Don Nickles

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from North Carolina (Mr. Helms) is necessarily absent.

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from North Carolina (Mr. Helms) is necessarily absent.

Mr. NICKLES. I announce that the Senator from North Carolina (Mr. Helms) is necessarily absent.

Mr. NICKLES

Mr. NICKLES. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. NICKLES. Mr. President, I ask that amendment No. 3256 be considered.

Mr. NICKLES. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. NICKLES. The amendment I called up, sponsored by Senator Breaux, Senator Miller, Senator Voinovich, and myself, will reduce the penalty if a utility doesn't achieve the renewable standard that is set in the legislation. The legislation says that 10 percent of the electricity produced has to be from renewable sources. Renewable sources are defined as wind and solar, biomass--interestingly enough, not hydro. That is a very difficult standard to achieve. I am not sure any State can achieve it now or any State will be able to achieve it in the future. We will have to see. Varying States have different renewable standards. I am all in favor of that, whatever States want to decide. We are getting ready to have a Federal mandate that says: 10 percent of your power has to be from renewable sources. Most people think renewables is nonfossil fuel, but that is not the case here. We are talking about primarily wind, solar, and biomass. Nuclear fuel is not included. Hydro, or at least old hydro, is not included. But if you don't achieve that 10 percent standard, there is a penalty. How do you get to the 10 percent? Let's say you do everything you can, but primarily most of the production in your State is fossil fuel. You run off coal or natural gas generators. And if you are short of the 10 percent, what do you do? Under the bill, you can buy it from other utilities, if they have surplus credits, or you can pay the Federal Government. You can pay the Government for the credits. You could call them credits. You could call them a tax. You could call them a penalty. But you have to pay, if you don't meet this 10 percent standard. Actually, the standard starts at 1 percent and it is phased up to 10 percent in the year 2019. If you don't make the standard, you have to pay something. It is a tax. Your utility has to write a check to the Federal Government, a large check. In many cases, it could be hundreds of millions of dollars. In many cases, the cost to the utilities--and I will enter into the Record some statements from different utilities--could be billions of dollars, because they have to pay 3 cents per kilowatt hour for whatever they are short of this target we are getting ready to mandate. How much is 3 cents per kilowatt hour? Most of us don't know. When we pay our utility bill, we don't know how much utilities really cost. The wholesale price of electricity right now, nationwide, is about 3 cents. If you don't meet the target, basically you have to pay 100 percent of whatever you are short on renewables in electricity cost. That is a lot, for 10 percent of your power. If you produce no electricity from the renewables, this bill is the equivalent of a 5-percent surcharge because you are paying in effect a 100-percent increase for that last 10 percent. If you average that over your entire cost, it is about a 5-percent increase in your utility bill. I will tell you, few if any utilities will meet this standard in this bill, even those utilities that are very progressive and aggressive in trying to meet renewable standards and have renewable energy sources such as wind, solar, and biomass. Few are able to meet this standard that is in this bill. So you are going to have to buy these credits and pay a lot of money. The essence of this amendment is, let's reduce that 3-cent penalty to a penny and a half. You might say, where did you get the penny and a half? It happens to be half of what is in the underlying bill, and it also happens to be half of what the Clinton administration proposed. President Clinton, in 1999, proposed that we have a renewable standard. Incidentally, he didn't go up to 10 percent; he only went to 7.5 percent of your electricity would have to be renewable. He also said: If you don't meet that objective, the penalty will be a penny and a half. That is the cost of the credits. Secretary Bill Richardson--many of us got to know him over the years and enjoyed working with him in Congress--when he was Secretary of Energy, that was the penalty, a penny and a half, not 3 cents. So the amendment Senator Breaux, Senator Miller, Senator Voinovich, and I have is to reduce the penalty from 3 cents to a penny and a half. That sounds as if we are talking about pennies. We are talking about billions of dollars, because we are talking about, 10 percent of all the electricity that is produced in the United States must come from renewables, and if you don't make it, you have to pay this 3 cents per kilowatt hour. What does that mean? I will cite a couple of letters. I have them from different companies and different States. I will start with my State. Oklahoma Gas and Electric said the penalty under the bill, as written right now--their estimate is it would cost $794 million through the year 2020. We would cut that in half. We have almost every utility in the country supporting of this amendment. This is a rather large utility called Southern Company. I mentioned the largest one in my State, Oklahoma Gas and Electric. Southern Company, which is in several Southern States, said it would cost them from $676 million to $1.014 billion annually by the year 2020. I hope my colleagues understand this. I have a letter I will also have printed in the Record from the president of Southern Company, one of the largest utilities in America that says the total cost across several states could be over a billion dollars--from $676 million up to over a billion dollars a year--if the 3-cent penalty stays in the bill. We would cut that in half under our amendment. I could go on and on. Is it going to cost the utilities ultimately? Probably