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Southern Co. Takes Aim at Renewable Energy Bill

Southern Company, by spending huge sums both on lobbying and on political campaigns, is among the biggest power players in Washington. The utility, which reported $14.4 billion in revenues in 2006, helped derail an administration plan to create a national electricity market three years ago.

Now Southern is targeting a high priority of a key Senate Democrat: requiring utilities to purchase a certain percentage of power from wind, solar, biomass and other renewable energy sources. The fight over the Renewable Portfolio Standard (RPS), authored by Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.), may be an early indicator of the great difficulties inherent in crafting a bill to curb global warming emissions. An RPS would lower greenhouse gas emissions, although not to the extent contemplated by bills that specifically target global warming. It would also affect utilities and regions of the country differently, thereby setting up political fault lines based on geography as well as political affiliation, just like a climate-change bill would. Bingaman's measure would require utilities to purchase 15 percent of their power from renewable sources by 2020. Versions have passed the Senate three times, but RPS supporters fear that opponents will take a tougher stand this year, including through the use of the filibuster. Before, these critics could count on House Republicans killing an RPS, but they are no longer in the majority. Bingaman is likely to introduce an RPS measure as an amendment to a bill the Energy and Natural Resources Committee passed last week that called for development of transportation biofuels and energy-efficiency targets. This bill could reach the floor later this month. Supporters argue that an RPS offers more than just environmental benefits. Studies by the Energy Information Administration (EIA) and others have found that an RPS would also lower prices for natural gas by lowering demand something that has become a main selling point for the Bingaman bill. Electricity prices would not rise appreciably under an RPS, according to the EIA. Looking to expand their base of support, RPS proponents are distributing a fact sheet that notes lower natural-gas prices would offer an important benefit to industries, such as fertilizer and chemical companies, reliant on natural gas as a feedstock fuel. More use of renewable sources of electricity would also lower the need to supplement domestic natural gas supplies with imports of liquefied natural gas, which often comes from the same places foreign oil does. Southern's argument is that the RPS would raise costs for its 4.3 million customers in Alabama, Georgia, Florida, and Mississippi an argument the company also used to defeat the effort to nationalize the power grid. The company has taken slides to Capitol Hill to show that an RPS would cost nearly $4 billion to implement by its sunset date of 2030. Other slides show the reason: The Southeast is short on wind and sun, unlike the Midwest and Southwest. "We do oppose such legislation because the practical use of renewables varies greatly depending on what region you are from," said Mike Tyndall, a spokesman for the company. For Southern, the 15 percent requirement translates into roughly 6,000 megawatts of power. That would require 6,900 wind turbines, or 200 square miles of lands dedicated to solar power, according to the slides. At zero megawatts now, Southern figures it can generate only around 800 megawatts by the bills deadline. Accordingly, it is lobbying very aggressively against the bill, said one utility lobbyist who supports the RPS. Other Southeastern utilities, such as Louisiana-based Entergy, have joined Southern in arguing their area doesn't have sufficient renewable sources of power. "In fact, they do," said Leon Lowery, a Senate Energy and Natural Resources Democratic aide. Lowery and other RPS supporters say the regional differences in renewable power are overblown, because there are already 6 megawatts of biomass that would qualify. The Bingaman bill also states that improvements in the efficiency at hydroelectric power plants would count as a renewable, as would landfill gas used to produce electricity, Lowery noted. Tyndall said the company does not believe that these other types of renewable energy are sufficient to meet the 15 percent requirement. But Lowery says critics exaggerate the costs of an RPS by assuming worst-case scenarios. The reality is likely to be lower than Southern's $4 billion estimate, he said, adding that some costs could be made up with lower natural-gas costs. But EIA studies have noted that there is some wealth redistribution under a national RPS. There are already roughly 20 states that have an RPS. Lowery argues that that number alone will provide relief on natural-gas prices. Without a national standard, utilities in states with renewable mandates will have to bear the costs of renewable energy while the benefits of cheaper natural gas accrue to everyone an argument that reverses the regional-burden argument that Southern and other utilities use. The administration has also opposed a national RPS. Instead, Energy Department officials are working to try to develop a market within the states that have an RPS. Utilities in these states could trade renewable credits as a way to keep the costs low. But Lowery said the disparity among state standards makes development of regional markets difficult. The fate of the RPS in the House is also up in the air. Rep. Rick Boucher (D-Va.), the chairman of the House Energy and Commerce Energy and Air Quality Subcommittee, has voted against an RPS in committee before, although Rep. John Dingell (D-Mich.), the chairman of the full committee, has voted for one. But the more immediate concern is the Senate. RPS opponents are targeting Republicans Chuck Grassley (Iowa), Gordon Smith (Ore.), Richard Lugar (Ind.) and John Thune (S.D.), as well as Democrats Mary Landrieu (La.) and Ben Nelson (Neb.). "Were working very hard to get to 60 votes [for the filibuster]," said one utility lobbyist who supports the RPS. "We're very close." This article first appeared in the Business & Lobbying section of The Hill on May 9, 2007.
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