    [Budget of the United States Government]
    [V. Investing in the Common Good: Program Performance in Federal Functions]
    [14. Energy]
    [From the U.S. Government Publishing Office, www.gpo.gov]

    [[Page 187]]

                                   14.  ENERGY

      ----------------------------------------------------------------------

                                   Table 14-1.  Federal Resources in Support of Energy
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Estimate
                   Function 270                   1999   -----------------------------------------------------------
                                                 Actual     2000      2001      2002      2003      2004      2005
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary Budget Authority..........     2,863     2,569     2,943     3,342     3,142     3,219     3,311
      Mandatory Outlays:
        Existing law..........................    -2,217    -4,473    -3,759    -3,924    -3,699    -4,012    -3,971
    Credit Activity:
      Direct loan disbursements...............     1,128     1,719     1,623       N/A       N/A       N/A       N/A
      Guaranteed loans........................        16       133       176       N/A       N/A       N/A       N/A
    Tax Expenditures:
      Existing law............................     1,880     1,930     1,940     1,955     1,305     1,350     1,380
      Proposed legislation....................  ........  ........       198       371       652     1,143     1,561
    ----------------------------------------------------------------------------------------------------------------
    N/A = Not available.

      ----------------------------------------------------------------------
      Federal energy programs contribute to energy security, economic
    prosperity and environmental protection. Funded mainly through the
    Energy Department (DOE), they range from protecting against disruptions
    in petroleum supplies, to conducting research on renewable energy
    sources, to cleaning up DOE facilities contaminated by years of nuclear-
    related research activities. The Administration proposes to spend $2.9
    billion for these programs. In addition, the Federal Government
    allocates about $1.9 billion a year in tax benefits, mainly to encourage
    development of traditional and alternative energy sources.
      The Federal Government has a longstanding and evolving role in energy.
    Most Federal energy programs and agencies have no State or private
    counterparts and clearly involve the national interest. The federally-
    owned Strategic Petroleum Reserve, for instance, protects against supply
    disruptions and the resulting consumer price shocks, while Federal
    regulators protect public health and the environment and ensure fair,
    efficient energy rates. DOE's applied research and development (R&D)
    programs in fossil, nuclear, solar/renewable energy and energy
    conservation speed the development of technologies, frequently through
    cost-shared partnerships with industry. The programs not only open new
    opportunities for American industry, but reach beyond what the
    marketplace demands today, putting the Nation in a better position to
    meet the demands of tomorrow.

    Energy Resources and R&D

      Strategic Petroleum Reserve (SPR): DOE maintains SPR and invests in
    R&D to protect against petroleum supply disruptions and reduce the
    environmental impacts of energy production and use.
      SPR was authorized in 1975, in response to the oil embargoes of the
    early 1970s. The Reserve now holds 567 million barrels of crude oil in
    underground salt caverns at four Gulf Coast sites. SPR helps protect the
    economy and provide flexibility for the Nation's foreign policy in case
    of a severe energy supply disruption.
       In 2001, DOE will maintain its capability to reach a SPR
              drawdown rate of about four million barrels a day within 15
              days and to maintain that rate for at least 90 days.

    [[Page 188]]

      Applied R&D: DOE's energy R&D investments cover a broad array of
    resources and technologies to make the production and use of all forms
    of energy--including solar and renewables, fossil, and nuclear--more
    efficient and less environmentally damaging. These investments not only
    lay the foundation for a more sustainable energy future but also open
    major international markets for manufacturers of advanced U.S.
    technology and enhance our nation's energy security.
      DOE's energy efficiency, renewable energy, and electric energy systems
    programs form a major part of the Administration's Climate Change
    Technology Initiative, which is intended to find ways to reduce
    emissions of carbon dioxide and other greenhouse gases in ways that
    benefit our economy rather than constrain it. (For more details, see
    Chapter 5, ``Promoting Research.'')

