[Congressional Record Volume 151, Number 77 (Monday, June 13, 2005)]
[Senate]
[Pages S6392-S6398]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CBO REPORT
Mr. DOMENICI. Mr. President, at the time Senate Report No. 109-78 was
filed, the Congressional Budget Office report was not available. I ask
unanimous consent that the report, which is now available, be printed
in the Congressional Record for the information of the Senate.
There being no objection, the material was ordered to be printed in
the Record, as follows:
congressional budget office cost estimate
Energy Policy Act of 2005--As ordered reported by the Senate
Committee on Energy and Natural Resources on May 26, 2005
Summary: The legislation would authorize funding for
several programs aimed at energy production, conservation,
and research and development. It would authorize the use of
energy savings performance contracts (ESPCs), make several
changes to the regulatory framework governing the nation's
electricity system, and establish a mandate for the use of
renewable fuels.
Most of the bill's estimated costs would stem from changes
in spending subject to appropriation. We estimate that
implementing the bill would cost $5.1 billion in 2006 and
$35.9 billion over the 2006-2010 period from appropriated
funds, assuming appropriation of the necessary amounts.
CBO estimates that enacting the bill also would increase
direct spending by $728 million over the 2005-2010 period but
would reduce direct spending by $591 million over the 2005-
2015 period. CBO estimates that enacting the bill would
increase net revenues by $75 million in 2006 and would result
in a net loss of revenues totaling $1.2 billion over the
2006-2010 period and $1.0 billion over the 2006-2015 period.
The bill contains numerous mandates as defined in the
Unfunded Mandates Reform Act (UMRA) that would affect both
intergovernmental and private-sector entities.
CBO cannot determine the cost of all the mandates in the
bill because several of the requirements established by the
bill would hinge on future regulatory action about which
information is not available. Though CBO cannot estimate the
cost of each mandate, we expect that the total cost of
private-sector mandates in the bill would exceed the annual
threshold established in UMRA ($123 million in 2005, adjusted
annually for inflation). That conclusion is based on our
analysis of the renewable fuels standard, which would impose
substantial costs on the motor fuels industry.
CBO estimates, however, that the total cost of complying
with intergovernmental mandates in the bill would not exceed
the threshold established in UMRA ($62 million in 2005,
adjusted annually for inflation). The bill also would
authorize numerous grants and initiatives that would benefit
state, local, and tribal governments; any costs those
governments incur for these projects and initiatives would
result from complying with conditions for receiving this
federal assistance.
Based on its review of the bill, CBO expects that the
mandates contained in the bill's titles on renewable energy
(title II), nuclear energy (title VI), electricity (title
XII), and energy efficiency (title I) would have the greatest
impact on private-sector entities and state and local
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of the legislation is shown in Table 1. The
costs of this legislation fall within budget functions 270
(energy), 300 (natural resources and environment), 350
(agriculture), 450 (community and regional development) and
800 (general government).
Basis of estimate
For this estimate, CBO assumes that the Energy Policy Act
of 2005 will be enacted near the end of fiscal year 2005.
Additionally, CBO assumes that the authorized and necessary
amounts will be appropriated for each year and that spending
will follow historical rates for ongoing activities. Table 2
details the components of estimated spending subject to
appropriation under the bill. (Table 3, provided later,
details the bill's direct spending effects.)
Spending subject to appropriation--Overview
The bill contains several provisions that specify amounts
authorized to be appropriated for programs related to energy
research, development, production, and conservation.
Additionally, the bill would authorize unspecified amounts to
be appropriated for energy conservation, loan guarantees for
certain energy facilities and projects to develop innovative
technologies,
[[Page S6393]]
incentives to use renewable energy, and several other energy
programs, studies, and reports. Assuming appropriation of the
necessary amounts, CBO estimates that implementing these
provisions would cost $5.1 billion in 2006 and $35.9 billion
over the 2006-2010 period. The following two sections detail
the costs of specified and estimated authorizations. (A
discussion of direct spending and revenue effects follows
the next two sections.)
TABLE 1.--ESTIMATED BUDGETARY IMPACT OF THE ENERGY POLICY ACT OF 2005
----------------------------------------------------------------------------------------------------------------
By fiscal year, in billions of dollars--
-----------------------------------------------------------------
2005 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Spending Under Current Law for Energy Science
Programs:
Budget Authority \1\...................... 6.0 0.0 0.0 0.O 0.0 0.0
Estimated Outlays......................... 5.4 2.9 0.6 0.1 * *
Proposed Changes:
Specified Authorization Levels:
Authorization Level................... 0.0 9.7 10.5 11.5 2.4 2.5
Estimated Outlays..................... 0.0 4.8 8.8 10.6 6.9 3.2
Estimated Authorization Levels:
Estimated Authorization Level......... 0.0 0.4 0.3 0.4 0.3 0.3
Estimated Outlays..................... 0.0 0.3 0.3 0.4 0.3 0.3
Total Proposed Changes:
Estimated Authorization Level..... 0.0 10.1 10.8 11.9 2.7 2.8
Estimated Outlays................. 0.0 5.1 9.2 10.9 7.2 3.5
Spending Under the Energy Policy Act of 2005
for Energy and Science Programs:
Estimated Authorization Level............. 6.0 10.1 10.8 11.9 2.7 2.8
Estimated Outlays......................... 5.4 8.0 9.7 11.0 7.2 3.6
CHANGES IN DIRECT SPENDING
Estimated Budget Authority.................... * 0.1 0.4 0.3 0.1 -0.1
Estimated Outlays............................. * 0.1 0.3 0.3 0.1 -0.1
CHANGES IN REVENUES
Estimated Revenues............................ 0.0 0.1 * -0.2 -0.4 -0.7
----------------------------------------------------------------------------------------------------------------
\1\ The 2005 amount is the amount appropriated for that year for energy conservation, development, production,
and science programs.
