    [Economic Outlook, Highlights from FY 1994 to FY 2001, FY 2002 Baseline Projections]
    [III. Major Functions of the Federal Government]
    [5.  Energy]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 71]]

                                   5.  ENERGY

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

                                   Table 5-1.  Federal Resources in Support of Energy
                                              (Dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                            Percent
                                    Function 270                                     1993        2001       Change:
                                                                                    Actual     Estimate    1993-2001
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary budget authority............................................      5,832       3,099    \1\ -47%
      Mandatory outlays.........................................................     -1,240      -3,636        193%
    Credit Activity:
       Direct loan disbursements................................................      1,508       1,916         27%
       Guaranteed loans.........................................................          1          30          NA
    Tax expenditures............................................................      2,420       2,100        -13%
    ----------------------------------------------------------------------------------------------------------------
    NA = Not applicable.

    \1\ The decline in discretionary budget authority is largely the result of restructuring accounts in this
      function since 1993. Selected funding was moved to the General Science, Space, and Technology function and to
      the National Defense function.

      ----------------------------------------------------------------------
      Federal energy programs contribute to energy security, economic
    prosperity, and environmental protection through a range of activities,
    from protecting against disruptions in petroleum supplies, to conducting
    research on renewable energy sources, to cleaning up Department of
    Energy (DOE) facilities contaminated by years of nuclear-related
    research activities. In addition to the spending programs, the Federal
    Government currently allocates about $2 billion a year in tax benefits,
    mainly to encourage development of traditional and alternative energy
    sources.
      DOE and Health and Human Services (HHS) also provide grants to States
    that assist low-income residents with energy: DOE provides grants to
    States to weatherize low-income homes, and HHS' Low-Income Heating and
    Energy Assistance Program (LIHEAP) provides grants to help low-income
    families pay their energy bills and also supplements the home
    weatherization program. LIHEAP funding, however, is included in the
    Income Security function. (See Chapter 14.)
      Energy efficiency rules are also an important part of the Government's
    energy program. For example, as a result of appliance efficiency rules,
    consumers are saving approximately $4.6 billion annually in reduced
    energy costs.
      The Federal Government has a longstanding and evolving role in energy.
    Some programs, such as DOE's Weatherization Assistance Program and HHS'
    LIHEAP, work with State agencies through block grants. However, most
    Federal energy programs and agencies have no State or private
    counterparts and focus on national concerns. 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. These are examples of the basic
    principles that form the framework of the Clinton-Gore Administration's
    energy policy:
      reliance on competitive markets as the ``first principle'' of
              energy policy;
      support for energy science and technology;

    [[Page 72]]

      promotion of Government/industry/consumer partnerships;
      use of targeted incentives and regulations to promote positive
              actions and to help internalize externalities; and,
      facilitation of international cooperation.
      The discussion that follows is organized around the following seven
    themes: applied energy R&D; environmental quality; electricity
    production and power marketing; petroleum supplies and emergency
    reserves; energy regulation; DOE corporate management and procurement
    reform; and, the operation of the Nuclear Regulatory Commission (NRC).

    Applied Energy 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 reach beyond what the
    marketplace demands today, enhancing our Nation's energy security,
    laying the foundation for a more sustainable energy future, and opening
    major international markets for manufacturers of advanced U.S.
    technology.
      DOE's energy efficiency, renewable energy, and electric energy systems
    programs, along with elements of the Fossil Energy and Nuclear Energy
    R&D 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.