    Energy Conservation

      Energy conservation programs, for which the budget proposes $851
    million, are designed to improve the fuel economy of various
    transportation modes, increase the productivity of our most energy-
    intensive industries, and improve the energy efficiency of buildings and
    appliances. They also include grants to States to fund energy-efficiency
    programs and low-income home weatherization. Each of these activities
    benefits our economy and reduces emissions of carbon dioxide and other
    greenhouse gases, and many rely on partnerships with the private sector
    for cost-sharing and commercialization.
      Past Results: Energy-efficiency technologies that have already come to
    market include heat-reflecting windows, high-efficiency lights,
    geothermal heat pumps, high-efficiency electric motors and compressors,
    and software for designing energy-efficient buildings. These five
    technologies alone have saved consumers and industry over $33 billion in
    energy costs. In 1999, commercialization efforts were completed for
    geothermal heat pumps, and full-size electrochromic windows (which
    darken electrically) and spectrally-selective windows (which block
    ultraviolet and infrared light) were demonstrated.
      In 2000:
       Daimler-Chrysler, Ford, and General Motors have recently
              shown the concept cars that represent the first major results
              of the Partnership for a New Generation of Vehicles.
      In 2001:
       The Federal Energy Management Program (FEMP) will exceed the
              original Energy Policy Act of 1992 goal of a 20-percent
              reduction in the Government's energy use per square foot of
              office space (relative to 1985) by reaching a 22-percent
              reduction. (In 1999 FEMP nearly reached that goal a year ahead
              of schedule, achieving a 19.6 percent reduction.)
       Industry will produce 45,000 vehicles that incorporate light-
              weight materials whose development was supported by DOE's
              Office of Transportation Technologies.
       Alcohol-fuel companies will produce six million gallons of
              cellulose-derived ethanol, based on DOE technologies.
       The Office of Industrial Technologies will see 10 of their
              technologies commercialized, bringing the total to 144. Annual
              energy savings to the U.S. economy from technologies they have
              supported will reach 170 trillion Btu, with another 90
              trillion Btu saved annually from their industry assessment and
              technology-transfer programs.
       Local recipients of DOE grant funds will weatherize 76,000
              low-income homes.

      Solar and Renewable Resources: Solar and renewable resources programs,
    for which the budget proposes $334 million, focus on technologies that
    will help the Nation use its abundant renewable resources such as wind,
    solar, and biomass to produce low-cost, clean energy that contributes no
    net carbon dioxide to the atmosphere. The United States is the world's
    technology leader in wind energy, with a growing export market and
    production costs that have fallen dramatically. In addition,
    photovoltaics are becoming more useful in remote power applications, and
    new biofuels plants are being constructed. DOE also is coordinating the
    President's Million Solar Roofs initiative, whose goal is to facilitate
    the installation of one million solar roof installations

    [[Page 189]]

    (a mixture of solar heat/hot water and photovoltaics) by 2010. Two
    programs that were formerly presented as part of Solar and Renewable
    Energy are now presented separately: electric energy systems ($48
    million) and hydrogen R&D ($23 million). Departmental energy management
    is a new line-item ($5 million).
      Past Results: The DOE wind energy program developed a new generation
    of airfoil designs for wind turbine blades, which have been incorporated
    into U.S.-made wind turbines in the 1990s, resulting in up to 30 percent
    better efficiency. The cost of wind-generated electricity has dropped
    from 35 cents per kilowatt-hour (kWh) in 1980 to less than five cents
    per kWh in 1999. (The program has set a very ambitious goal of reducing
    those costs to 2.5 cents by 2002.) From 1990 to 1999, the production
    cost per watt of photovoltaic (PV) panels has dropped by a factor of
    six, and shipments of PV panels have roughly tripled. The cost of
    geothermal electricity dropped by half from 1980 to 1990 (from 12 to six
    cents per kWh), and has dropped another one-third between 1990 and 1999,
    to less than four cents per kWh. States, cities, and Federal agencies to
    date have pledged 912,000 ``solar roofs'' over the next eight years,
    including 200,000 new pledges in 1999.
      In 2001, DOE's Solar and Renewable Resources program will:
       support the President's Million Solar Roofs initiative
              through partnerships and technical assistance so that at least
              40,000 solar roofs will be installed in 2001 (51,000
              installations have been completed, an increase of 26,400 in
              1999).
       aid in the expansion of non-hydropower renewable energy
              capacity in the U.S. to 10.9 gigawatts.
       continue pushing the technological state-of-the-art:
              -- achieve 14 percent stable efficiency in a thin-film
              photovoltaic module;
              -- complete a second commercial-scale test of co-firing
              switchgrass with coal; and,
              -- reduce the cost of geothermal power from ``binary'' plants
              to 3.5 cents/kWh.

