[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]


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                               5.  ENERGY

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                               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;

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  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.

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  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''

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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

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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

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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.'')

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  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.

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  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.
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