      Energy Conservation: DOE's energy conservation programs 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. During this Administration, funding for energy
    conservation has risen from $576 million to $817 million, a 42-percent
    increase. A basic societal improvement to which these programs have
    contributed is that the ``energy intensity'' of the Nation's economy--
    the average amount of energy society uses to create a unit of Gross
    Domestic Product--has decreased by 12 percent since 1992.
      DOE supports a broad research portfolio for energy conservation. It is
    difficult to predict in advance which particular technologies will be
    the biggest commercial successes, but a study in the mid-1990s showed
    that just five--heat-reflecting windows, high-efficiency lights,
    advanced oil-burners, high-efficiency electric motors and compressors,
    and software for designing energy-efficient buildings--could be proven
    to have saved consumers over $15 billion in energy costs at that time,
    and the cumulative consumer savings from those technologies today are
    estimated at more than $30 billion.
      In 1994, the Administration worked with the U.S. auto industry to
    create the Partnership for a New Generation of Vehicles (PNGV) with a
    goal of creating cars with triple the fuel economy of conventional
    vehicles by 2004. This past year, all three Detroit automakers
    demonstrated ``hybrid-electric'' concept cars capable of offering
    anywhere from 70 to 80 mpg in a mid-sized five-passenger car. Some PNGV
    technologies are already in use or will be introduced shortly into
    production. PNGV has not only enjoyed considerable R&D success, it has
    also served as a model for Government-industry R&D collaboration and
    partnership.
      Over the last six years, nearly 80 communities joined the
    Administration's Clean Cities effort, deploying more than 160,000
    alternative-fuel vehicles (AFVs) in public and private fleets and
    building over 4,800 alternative refueling stations. The vehicles,
    operating on natural gas, ethanol, propane, and electricity, will reduce
    oil use by an estimated 125 million gallons per year. AFVs in Clean
    Cities have already reduced criteria pollutant emissions by more than
    100,000 tons.

    [[Page 73]]

      DOE's Federal Energy Management Program reduces energy costs to the
    Federal Government--the largest power user in the country--by helping
    other agencies improve their energy efficiency. The Administration
    implemented the Energy Policy Act of 1992 and met its goal of a 20-
    percent reduction in energy use per square foot by 2000. More recently,
    President Clinton signed Executive Order 13123, setting new energy goals
    for 2010 to reduce energy consumption by 35 percent in Federal office
    buildings and by 25 percent in Federal labs and industrial facilities,
    to diminish greenhouse gas emissions by 30 percent, to improve water
    efficiency, and to increase use of renewable energy technology.
      DOE's Office of Industrial Technologies has seen roughly 140 of their
    technologies commercialized; annual energy savings to the U.S. economy
    from those is about 170 trillion Btu, with another 90 trillion Btu saved
    annually from their industry assessment and technology-transfer
    programs. Major commercial successes include the Advanced Turbine
    Systems program, which has helped industry develop turbines that are 15
    percent more efficient than previous models, have lower emissions, and
    produce electricity for cogeneration systems at a lower price.
      DOE's energy conservation program also provides grants to States to
    fund weatherization improvements in low-income residents' homes. Those
    improvements often take advantage of the improved building materials and
    efficient heating systems developed in the R&D program. Over the past
    eight years, DOE's weatherization program has weatherized approximately
    689,000 low-income homes. Over the estimated 20-year life of those
    improvements, the occupants will save $2.1 billion on their energy bills
    and will cut 4.9 million metric tons of carbon emissions. As noted
    earlier, LIHEAP also provides grants to States, which assist low-income
    residents in paying their energy bills and also supplement the DOE
    weatherization program grants.

      Solar and Renewable Resources: DOE's solar and renewable resources
    programs develop 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.
      The 1990s have seen considerable progress in the use and cost-
    competitiveness of solar and renewable energy. Wind power was the
    fastest-growing source of electricity in the world, and in the U.S. wind
    power has dropped in price to less than five cents per kilowatt-hour
    (kWh) in good wind sites. (The program has set a very ambitious goal of
    reducing those costs to 2.5 cents per kWh in 10 years.) 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 one-third between
    1990 and 1999, to as little as 3.5 cents per kWh.
      The Administration's Million Solar Roofs initiative was established to
    facilitate the placement of one million solar roof installations (a
    mixture of solar heat/hot water and photovoltaics) by 2010. DOE has now
    received commitments from Federal agencies, State, and local
    governments, and private developers for more than one million solar
    energy systems, and nearly 100,000 systems have already been installed.