not. They are going to pass it, if they can; and I expect that they can. Residential consumers and industrial consumers will pay for it. Frankly, if industrial consumers are paying for it, they are going to pass that on, too. If you want to set about an inflationary spiral, we are doing that. We are increasing utility costs if we allow the Daschle-Bingaman 3-cent penalty per kilowatt hour to stay in the bill. I think it should be zero. Senator Kyl had an amendment to strike out the renewable section, but I am coming up with half a loaf. I am saying cut it in half. I am a legislator. If we can pass a bill half as damaging, I am willing to do it. If we can reduce the numbers by half, I think we will have made a big step in the right direction. Why in the world would we have a cap or a penalty higher than the Clinton administration proposed? Incidentally, it didn't pass. Some people said we should not pass it because it costs too much. Look at some of the other States that are involved. Kansas City Power and Light said it would cost over $300 million, and that is the current cap. We would cut that in half. Different companies have used different ways of stating the costs. Pinnacle West in Arizona talks about it costing billions of dollars to comply. They even said it may have a residential rate increase of 28 percent. In Pennsylvania, PP&L, which has facilities in Pennsylvania and Montana, estimates penalties at $178 million per year in 2006, growing to $260 million by 2020. The reason they start out low is the renewable section starts out low, at 1 percent, but it grows every year, up to the very expensive 10 percent by 2019. Let me mention a couple letters, which I will enter into the Record, so that this won't just be little excerpts from my floor speech. This is a note from Allegany Energy. It says: The rates under the restructuring initiative to lower consumer costs may restrict Allegany Energy, a conservative-- 1 percent requirement would cost $13 million annually, and a 10 percent requirement would cost $135 million annually, assuming no growth in customer electricity consumption. I think most people would assume the consumption would go up over that period of time. That is a very conservative estimate. Exelon: I will read various segments of this: Meeting the Bingaman RPS amendment will cost our customers between $2.3 billion and $4.6 billion more than they would otherwise pay for electricity between 2005 and 2020. I hope my colleagues have a chance to absorb some of these numbers. This is a very large utility, and they are primarily in Illinois and Pennsylvania. They said it could cost $4.6 billion if we don't change the Bingaman amendment. Our amendment says we will cut it in half. I hope the Senators from Pennsylvania, the Senators from Illinois, and others will stop and say, wait a minute, who pays for that? Are we really passing something where we know what we are doing? Are we going to mandate those cost increases on consumers? Wait a minute, we are giving people a chance to cut it in half. That is what this amendment does. Listen to this comment made from Bill Richardson before a House committee in June 17 of 1999: To hold program costs down, the administration's proposal would allow electricity sellers to purchase credits from the Department of Energy at a cost of 1.5 cents per kilowatt hour. As a result, sellers would not be forced to pay excessive amounts for credits that are sold by other electricity providers that exceed the 7.5 percent RPS requirement. This bill has a 10-percent requirement, and if you don't meet it, it says you have to pay 3 cents per kilowatt hour. As I have mentioned by a few examples, the cost is absolutely enormous. I want to mention a couple others. This is a the Public Service Commission for the State of Florida: However, in order to mitigate the ``tax impact'' of this poorly conceived national program, we support the Nickles amendment to lower the amount of penalty from 3 cents to 1.5 cents per KWH. This would reduce the potential cost of this federal mandate on Florida ratepayers. That is a copy of a letter to Senator Gramm. This is a note from American Electric Power. It says: AEP is joining in this effort with Allegany Energy, Console Energy, Peabody Energy, and the U.S. Mineworkers of America. AEP and Allegany are the two largest utilities in West Virginia and are responsible for all the electricity distributed in the State. I will enter into the Record a letter from Southern Company. This is signed by Allen Franklin, chairman and president and CEO: The cumulative cost of the RPS mandate to Southern Company through the year 2020 will be from $3 billion to $6.5 billion. This does not include substantial transmission and interconnection costs for remote wind turbines located in the upper Midwest. . . . I will enter this into the Record. That is a major company, covering several States, saying this will cost billions of dollars over the next 15 years. I just tell my colleagues that when we talk about a penalty of a penny and a half and 3 cents per kilowatt, that doesn't sound like much. When you multiply it times all the electricity and mandate that 10 percent of the electricity meet the standard and, if it doesn't, they have to pay this 3 cents--basically a 100-percent tax on electricity, equal to the value of 100 percent of wholesale cost of electricity-- you are talking about an enormous utility increase. We have a chance to mitigate that; we have a chance to reduce it by basically agreeing to the same standard that was proposed by the Clinton administration in 1999. I urge my colleagues to do so. I ask unanimous consent to have the letters to which I referred printed in the Record.

Mr. NICKLES. Correct me if I am wrong; Texas has a requirement that has a goal of 2,000 megawatts of new renewable energy by the year 2009. That represents 2.6 percent of their present generating capacity. Also correct me if I am wrong, but Texas has their whole basis on capacity, not on electricity produced. So that Texas mandate is a whole lot less than the 10 percent mandate as proposed by the Senator from New Mexico.

