Bush’s Task: Turn Out Lights On Energy Bill

By Jerry Taylor
This article appeared in The Wall Street Journal on October 22, 1992.

Even though the scandal-plagued 102nd Congress has adjourned, its legacy is perfectly embodied in one last piece of business it left for President Bush to ponder: the 1992 Energy Act. Despite the fact that legislators from both parties practically broke their arms patting each other on the back for passing this “courageous, visionary” blueprint for America’s energy future, the Comprehensive National Energy Policy Act is not comprehensive — it is marginal. It is not national — it is parochial. And it is not policy — it is pork. Moreover, the bill is weighted down with tax hikes that promise to hit low- and middle-income Americans hardest.

The legislation is built on the idea that energy efficiency and renewable energy are cost-effective and beneficial but that, for some reason, American consumers and businessmen are either too stupid or too stubborn to spend their money intelligently. Thus, they must be bribed (with their own tax money, no less) or forced to purchase these wonderful technologies.

Under the act, public utilities, for example, would receive from the government 1.5 cents for every kilowatt hour of electricity they produced from renewable energy sources. To put that into perspective, electricity from conventional sources costs about three to five cents per kilowatt hour to produce, so the generous help of the U.S. taxpayer may make patently uneconomical and inefficient fuel sources artificially attractive to utilities.

Public utilities are also required to consider massive investments in energy conservation efforts (known as “demand-side management” programs), which are to be subsidized by the utility customers. The few honest studies that have been made on such programs, such as those conducted by the National Economic Research Institute, conclude that those programs not only fail to save much energy but also shoot utility rates straight through the roof. They do, however, provide for plenty of jobs for energy-efficiency planners and bureaucrats.

If those “carrots” are not enough to produce socially acceptable behavior from American consumers, then the bill’s “sticks” can be counted on to do the job. Thousands of lamps, electric motors, shower heads, faucets, toilets, transformers, and heating and cooling units for commercial buildings are to be banned from the marketplace because they are not “efficient.” New commercial buildings must also meet more stringent energy-efficiency standards, regardless of cost. Private companies with their own automobile fleets are further ordered to buy an escalating percentage of alternatively fueled vehicles, often at double the cost.

Cash-strapped federal and state governments will be required to invest billions in energy and water conservation technologies for government properties that, by optimistic forecasts, might pay for themselves after about 10 years.

The energy bill is, in a sense, a Clinton-style bill: It continues the time-honored tradition of subsidizing the research and development needs of American industry. (Remember Jimmy Carter’s Synfuels?) U.S. tax dollars will be used to help pay for Detroit’s development of electric and alternatively-fueled cars; commercial loans for the renewable fuels industry (loans that are apparently too risky for private banks to make affordable); and research and development wish lists of the natural gas, coal, automobile, renewable fuels, oil and nuclear industries.

The bill also moves to reregulate the disposal of some grades of low-level radioactive waste, waste that the Nuclear Regulatory Commission has deemed far below the threshold of public health concern. Laboratory technicians who conduct X-ray examinations, for example, would be required to have their hospital garments entombed in high-tech, space-age waste disposal facilities that unnecessarily drive up medical and energy bills.

There are some marginal attempts in the bill to untangle the regulatory knot that has plagued the nuclear and natural gas industries. But those attempts are too tangential to significantly reduce consumer energy costs. Nuclear power plant licensing procedures will be streamlined. But the statute merely codifies a 1989 NRC rule that is already in effect.

The bill also contains some pointless items. It enjoins the Federal Energy Regulatory Commission from discriminating against imported natural gas in setting pipeline rates or other regulations, but it’s pretty clear that the North American Free Trade Agreement outlaws such practices anyway. The bill directs FERC to simplify its methodology for determining “just and reasonable” oil pipeline rates. But without recourse to a market pricing mechanism, it’s unclear how FERC can ascertain real prices any better than did energy planners in East Europe.

Under the bill, non-utility generators of electricity are allowed to build, own and operate power plants anywhere in the U.S., but they can sell their electricity only to the entrenched public utilities and are barred from entering the retail market. But why not break up the public utility monopoly and let consumers choose from whom to buy their electricity?

And then there are the taxes: $2.5 billion levied on certain chemicals, marital estate trusts, business transactions, stock holdings, business travel expenses, and housing sales. (The marital estate item fiddles with tax deductions.) Many of these tax hikes are unrelated to energy problems — they are leftover revenue raisers from the urban aid bill, items which legislators attached to the Energy Bill in the confidence that it would pass.

In fact, the energy bill is a perfect monument to Congress: It moves toward greater bureaucracy at a time when the world is moving away from it. If George Bush wants to be true to his campaign promises this time around, he will veto the Energy Act.

Jerry Taylor is Director of Natural Resource Studies at the Cato Institue.