      Electric Energy Systems: The budget proposes $48 million for these
    activities, which in previous years have been described as part of the
    solar and renewable energy budget. These programs focus on technical
    advances in electricity transmission and storage and on the efficiency
    and reliability of the nation's electrical grid. The largest activity is
    in high-temperature superconductivity R&D, which can greatly increase
    the efficiency of generators and heavy electrical machinery, and which
    can dramatically increase the carrying capacity of high-voltage
    transmission lines.
      In 1999, for the first time in the world, a high-temperature
    superconducting cable provided commercial grid electricity to a
    manufacturing plant--enough electricity to power a small town.
       In 2001, DOE will make available ``second generation'' high-
              temperature superconducting wires in continuous lengths.

      Fossil Energy R&D: Fossil fuel energy R&D programs, for which the
    budget proposes $376 million, help industry develop advanced
    technologies to produce and use coal, oil, and gas resources more
    efficiently and cleanly. Federally-funded development of clean, highly-
    efficient gas-fired and coal-fired generating systems aim to reduce
    greenhouse gas emission rates, while reducing electricity costs compared
    to currently available technologies. These programs also include efforts
    to discover effective, efficient, and economical means of sequestering
    carbon dioxide. The programs also help boost the domestic production of
    oil and natural gas by funding R&D projects with industry to cut
    exploration, development, and production costs.
      Past Results: In 1999, DOE demonstrated a more efficient and less
    costly drilling and completion technology that could ultimately add six
    trillion cubic feet (TCF) of domestic gas reserves; demonstrated four
    advanced oil production enhancement technologies that contributed to
    adding 46 million barrels of incremental domestic oil reserves; and
    began full-scale component testing of two advanced, utility-scale
    turbines that are more efficient and less polluting than current
    technologies.
      In 2001, DOE will:

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       Demonstrate the feasibility of effectively separating
              hydrogen and CO2 from synthetic gas using both high-
              temperature hydrogen separation membranes, and low-temperature
              CO2 hydrate technology to meet the long-term goals of
              providing low-cost hydrogen for high-efficiency fuel cells and
              for concentrating CO2 into forms that can be ``sequestered,''
              e.g., buried or otherwise kept out of the atmosphere;
       Complete evaluation of the results of an international
              collaborative research project on CO2 injection into deep,
              unmineable coal seams for sequestration; and
       The advanced research materials program will test a high gas
              flux oxygen separation device that promises more efficient,
              less expensive gas separation techniques that can improve
              powerplant efficiency, and can aid carbon sequestration
              efforts.

      Nuclear Energy R&D: Nuclear fission power is a widely used technology,
    providing about 19 percent of the electric power consumed in the United
    States and about 17 percent worldwide without generating greenhouse
    gases. If fossil plants were used to produce the amount of electricity
    generated by these nuclear plants, more than 300 million additional
    metric tons of carbon would be emitted each year. Continued R&D
    addressing the issues that threaten the acceptance and viability of
    nuclear fission in the United States will help determine whether nuclear
    fission can continue to supply increasing amounts of economically-price
    energy while reducing greenhouse emissions.
      In 2001, DOE will:
       complete identification of feasible and important new reactor
              and fuel cycle concepts to help improve the cost, performance,
              safety, or proliferation-resistence of civilian nuclear power
              for continued development;
       maintain the advanced radioisotope power system program and
              facility operations and capabilities for current and future
              space and national security missions;
       complete the National Environmental Policy Act review of the
              environmental impacts of returning the Fast Flux Test Facility
              (FFTF) at Hanford to operation and issue a record of decision;
              and,
       initiate design of two facilities for processing depleted
              uranium hexafluoride (DUF6) at Paducah, Kentucky and
              Portsmouth, Ohio.

    Environmental Quality

      Environmental Management: In the Non-Defense Environmental Management
    and Uranium Enrichment Decontamination and Decommissioning Fund, the
    budget proposes $589 million to manage the Nation's most complex
    environmental cleanup program, the result of more than five decades of
    research and production of nuclear energy technology and materials. (For
    information on DOE's Defense Environmental Management program, see
    Chapter 11, ``National Defense.'') This will reduce environmental risk
    and manage the waste at: (1) sites run by DOE's predecessor agencies;
    (2) sites contaminated by uranium and thorium production from the 1950s
    to the 1970s; (3) DOE's inactive uranium processing plant; and, (4) the
    gaseous diffusion plants operated by the now-private United States
    Enrichment Corporation.
      Past Results: In 1999, DOE completed remediation of three sites: Ames
    Laboratory in Iowa, Sandia National Laboratory in California, and
    Princeton Plasma Physics Laboratory in New Jersey. Through 1999, a total
    of 69 sites have completed remediation.
      In 2000:
       DOE plans to complete remediation of two geographic sites.
      In 2001, DOE will:
       complete remediation at three geographic sites;
       increase the total number of geographic sites completed to 74
              of 113; and,
       fill five canisters with high-level waste at the West Valley
              Demonstration Project in New York for long-term storage.