      Electric Energy Systems: 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. The practical fruits of a decade of basic and applied materials
    research are just emerging. 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. This year, DOE will make available ``second generation''

    [[Page 74]]

    high-temperature superconducting wires in continuous lengths.
      Hydrogen: Prior to 1993, the only practical technology for extracting
    hydrogen from raw fuels was large-scale steam reforming, requiring
    exotic alloys to handle the extreme temperatures and pressures. DOE
    research in the past eight years has pursued several avenues. Steam
    reformers aided by catalysts can operate at much lower temperatures,
    allowing the use of conventional, less expensive alloys and reducing the
    capital cost of reformers. Progress has also been made in technologies
    such as plasma reformers and proton-exchange membranes that will allow
    production of hydrogen on a smaller, more distributed scale--directly at
    fueling stations, for instance. DOE has also developed advanced storage
    tanks for hydrogen-fueled vehicles that can store roughly three times as
    much hydrogen (and therefore offer three times the driving range) as
    conventional tanks, and has made considerable progress on advanced
    materials such as carbon nanotubes that will allow auto manufacturers
    much more flexibility in designing fuel systems than they ever have had
    before.
      Fossil Energy R&D: Fossil fuel energy R&D programs help industry
    develop advanced technologies to produce and use coal, oil, and gas
    resources more efficiently and cleanly. Over the past eight years,
    federally-funded development of clean, highly-efficient gas-fired and
    coal-fired generating systems aimed to reduce greenhouse gas and other
    air-pollution emissions, 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.
      Among the program's accomplishments:
      In 1999, DOE helped demonstrate a more efficient and less
              costly drilling and completion technology that could
              ultimately add six trillion cubic feet 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 2000, DOE's Advanced Turbine Systems effort with industry
              introduced the first gas turbines to exceed 60-percent
              efficiency when operated in combined-cycle mode--the ``four
              minute mile'' of turbine technology. When the effort began in
              the early 1990s, the best turbine systems had efficiencies of
              only about 50 percent. The new, higher efficiency can reduce
              operating costs by about 10 percent, saving as much as $200
              million over the life of a typical gas-fired 400-500 megawatt
              combined-cycle plant, while also reducing pollution and
              greenhouse gas emissions.

      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-priced
    energy while reducing greenhouse gas emissions. The Administration's
    investments have focused on advancing future nuclear power plant
    designs, the safety and life-extension of existing reactors, and the
    safe long-term storage of spent nuclear fuel (discussed later in this
    chapter under Environmental Quality).
      Based on the recommendations of the President's Committee of Advisors
    on Science and Technology (PCAST), the Nuclear Energy Research
    Initiative (NERI) was initiated in 1999 to improve the economics,
    proliferation resistance, waste management, and safety of advanced
    nuclear energy systems for the longer-term future. In its first two
    years, the NERI program has awarded a total of 56 innovative R&D
    projects on a competitive, peer-reviewed basis to universities, national
    laboratories, and industry. Other

    [[Page 75]]

    recommendations from PCAST led to the creation of the Nuclear Energy
    Plant Optimization program to consult cost-shared R&D with industry to
    develop new technologies to manage the long-term effects of ageing and
    enhance the reliability and safety of existing U.S. nuclear power
    plants. Fifteen projects have begun in the first two years of this
    initiative.

      Uranium Enrichment: In 1998, the Administration successfully
    privatized the U.S. Enrichment Corporation (USEC). The Treasury
    Department received about $1.7 billion from the sale of public stock and
    proceeds from debt equity. This sale through a public offering was the
    biggest privatization since 1986. USEC was established as a Government
    corporation under legislation passed by the Congress in the Energy
    Policy Act of 1992, which placed it on a path toward privatization,
    based on the belief that the private sector can perform this business
    activity better than the Federal Government.

    Environmental Quality

      Environmental Management: The Non-Defense Environmental Management and
    Uranium Enrichment Decontamination and Decommissioning Fund programs are
    part of the Nation's most complex environmental cleanup program (the
    remainder being the Defense Environmental Management program),
    addressing the results of more than five decades of research and
    production of nuclear energy technology and materials. During this
    Administration, these programs reduced safety and health risks and
    managed radioactive and hazardous wastes to protect the environment 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 in Oak Ridge, Tennessee; (4) New
    York's defunct spent nuclear fuel reprocessing center; and, (5) the
    gaseous diffusion plants operated by the now-private USEC.
      The successes of these activities ranged from the removal of low-level
    radioactive contamination at sites accessible to the public such as the
    Ventron site in Beverly, Massachusetts, to meeting the technical
    challenge of solidifying high-level radioactive waste at the West Valley
    Demonstration Project vitrification facility. At the beginning of 1993,
    remedial action was completed at 23 of the 113 sites in the cleanup
    program. Through 1999, cleanup activities were completed at an
    additional 46 sites. In 2000, this Administration continued its focus on
    protecting human health and the environment by completing remediation of
    the King Avenue site in Columbus, Ohio, and the General Atomics facility
    north of San Diego, California, for a total of 48 sites cleaned up since
    1993.

