Senate OKs measure requiring utilities to use renewable fuels

WASHINGTON – Utilities would have to generate at least 10 percent of their electricity from renewable sources under a measure the Senate approved Thursday.

Separately, a package of environmentally friendly tax incentives was advanced by a committee as senators made clear their intention to fashion a sharply different energy bill from one passed by the House.

Electric utilities would have to rely more heavily on wind turbines, solar energy, biomass from garbage or plants and other nonfossil fuels to generate electricity under the provision approved by a 52-48 vote.

Republican Sens. Olympia Snowe and Susan Collins of Maine voted for the measure.

Opponents argued the mandate, which would begin in 2020, would force higher electricity prices in regions of the country where such renewable fuels are not widely available. But Sen. Jeff Bingaman, D-N.M., the measure’s chief sponsor, said any modest price increase would be offset by lower natural gas prices as utilities shift from gas to other energy sources. He said 18 states already have requirements for utilities to use some renewable fuels, including some that are much more ambitious that his proposal. California, for example, is requiring 20 percent of its electricity to come from renewable sources by 2017; Maine is requiring 30 percent by 2011, said Bingaman.

The Senate Finance Committee advanced $18 billion in energy tax breaks that lean heavily toward promoting energy efficiency, renewable, alternative motor fuels and clean coal technologies. House tax measures totaled only $8 billion and went almost exclusively toward developing traditional energy sources.

“What came out of the House was not even a pale green. This is deep forest green,” said Sen. Charles Schumer, D-N.Y.

Finance Chairman Charles Grassley, R-Iowa, said he expects the tax provisions to be rolled into the energy bill early next week. “We don’t expect a lot of fuss on this on the floor,” said Grassley.

The provisions, covering tax breaks over 10 years, include nearly $3.8 billion for energy conservation and efficiency, including tax credits for solar panels, energy-efficient appliances and construction of energy-efficient homes. It also provides $2.6 billion in tax breaks to promote alternative fuels, including a tax credit for people who buy hybrid gasoline-electric cars and incentives to produce biodiesel fuel.

The tax package would recoup some of the cost of the incentives with $4.3 billion in revenue from new or revamped energy taxes, bringing the cost to the government to $14 billion over 10 years, still more than twice the amount the White House had wanted.

Sen. Jon Kyl, R-Ariz., said he opposed the measure because “a lot of the subsidies will support very popular programs” that, he argued, could be developed without government help. Hybrid automobiles have been growing in popularity and the wind power industry – which would receive about $3 billion in tax breaks over 10 years – is growing on its own, he maintained.

The House legislation calls for $8 billion in energy tax breaks, of which less than $500 million would go to energy efficiency and renewable energy sources. House Republicans also have said they would oppose a requirement for utilities to use renewable energy.

Bingaman called his provision “modest” and easily achievable, dismissing complaints that the requirement might be difficult to achieve in some parts of the country. While wind, geothermal sources and other renewables might be concentrated, biomass fuels from wood chips, plants and other sources “are everywhere,” said Bingaman. He also said a utility could buy credits if it was unable to meet the 10 percent mandate.

“It’s a big rate increase,” countered Sen. Lamar Alexander, R-Tenn., citing an assessment by the Energy Department that said the renewable mandate would cost the utility industry $18 billion over 20 years – costs, he said, which will be passed on to consumers.

“The $18 billion will be more than offset by the savings utilities would get by not having to invest in traditional sources of fuel,” said Bingaman.