      Radioactive Waste: DOE's Civilian Radioactive Waste Management Program
    oversees the management and disposal of spent nuclear fuel from
    commercial nuclear reactors and

    [[Page 191]]

    high-level radioactive waste from Federal cleanup sites. In 2001, DOE
    will:
       conduct public hearings on the Secretary's consideration of
              the possible recommendation of the Yucca Mountain, Nevada site
              for development as a repository;
       complete a review of the Site Recommendation Report that will
              provide the technical bases for a Site Recommendation
              Statement;
       complete a Site Recommendation Statement for the Secretary to
              submit to the President and then the Congress, if the
              Secretary and the President decide to recommend the site; and,
       if the President and Congress approve the Site
              Recommendation, work on completing a License Application to
              the Nuclear Regulatory Commission.

    Energy Production and Power Marketing

      Power Marketing Administrations: The Federal Government is reshaping
    programs that produce, distribute, and finance electric power. The four
    Federal Power Marketing Administrations, or PMAs, (Bonneville,
    Southeastern, Southwestern, and Western) market electricity generated at
    127 multi-purpose Federal dams and manage 33,000 miles of federally-
    owned transmission lines in 34 States. The PMAs sell about five percent
    of the Nation's electricity, primarily to preferred customers such as
    counties, cities, and publicly-owned utilities. The PMAs face growing
    challenges as the electricity industry moves toward open, competitive
    markets.
       In 2001, each PMA will operate its transmission system to
              ensure that service is continuous, reliable, and balanced--
              that is, that the system achieves a ``pass'' rating each month
              under the North American Electric Reliability Council
              performance standards. Each PMA received a ``pass'' rating
              every month during 1999. These measures are used industry-wide
              and indicate the reliability and quality of power provided by
              utilities.

      Tennessee Valley Authority (TVA): TVA is a Federal Government
    corporation and the Nation's single largest electric power generator. It
    generates four percent of the electric power in the country and
    transmits that power over its 17,000 mile transmission network to 159
    municipal utilities and rural electric cooperatives that serve some
    eight million customers in seven States.
      TVA is responding to changes that are bringing greater competition to
    the electric power industry by taking steps to maintain its ability to
    supply power at competitive prices. The agency is now engaged in a major
    effort to cut its debt. TVA has cut its debt by $1.3 billion in the past
    three years.
       In 2001, TVA will reduce its debt by over $750 million.
      (For information on TVA's non-power activities, see Chapter 19,
    ``Community and Regional Development.'')

      Rural Utilities Service: In 2001, the Agriculture Department's Rural
    Utilities Service (RUS) will make $1.6 billion in direct loans to rural
    electric cooperatives, public bodies, nonprofit associations, and other
    utilities in rural areas for generating, transmitting, and distributing
    electricity. Its main goal is to finance modern, affordable electric
    service to rural communities. Included within this funding amount is
    $400 million for private sector guarantees, which will help rural
    utility borrowers position themselves to be viable in a competitive,
    deregulated environment. RUS borrowers continue to provide service in
    the poorest counties in rural America and to the majority of counties
    suffering the most from population out- migration.
       In 2001, RUS will upgrade 169 rural electric systems, which
              will benefit over 1.8 million customers and create or preserve
              approximately 40,250 jobs.

    Energy Regulation

      The Federal Government's regulation of energy industries is designed
    to protect public health, achieve environmental and energy goals, and
    promote fair and efficient interstate energy markets.

      Appliance Efficiency Rules: DOE improves the Nation's use of energy
    resources through its appliance energy efficiency pro

    [[Page 192]]

    gram, which specifies minimum levels of energy efficiency for major home
    appliances, such as water heaters, air conditioners, and refrigerators,
    and for commercial-scale heating and cooling components. The initial
    efficiency standards were established in legislation, and DOE
    periodically issues rules to revise those standards or to create
    standards for new categories of equipment.
      Past Results: In 1999, DOE issued six new proposed rules. In previous
    years DOE has issued eight final rules. As a result of the appliance
    efficiency rules that DOE administers, consumers are saving
    approximately $4.7 billion annually in reduced energy costs. In 2001:
       DOE will issue one final rule and three proposed rules and
              determinations on different categories of appliances.

