Some Utilities Disappointed in Scaled-Back U.S. Energy Plan

Senate Democrats’ decision to scale back energy legislation disappointed environmentalists, some utilities and the Obama administration, which took office promising to steer the U.S. economy away from fossil fuels.

Conversely, Senate Majority Leader Harry Reid’s decision to drop a cap-and-trade plan, in which companies would buy and sell pollution rights, was “welcome news” for companies that sell coal to power plants, said Luke Popovich, spokesman for the National Mining Association.

A cap-and-trade program to reduce carbon dioxide and other greenhouse gases linked to climate change was a major feature of the first budget President Barack Obama sent to Congress last year. Climate legislation passed the House in June 2009, then took a back seat to overhauls of the health-care system and banking sector.

“We are disappointed that we do not yet have agreement on comprehensive legislation,” Carol Browner, Obama’s senior energy adviser, said at a press conference with Reid yesterday in Washington. She said the White House will continue to work to get climate-change legislation passed, and Reid made a similar promise.

Reid said he can’t round up enough support in the Senate this month for broad energy measures like a cap-and-trade program to restrict carbon pollution and a requirement that utilities buy more electricity from renewable sources.

Instead, the majority leader said he will offer legislation to overhaul offshore drilling rules in response to the BP Plc oil spill, and establish household energy-efficiency programs and incentives for natural-gas-fueled vehicles. The measure is scheduled for Senate debate next week.

$1 Billion on Lobbying

For utilities that spent more than $1 billion over the past decade lobbying Congress for new energy policies, yesterday’s announcement will “mean continued uncertainty and delay,” said Ralph Izzo, president of the Public Service Enterprise Group Inc. utility based in Newark, New Jersey.

Some utility officials said it will slow the spending of billions of dollars on solar, wind and other types of renewable energy.

Power companies are ready to invest $1 trillion in new infrastructure “but much of that money remains on the sidelines” without clear rules for carbon dioxide emissions, said Howard Riefs, spokesman for Exelon Corp., the biggest U.S. nuclear-power producer.

The American Wind Energy Association, a Washington group that represents companies such as Clipper Windpower PLC and Siemens AG, said it is “beyond comprehension” that the energy bill wouldn’t require utilities to buy more renewable electricity.

Jobs in Jeopardy

About 85,000 existing wind-industry jobs may be in jeopardy and the opportunity to create more than 270,000 new jobs may be lost, Denise Bode, the wind industry organization’s chief executive, said in an e-mail.

Some utilities are in less of hurry for Congress to act. John Russell, president of Jackson, Michigan-based utility company CMS Energy Corp., said before Reid’s announcement that lawmakers should wait until “the economy has rebounded” to tackle the climate-change issue.

“We feel more cost pressure today than we have in many years because of the state of the economy,” Russell said.

Popovich said companies that own coal-burning power plants, including American Electric Power Co. and Southern Co., have been looking to Congress to pass legislation that supersedes greenhouse-gas regulations planned for next year by the Environmental Protection Agency.

‘Worse Than the Disease’

The cap-and-trade program sought by Senators John Kerry, a Massachusetts Democrat, and Joe Lieberman, a Connecticut independent, “would have been a cure that’s worse than the disease,” Popovich said. The news isn’t all good for the coal industry because the EPA’s rules are still coming next year, he said.

Tom Gibson, chief executive officer of the American Iron and Steel Institute, said the broader proposal would have hurt “energy-intensive, trade-exposed manufacturers” with overseas competitors.

Although Senate Democrats are divided over plans for cutting carbon dioxide emissions, Reid blamed a lack of Republican support, and that party’s leaders took credit for blocking the cap-and-trade plan.

“Republicans are more than happy to protect Americans from a job-killing national energy tax,” Don Stewart, a spokesman for Senate Republican Leader Mitch McConnell of Kentucky, said in an e-mail.

Trucks, Homes and Drilling

Reid told reporters the legislation would aid the conversion of diesel-fueled trucks to natural gas to help reduce U.S. oil imports. The bill would include a new version of “Homestar,” a $6 billion program Obama proposed in March offering rebates to homeowners for new insulation, water heaters, windows and other energy-saving upgrades.

The League of Conservation Voters, a Washington-based environmental group, called Reid’s decision “deeply disappointing” and said advocates for regulating greenhouse gases will keep pressing for climate-change legislation this year.

The energy bill may also raise the $75 million liability cap for companies that cause oil spills, Reid said without providing details.

Bill Bush, a spokesman for the American Petroleum Institute, said in an e-mail that any move to eliminate the oil spill liability cap “could all but shut down deepwater operations, affecting many thousands of jobs.”

To contact the reporters on this story: Simon Lomax in Washington at slomax@bloomberg.net; Lisa Lerer in Washington at llerer@bloomberg.net

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