      Radioactive Waste: DOE's Civilian Radioactive Waste Management Program
    was created by the Nuclear Waste Policy Act (NWPA) in 1982 to develop a
    geologic repository for the disposal of the Nation's spent nuclear fuel
    from commercial nuclear reactors and high-level radioactive waste from
    the nuclear weapons program.
      Since 1994, the program has focused resources on completing an
    evaluation of the technical suitability of the Yucca Mountain candidate
    repository site. This effort has included construction of the
    Exploratory Studies Facility, a 25-foot diameter, 4.9-mile tunnel that
    provides direct access to the geologic formation that may house a
    repository block. In 1998, DOE completed a viability assessment
    concluding that the Yucca Mountain site remains a promising candidate
    for a geologic repository. It also identified areas for further
    investigation before a decision can be made on whether or not the site
    should be recommended. In July 1999, DOE issued a draft environmental
    impact statement for the Yucca Mountain site. It also evaluated
    potential impacts from the transportation of spent fuel and high-level
    waste to it. The Environmental Protection Agency (EPA), under the
    authority of the Energy Policy Act, has issued a draft site-specific
    radiation standard for Yucca Mountain. This regulatory framework will be
    complemented by NRC, which will adopt EPA's standards in its licensing
    regulation. DOE expects to revise its site recommendation guidelines to
    conform to these regulations.
      DOE reached an agreement with PECO Energy Company in July 2000 to
    settle potential litigation over spent fuel storage costs that PECO has
    incurred due to the

    [[Page 76]]

    Department's delay in commencing spent fuel acceptance. This agreement
    is a model for settlement negotiations with other utilities who have
    filed suit against the Department for failure to begin waste acceptance
    in 1998, as required under the NWPA.
      DOE expects to complete a ``Site Recommendation Consideration Report''
    by the end of 2000, to be followed by a Secretarial determination in
    2001 on whether or not to recommend the Yucca Mountain site to the
    President. The report presents the technical basis for a site
    recommendation.

      DOE Lands: During the past eight years, over 300,000 acres of land at
    DOE sites have been set aside as environmental reserves to preserve
    unique habitat and animal species permanently.

    Electricity Production and Power Marketing

      Power Marketing Administrations: 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.
      Over the past eight years, each PMA has operated its
              transmission system to ensure that service is continuous,
              reliable, and balanced--that is, each PMA system achieved a
              ``pass'' rating each month (or its equivalent in past years)
              under the North American Electric Reliability Council
              performance standards. These measures are used industry-wide
              and indicate the reliability and quality of power provided by
              utilities.
      The Administration proposal to sell Alaska Power
              Administration assets to current customers was signed into law
              on November 28, 1995. The Eklutna and Snettisham projects were
              sold in 1998 for a cash payment of $88 million.
      The Administration modified the purchase power and wheeling
              activities of Southeastern, Southwestern, and Western PMAs to
              phase down and eliminate Federal appropriations to support
              these activities after 2004. This will encourage PMA customers
              to assume additional responsibility for the purchase and
              delivery of power rather than relying on Federal PMAs.

      Tennessee Valley Authority (TVA): TVA is a Federal Government
    corporation and one of the three largest electric power suppliers in the
    country. TVA produces four percent of the Nation's electric power and
    transmits that power over its 17,000 mile transmission network to 158
    municipal utilities and rural electric cooperatives that serve eight and
    a half million customers in seven States.
      During the past eight years, TVA has taken important steps to improve
    its power program's operating and financial performance:
      In 1992, TVA's nuclear power program faced tough management
              challenges. Two completed nuclear power units had been out of
              service for seven years and one unit under construction was
              years behind schedule. Today, TVA has turned that situation
              around. It currently has five nuclear units on line and they
              are part of an award-winning nuclear power program.
      In 1997, TVA announced its 10-Year Business Plan, a long-term
              financial strategy designed to ensure that the Federal power
              agency reduces its outstanding debt, operates on a sound
              financial footing, and is prepared to supply power at
              competitive prices when the Nation's electric power industry
              is restructured. Through the end of 2000, TVA has reduced its
              long-term debt by more than $1.7 billion. Before 1997, TVA's
              debt had increased every year for 35 years.
      TVA held rates steady over the past decade with only one 5.5
              percent rate increase. During the same period the cost of
              living increased more than 40 percent.
      (For information on TVA's non-power activities, see Chapter 10,
    ``Community and Regional Development.'')

