Learning from Past, Failed Energy Laws

The Obama administration and Congress should be very careful as they try to write comprehensive legislation aimed at changing the way Americans use energy. It’s time for a big slice of humble pie.

The legislative landscape is littered with bad energy law, going back decades. It’s not a pretty picture when it comes to the impact on consumers and the electricity industry. Been there; seen that.

Let’s start with the most recent attempt—the Energy Policy Act of 2005 (EPAct). That law was the result of more than a dozen years of tries to update the Energy Policy Act of 1992, one of the few recent legislative success stories (for the most part) in the energy policy arena.

After years of failing to come up with new laws to adapt to the positive changes in energy markets that had developed in the 1990s—in part because of the 1992 law—the Republican Congress, with the support of Democrats in key regions, stumbling and bumbling and straggling and sucking air, finally passed a new energy law. They proclaimed it great. President Bush (II) signed it. It wasn’t great. Far from it.

A Record of Failure

Nearly five years later, it is clear that the 2005 law was a failure. Congress labored too long and too hard to come up with a law to respond to what they and the nation correctly saw as a changed energy world. Their vision was flawed; their tactics were wrong. They produced a law that misperceived the new energy economy. They blew it.

Among the key provisions of EPAct:

  • Loan guarantees to revitalize the nuclear generating business: Failure.
  • Giving the federal government “backstop” authority for high-voltage interstate electric transmission siting: Failure.
  • Incentives for advanced coal technologies, including integrated gasification, combined-cycle generation with carbon capture, and sequestration: Failure.
  • Encouraging the development of hydrogen-powered fuel cell cars: Failure.

Now, the Obama administration says it is going to once again try to restructure the way the government, and American society, addresses energy. I’m doubtful, having observed and reported on national energy policy for four decades now. That’s four decades of essential legislative fecklessness. I don’t have an ideological take on this. I was trained as a historian and journalist, not an advocate.

Government, in my experience, has no idea what consumers want in terms of energy, or attempts to direct consumers in ways they don’t want. Most folks, in my experience, don’t give a darn, at a practical level, about time-of-day pricing, the need for energy conservation, or their carbon footprint. They want light when it is dark and cool temperatures when it is hot outside. Anything else is fluff. Compact fluorescent light bulbs? Who cares?

Most folks I know want the biggest, most comfortable car they can afford, regardless of the price of gasoline. Toyota’s Prius, a fine vehicle, has been a U.S. loss-leader for the Japanese auto company. Toyota’s most profitable cars have been sport utility vehicles (SUVs) —I drive a Highlander and love it—and trucks, just as is the case in Detroit. Ford’s F-150 pickup has been the best-selling vehicle in the U.S. for decades, regardless of the price of gasoline. From November 2007 to November 2008, the F-150 outsold the Prius by a factor of 4:1. What’s all that stuff I hear about Detroit not building cars that people want to buy?

Avoid Industrial Policy

What does this mean for government policy? Legislators and the executive branch (which is now the majority stockholder in General Motors [GM]) must eschew any attempt to tell Detroit what kind of cars it should build and how it should sell them.

The Obama administration has said it will not dictate to GM any details of company management. I’ll take them at their word, but it’s going to be really tempting on the part of Washington (the executive branch and Congress) to play auto exec. Already, congressional committees are hearing complaints from Chrysler and GM dealers about whether they can continue as franchisees. Only courts can resolve these thorny issues.

I recently listened on National Public Radio to Ray LaHood, a former Republican member of Congress who is now Obama’s secretary of transportation. He dutifully eschewed any interest in running GM. But he repeatedly said that the new, restructured GM will make cars “that Americans want to buy,” saying and implying that GM had not done so in the past. That’s scary. GM and all automakers offer cars they believe Americans will buy. Ray LaHood can’t know what Americans will buy. Nor can he or the administration determine how banks will make credit available to car buyers and what kind of cars they will finance.

Equally scary is the notion that government can dictate to Americans what kind of electricity they must buy. Most consumers understand that electricity is electricity; cheaper is better and more is great. So what’s all the huff and puff about wind and solar being superior? Most consumers don’t buy it and they shouldn’t. But many in Congress and the administration want to tell us what flavor of electricity we should buy, with the emphasis on wind and solar. I can determine what kind of car I want. I can’t determine how wind or solar tastes different from coal or gas generation.

LaHood strikes me as a lightweight. He clearly didn’t know what he was talking about on the radio show. Americans don’t want small, fuel-efficient cars unless the price of gasoline is high. They don’t want high gasoline prices. So they want big, comfortable cars with low-cost gasoline. They have demonstrated that repeatedly. When gasoline prices are low they buy pickups and SUVs. Because so many Americans own small businesses and work as contractors for small businesses, they buy pickup trucks and work vans regardless of the price of gasoline.

Americans don’t want houses that are hot in the summer and cold in the winter. They don’t want outside forces—government or business—telling them what they want in terms of energy consumption. I sure don’t. I live in a passive solar house with all kinds of energy- and water-efficient bells and whistles. I paid for them myself, based on my own perception of economics in 1990 (and the fact that I could roll the costs into a mortgage, which has now been paid off for over a decade).

Lists of Legislative Folly

Congress and the White House, both loci of incredible hubris, must back off and provide an energy policy that works for most people, not politically powerful elites. The history of energy policy legislation is littered with disappointments. Here are some—hardly an exhaustive list—to add to EPAct:

All of these had unintended and unanticipated consequences, most often bad. And I’ve not even delved into the 1990 Clean Air Act Amendments, which have had myriad issues that courts have had to decide, for good and ill, over nearly 20 years. If writing law is akin to making sausage, the butchers and the consumers must pay more attention to what comes out of the legal and policy end of the meat grinder. Despite the ugly process, is the result palatable? Mostly, the answer is “no” when it comes to energy; the grinding of the meat is ugly and the result is too-often inedible.

House Democrats have written a 900-page energy legislative behemoth that I doubt any member has read in its entirety. It will come to the House floor this summer, and likely will pass.

House Republicans responded this month with their own bill, stressing domestic oil and gas exploration and the construction of nuclear power plants. The GOP bill calls for 100 new nuclear power plants in the next 20 years. That is, to put it gently, preposterous. But the Republicans know that their bill is dead on arrival and planned it that way. It’s another demonstration of political cynicism that gets in the way of things that can work.

The drafters of energy legislation and their advisory gurus from all directions should have a humble recognition of what can go wrong in the real world. They should be particularly mindful of how provisions in one part of legislation could impact provisions in another. That’s been absent in recent energy legislation.

Most of all, the forces for new energy legislation should reach for modest, achievable goals, rather than grasping at unachievable but popular ends, such as unreasonable targets for renewable energy generation or carbon dioxide reductions or nuclear plant construction. In short, it should be about what can be done, not what policy makers or political pressure groups would like to have done.

Overreaching has been the worst villain in legislative drafting of energy law in recent history, rightfully sowing cynicism about the ability of Congress to address problems through legislation. Laws that can’t work are laws that can’t be respected.

—Kennedy Maize is MANAGING POWER’s executive editor.