign says the former New York mayor supports alternative fuels. ``He is an advocate for developing renewable energy as a way of achieving energy independence,'' spokeswoman Maria Comella says. She didn't comment on the lobbying effort.

New Fuel Standards

Other provisions of the energy bill, such as the first increase in automobile fuel-economy standards in three decades and a mandate to increase the use of ethanol and other alternative fuels, aren't as disputed. That's because they were largely worked out with industry input and would be included in any bill sent to the president.

The renewable-electricity standard is contentious because it may substantially raise electricity bills in some regions. Wind, solar and biomass power production are more expensive than fossil energy options such as coal or natural gas. The power companies say they can't meet the standard because environmental conditions in the South and Midwest don't lend themselves to wind energy.

The bill would require utilities to obtain 2.75 percent of their power from renewable sources starting in 2010, ramping that up to 15 percent by 2020. Almost one-quarter of the mandate could be met by improving efficiency. Companies that fail to meet the standard would have to pay a penalty to the federal government.

`Far Too Expensive'

``The only reason renewable electricity needs to be mandated in the first place is that these alternatives are far too expensive to compete otherwise,'' says Ben Lieberman, an analyst at the Heritage Foundation, a Washington research group that opposes more federal regulation of energy. ``Washington is forcing costlier energy options on the public.''

Congress first began debating a renewable-electricity bill in the 1990s, and three different versions have passed in the Senate since 2001. Currently, two-dozen states, including California and Texas, have such mandates.

Other countries have struggled to meet similar targets. The U.K. said last month that it won't reach its goal of generating 10 percent of its electricity from sources such as wind and energy crops by 2010, and is now aiming for 2020.

The European Union has a goal of producing 20 percent of all energy from such sources by 2020.

`Old Guard'

In the U.S., House Speaker Nancy Pelosi has made passing the federal standard a priority. Her goal: to cut reliance on fossil fuels that must be imported and contribute to global warming.

``Power plants are responsible for 40 percent of all U.S. global-warming pollution,'' says Jeremy Symons, executive director of the global-warming program for the National Wildlife Federation. ``The old guard will continue to argue for the most polluting technologies.''

The American Council for an Energy-Efficient Economy released a study last week saying the new standards would cut carbon-dioxide emissions by 100 million metric tons, slash electricity use and create tens of thousands of jobs.

The greater efficiency required would also reduce electricity bills, says Bill Prindle, deputy director of the Washington-based group. He says the industry's price-tag estimates also don't account for escalating coal and natural-gas costs and future drops in renewable-electricity rates.

Paying Off

Still, the lobbying effort is paying off. Senator David Vitter, a Louisiana Republican, says his party's support for the energy bill collapsed after Senate Majority Leader Harry Reid, a Nevada Democrat, ``completely reneged'' on a pledge to deliver legislation without the renewable-electricity standard.

The office of House Minority Whip Roy Blunt, a Missouri Republican, sent out an e-mail last week with the headline: ``Democrats take dead aim at Southern ratepayers by attaching billion-dollar mandate to lights-out energy bill.'' It included links to hundreds of news stories, blogs, and industry data trashing the measure.

The opposition is so strong that Reid says he may strip out the renewable-energy and tax provisions. ``If we can't get it all, we'll get part of it,'' he told reporters on Dec. 6. ``The American people deserve it.''

To contact the reporters on this story: Tina Seeley in Washington at tseeley@bloomberg.net; Daniel Whitten in Washington at dwhitten2@bloomberg.net.

Last Updated: December 9, 2007 19:16 EST