    [[Page 77]]

      Rural Utilities Service: The Department of Agriculture's (USDA's)
    Rural Utilities Service (RUS) provides electrification,
    telecommunication, and distance learning and telemedicine grants and
    loans. RUS provides direct and guaranteed loans to rural electric
    cooperatives, public bodies, nonprofit associations, and other utilities
    in rural areas for generating, transmitting, and distributing
    electricity. Since 1993, RUS has supported construction of 97,000 miles
    of new or upgraded electric transmission and distribution lines, and has
    approved loans for over 2,500 megawatts of new electric generation
    capacity.
      In order to provide electric service to rural areas and minimize the
    potential for loan defaults, RUS works with the electric service
    providers in meeting the demands of a changing industry. For example, in
    1997, RUS assisted Oglethorpe Power Corporation (OPC) into
    ``unbundling'' operating companies into generation, transmission, and
    operating companies. The restructuring of OPC resulted in better and
    lower cost of service to OPC's consumers in Georgia and improved the
    security of RUS loans to OPC and its member distribution cooperatives.
    In addition, from 1997 to 2000, RUS's assistance in the merger of Tri-
    state Generation and Transmission Association and Plains Electric
    Generation and Transmission Cooperative, serving Arizona, New Mexico,
    Colorado, Wyoming, and Nebraska, prevented the need for $340 million in
    RUS debt forgiveness from the Government.
      In addition, RUS assists in closing the ``digital divide'' for rural
    communities that have limited access to learning, health care expertise,
    and telecommunications. Through RUS loans, the number of miles of fiber
    optic lines in rural America have more than doubled since 1993. RUS
    assisted in bringing first-time telephone service to the San Carlos
    Apache Nation in Arizona in 1999. RUS financing has also facilitated the
    extension of mobile wireless and broadband services to rural America.
    The RUS Distance Learning and Telemedicine Program, started in 1993, was
    designed specifically to meet the educational and health care needs of
    rural America by financing computer links in rural schools and hospitals
    to transmit educational programming and medical resources from urban
    areas. This program has funded 383 projects in 48 States and territories
    totaling $102 million, including $15 million for 52 projects for Native
    American communities. In addition, to improve access to the Internet and
    to further close the digital divide, the Administration's 2001 Budget
    proposal was enacted for RUS to provide over $100 million in USDA
    assisted financing for a pilot program designed to increase the
    broadband access to rural communities.

    Petroleum Supplies and Emergency Reserves

      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 about 540 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. The Government has begun to acquire royalty
    oil from off-shore leases and is adding 28 million barrels to SPR, the
    first increase since 1994.
      DOE recently completed a facilities life-extension program that marked
    a major milestone for SPR. Most SPR facilities were constructed in the
    late 1970's and early 1980's and were nearing the end of their 20-year
    design life. Under the life-extension program, DOE redesigned and
    replaced critical systems and equipment that had deteriorated, ensuring
    that the Reserve will be able to operate as designed for the next 25
    years--achieving a draw-down rate of four million barrels per day within
    15 days of a Presidential determination, and maintaining that rate for
    at least 90 days. The improvements also have reduced SPR's operating
    costs by $12-$15 million per year.

      Regional Heating-Oil Reserve: DOE created the Northeast Home Heating
    Oil Reserve in 2000 by exchanging oil from the Strategic Petroleum
    Reserve. This regional reserve will act as an emergency source of
    heating oil to residents in New England and the northeast in the event
    of a winter shortage of heating oil.

    [[Page 78]]

      Elk Hills Privatization: On February 5, 1998, DOE concluded the
    largest divestiture of Federal property in history. As part of the
    Administration's efforts to return to the private sector those Federal
    functions that operate more like commercial businesses, the Elk Hills
    Naval Petroleum Reserve in California was sold to Occidental Petroleum
    for $3.7  billion. Revenue received from the sale was deposited in the
    U.S. Treasury for debt reduction.