      Federal Energy Regulatory Commission (FERC): FERC, an independent
    agency within DOE, regulates the transmission and wholesale prices of
    electric power, including non-Federal hydroelectric power, and the
    transmission of oil and natural gas by pipeline in interstate commerce.
    FERC promotes competition in the natural gas industry and in wholesale
    electric power markets. Recent FERC reforms to give consumers
    competitive choices in services and suppliers will cut consumer energy
    bills by $3 to $5 billion per year.
      In 2001, FERC, in order to promote competitive, well-functioning
    energy markets, will measure the response of prices to external
    conditions in natural gas and electricity, the level of price volatility
    and changes in price volatility in electricity and gas, and the
    correlation of commodity prices across regions.

    DOE Corporate Management

      Program and contract management at DOE is a Priority Management
    Objective of the Administration because more than 90 percent of the
    Department's budget is spent on contracts to operate its facilities (see
    Chapter 31, ``Improving Government Performance through Better
    Management.'')
      All DOE programs may be affected by a proposed consolidation of its
    security activities within one departmental budget account. The
    Administration anticipates transmitting a budget amendment to propose
    this consolidation in early 2000.

    Nuclear Regulatory Commission (NRC)

      NRC, an independent agency, regulates the Nation's civilian nuclear
    reactors and the medical and industrial use of nuclear materials and
    their safeguards, and the disposal of nuclear waste in order to ensure
    public health and safety and to protect the environment. NRC
    international activities also promote adequate protection of U.S.
    interests in nonproliferation and the safe and secure use of nuclear
    materials in other countries. To meet the challenges of a restructured
    and deregulated electric utility industry, NRC is committed to adopting
    a more risk-informed and performance-based approach to regulation. This
    regulatory framework will focus NRC and licensee resources on the most
    safety-significant issues, while providing flexibility in how licensees
    meet NRC requirements.
      Past Results: In 1999, NRC and the U.S. nuclear industry achieved the
    same goals as listed below for 2001: zero radiation-related deaths or
    illnesses from the operation of civilian reactors or the use and
    disposal of nuclear materials, and zero significant adverse impacts on
    public health and safety and the environment from the recovery, cleanup,
    and disposal of radioactive wastes.
      In 2001:
       NRC's nuclear reactor safety goal is for there to be zero
              radiation-related deaths and illnesses in connection with the
              operation of civilian reactors.
       NRC's nuclear materials safety goal is for there to be zero
              radiation-related deaths and illnesses in connection with the
              use of nuclear materials.
       NRC's nuclear waste safety goal is for there to be zero
              significant adverse impacts to the current and future public
              health and safety and the environment from radioactive wastes.

    [[Page 193]]

    Tax Incentives

      Federal tax incentives are mainly designed to encourage the domestic
    production or use of fossil and other fuels, and to promote the vitality
    of our energy industries and diversification of our domestic energy
    supplies. The largest incentive lets certain fuel producers cut their
    taxable income as their fuel resources are depleted. An income tax
    credit helps promote the development of certain non-conventional fuels.
    It applies to oil produced from shale and tar sands, gas produced from a
    number of unconventional sources (including coal seams), some fuels
    processed from wood, and steam produced from solid agricultural
    byproducts. Another tax provision provides a credit to producers who
    make alcohol fuels--mainly ethanol--from biomass materials. The law also
    allows a partial exemption from Federal gasoline taxes for gasolines
    blended with ethanol.
      The direct funding in the Climate Change Technology Initiative is
    complemented by a $4 billion, five-year package of tax incentives that
    will help reduce greenhouse gas emissions by spurring the purchase of
    energy-efficient products and the use of renewable energy. For homes and
    buildings, the incentives provide tax credits for the purchase of new
    energy-efficient homes; for purchase of highly energy-efficient
    equipment like heat-pump water heaters, natural-gas heat-pumps, and fuel
    cells; and, for purchases of rooftop photovoltaic and solar hot-water
    systems. For vehicles, the incentives extend the current tax credit for
    electric and fuel-cell vehicles, and create a new system of tax credits
    for hybrid vehicles. To promote renewable energy, the provisions extend
    the current tax credits for power produced from wind and ``closed loop''
    biomass, and create new credits for certain ``open loop'' biomass
    projects, methane from landfills, and co-firing of biomass with coal in
    existing powerplants. To encourage more industrial use of distributed
    power generation, a uniform 15-year cost-recovery period is proposed for
    distributed-power property.