Mr. NICKLES. I announce that the Senator from North Carolina (Mr. Helms) is necessarily absent.

Mr. NICKLES. I know the House had a hearing in 1999. The Clinton administration proposed a 1.5-cent credit penalty per kilowatt hour. Why did the chairman come up with a 3-cent penalty, double what the Clinton administration proposed a couple of years ago?

Mr. NICKLES. Will the Senator yield?

Mr. NICKLES. Will the Senator yield?

Mr. NICKLES. Did we have a hearing on any proposal to have this penalty?

Mr. NICKLES. Will the Senator yield?

Mr. NICKLES. Did we have a hearing on the renewable portfolio standards as proposed by the Senator in this bill, period?

Mr. NICKLES. In the last 2 years, did we have a hearing on a mandate of 10 percent and a cost of 3 cents?

Mr. NICKLES. If the Senator will require the Texas utility code section 39.904, goals for renewable energy is 2,000 megawatts of generating capacity. I mention this because capacity is one thing, to generate electricity is another. For wind, you need three times the facilities to actually generate because they don't operate 24 hours a day. The wind does not always blow. Capacity is less intrusive and less expensive. And factually, the amount of megawatts produced equals right now 2.6 percent of the Texas generating capacity and less than 2 percent anticipated by the year 2009. I heard my colleague say this is modeled after Texas. But it is not modeled after Texas. It did not follow Texas in any way, shape, or form. That is an editorial comment.

Mr. NICKLES. Mr. President, I know my colleague from Ohio desires to speak, but I wish to make a couple of rebuttals to the comments made by the Senator from New Mexico. Then I am delighted to have my friend from Ohio speak. We didn't reduce the renewable portfolio standard. It is still 10 percent. I don't think it should be there, but my decision was to minimize the damage under the Bingaman proposal, and we decided to cut the penalty in half, the same amount the Clinton administration proposed--the only proposal that had a hearing before Congress, and that happened to be a hearing not before this Congress but the last Congress in 1999. To think we would even have a proposal that has an indirect tax on utility users and consumers of billions of dollars, estimated by the Energy Information Agency of $88 billion, without even having a hearing, I find ridiculous. I hear colleagues say it was based on Texas, and it was not; there is a world of difference between capacity and generated electricity, especially when you talk about renewables. Texas has a standard that would equal 2 percent of their generation, and we are talking about a 10 percent mandate. There is a lot of difference. There is a lot of difference when the cost impact is in the millions and billions of dollars for utilities all across the country. And I will put in more estimates. When I made this speech earlier, trying to strike the provision, I said something about a chart we got from the Department of Energy that said Kansas City Power and Light said it would cost $16 million--that is per year--when fully implemented. I mentioned that was pretty good for the consumers of Kansas City Power and Light. They said, in a letter: Unfortunately, EIA grossly understated the cost of 10 percent mandate to Kansas City Power and Light. The hit is much worse than that. We project total costs being more than $300 million over the 15-year period between 2005 and 2020 for the full 10 percent. For a company of our size, these costs are intolerable. So for people to say we don't think it will be very much, Senator Breaux, Senator Voinovich, Senator Miller, and I are at least trying to reduce the cost and trying to keep the cost at somewhat more affordable levels as proposed by the previous administration. I yield the floor.

Mr. NICKLES

Mr. NICKLES. If the Senator will yield further, existing hydro is not included in the bill. Only incremental new hydro is included in the bill, and I do not know how the Senator can count that for existing percentages.

Mr. NICKLES. I did not think hydro was included in this bill.

Mr. NICKLES. I thank my friend and colleague from Arizona for his statement, for his homework, for his research and knowledge on the issue. I hope all Senators will pay attention because we are talking about an amendment that will have a real impact on utility rates, on electric rates all across the country. It will cost millions. Actually, I think my colleague from Arizona will agree, utility companies don't really pay those rates. They may be assessed, but they will pass them on to consumers. They will pass them on to ratepayers in Florida, in Arizona, in Illinois, in Oklahoma, and in Nevada. I appreciate my colleague's homework and also his very strong statement.

Mr. NICKLES. Will the Senator yield for a question?

Mr. NICKLES. Will the Senator from Vermont yield?

Mr. NICKLES. Will the Senator yield?

Mr. NICKLES. I thank my colleague. I heard you say this amendment was an attempt to destroy the renewable section. Are you aware of the fact that we didn't change the 10-percent requirement so the bill still requires that 10 percent of the electricity generated would have to be in the form of renewables? And I remind you that the Clinton administration only proposed 7.5 percent. So we didn't change that. And I might say that the penalty, the cap, is the same amount that was proposed by the Clinton administration. It was a penny and a half per kilowatt hour. If you missed the target of 10 percent, that target amount, the penalty amount, would be the same as required by the Clinton administration. So I don't think this amendment guts the renewables. I wanted to make sure you were aware of it. This isn't the same vote we had previously on renewables.