    Energy Regulation

      The Federal Government's regulation of energy industries is designed
    to protect public health, achieve environmental and energy goals,
    improve energy security, 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 program, 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. Over the last eight years, including this year,
    DOE will have issued seven new or revised final rules. As a result of
    the appliance efficiency rules that DOE administers, consumers are
    saving approximately $4.6 billion annually in reduced energy costs.
      Federal Energy Regulatory Commission (FERC): FERC has been at the
    forefront of the national effort to introduce competition into
    previously regulated natural gas and electric power commodity markets.
    Over the past eight years, the Commission's focus has been shifting from
    command-and-control (setting prices and service offerings for individual
    companies) to oversight and monitoring of regional and national markets.
    Early during this period, the Commission implemented Order No. 636,
    completing the final major step in restructuring the natural gas
    transportation industry by requiring natural gas pipelines to separate
    their sales and transportation services and allow open access to their
    facilities. FERC also substantially streamlined oil pipeline rates
    through indexing. In 1996, the Commission began to address the generic
    need for more competition in electric power, issuing Order No. 888. This
    order required all public utilities that own, operate, or control
    interstate transmission facilities to offer others the same transmission
    service they provide themselves. Also in 1996, the Commission issued a
    merger policy statement, giving guidance for preparing electric merger
    applications and paving the way for quicker Commission response. Order
    No. 642, issued in November 2000, finalized the merger policy.
      In 2000, FERC continued the promotion of competition in electric
    markets and fine-tuned aspects of natural gas transportation markets.
    Order No. 2000 will lead to the establishment of regional transmission
    organizations, providing crucial support for competition in the electric
    industry. Order No. 637 requires natural gas pipelines to take measures
    to increase the transparency and efficiency of the pipeline grid. It
    also temporarily removes price caps from the resale market. While
    undertaking these new policy directions, the Commission has steadfastly
    maintained its responsibility to protect consumers from potential market
    power abuse, applying traditional cost-based regulation as necessary. In
    addition, FERC has made significant accomplishments in the area of
    energy projects, including an alternative licensing process for
    hydropower projects.

    DOE Corporate Management and Procurement Reform

      Reducing the size of DOE was one of the Administration's ``reinventing
    Government'' goals. Because so much of DOE's work is performed by
    contractors, simply reducing the number of civil service employees would
    not have a great effect on the total effective size of the agency, so
    reductions in contractor employees were also sought. Over eight years,
    direct employment by DOE has been reduced from 13,000 full-time
    equivalents (FTE) to 10,200 FTE, and contractor employment has been
    reduced from 148,000 FTE to 101,000 FTE.

    [[Page 79]]

      Part of the reduction in contractor FTE is attributable to better
    contract management at DOE, which has been an Administration management
    priority. Over 80 percent of DOE's budget is spent through contracts,
    many of them large multi-billion, long-term contracts to manage and
    operate facilities. The Administration has been able to get DOE to begin
    to use competitive, performance-based contracting procedures. Since
    1994, DOE completed 28 management and operating (M&O) contracts worth
    more than $40 billion. This exceeds the total number of M&O competitive
    contracts issued in the entire history of DOE and its predecessor
    agencies. In addition, in 1999, DOE created a project management office
    reporting to the Deputy Secretary to better plan and manage large
    projects. The office has implemented procedure which require programs to
    define cost, schedule and performance goals for all major projects.
    Projects that exceed or do not meet these goals are being placed on a
    ``watch list'' for monitoring by the Chief Operating Officer. These
    improved management practices will save millions of dollars in contract
    costs at DOE.

    Nuclear Regulatory Commission (NRC)

      NRC, an independent agency, regulates the Nation's 103 civilian
    nuclear reactors and 21,000 academic, medical, and industrial licensees,
    as well as 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.
      While maintaining safety as its highest priority, over the past eight
    years, NRC has renewed the license applications for four nuclear plants
    providing each an additional 20 years of operation; implemented a new
    reactor oversight process, which focuses inspection efforts on those
    aspects that present the greatest risk; approved license transfers
    arising from the restructuring of the electric utility industry;
    approved two standard reactor designs and developed regulations that
    provide a more predictable and stable regulatory process for future
    reactor applications; and developed the regulatory framework necessary
    to review a potential DOE application to construct and operate a high
    level nuclear waste repository at Yucca Mountain, Nevada.