Notes: * = less than $50 million.
Components may not sum to totals because of rounding.
TABLE 2.--ESTIMATED EFFECTS OF THE ENERGY POLICY ACT OF 2005 ON SPENDING SUBJECT TO APPROPRIATION
----------------------------------------------------------------------------------------------------------------
By fiscal year, in billions of dollars--
-----------------------------------------------------------------
2005 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION
Discretionary Spending Under Current Law for
Energy and Science Programs:
Budge Authority \1\....................... 5,953 0 0 0 0 0
Estimated Outlays......................... 5,366 2,882 556 86 29 29
Proposed Changes:
Specified Authorization Level............. 0 9,684 10,454 11,492 2,440 2,539
Estimated Outlays......................... 0 4,765 8,843 10,553 6,889 3,228
Estimated Authorizations:
Energy Conservation Measures at
Federal Agencies:
Estimated Authorization Level..... 0 93 99 106 107 114
Estimated Outlays................. 0 76 98 105 108 113
Loan Guarantees for Innovative
Technologies:
Estimated Authorization Level..... 0 85 85 85 85 60
Estimated Outlays................. 0 85 85 85 85 60
Indian Energy Programs:
Estimated Authorization Level..... 0 36 51 61 71 56
Estimated Outlays................. 0 21 41 55 67 60
Renewable Energy Production Incentive
(REPI):
Estimated Authorization Level..... 0 100 23 13 8 27
Estimated Outlays................. 0 70 46 16 10 21
Cellulosic Biomass and Cane Sugar Loan
Guarantee:
Estimated Authorization Level..... 0 30 0 40 0 40
Estimated Outlays................. 0 30 0 40 0 40
Other Provisions:
Estimated Authorization Level..... 0 46 50 56 14 14
Estimated Outlays................. 0 43 49 56 14 14
Subtotal, Estimated Authorizations:
Estimated Authorization Level..... 0 390 307 360 284 310
Estimated Outlays................. 0 325 318 357 283 307
Total Proposed Changes:
Estimated Authorization Level..... 0 10,073 10,761 11,852 2,724 2,849
Estimated Outlays................. 0 5,090 9,161 10,910 7,172 3,535
Discretionary Spending Under the Bill
for Energy and Science Programs:
Estimated Authorization Level \1\. 5,953 10,073 10,761 11,852 2,724 2,849
Estimated Outlays................. 5,366 7,972 9,717 10,996 7,201 3,564
----------------------------------------------------------------------------------------------------------------
\1\ The 2005 amount is the amount appropriated for that year for energy conservation, development, production,
and science programs.
Spending subject to appropriation: specified authorizations
The legislation would specifically authorize the
appropriation of $36.6 billion over the next five years for
several energy-related programs. Assuming appropriation of
the authorized amounts, CBO estimates that implementing the
bill's programs with specified authorizations would cost $4.8
billion in 2006 and $34.3 billion over the 2006-2010 period.
That estimate includes:
Nearly $2.5 billion for the Department of Energy's (DOE's)
energy conservation programs (title I);
Nearly $700 million for renewable energy grants and
research projects (title II);
$3.3 billion for programs related to federal oil and gas
resources and for financial assistance to coastal states
(title III);
$400 million to research and demonstrate new technologies
that use coal (title IV);
$134 million for programs to research and develop energy
resources on Indian lands (title V);
About $540 million for a new program to research, develop,
design, construct, and operate an Advanced Reactor Hydrogen
Cogeneration Project and $16 million for a nuclear
decommissioning project in Arkansas (title VI);
About $450 million for research and demonstration of
vehicles that use alternative transportation fuels (title
VII);
$2.8 billion for research, development, and demonstration
of hydrogen-based fuel technologies and infrastructure for
hydrogen fuels (title VIII);
$23 billion to research energy efficiency technologies,
renewable energy sources, fossil energy development, basic
science, and other energy sources and new technologies (title
IX);
$45 million to promote a technology infrastructure program
and support small business participation in DOE research
activities (title X);
About $300 million for training personnel to work in the
energy technology industry, and providing awards and
fellowships in science, mathematics, and energy education
(title XI); and
About $40 million for incentive payments for advanced power
technologies (title XII).
Spending subject to appropriation: Estimated authorizations
Based on information from DOE, the Department of the
Interior (DOI), the Environmental Protection Agency (EPA),
other affected agencies, and industry sources, CBO estimates
that implementing the provisions of the bill that are subject
to appropriation and have no specified authorization level
[[Page S6394]]
would cost $325 million in 2006 and $1.6 billion over the
2006-2010 period. Key components of this estimate are
described below.
Energy Conservation at Federal Agencies. Title I would
amend several energy conservation goals and requirements that
apply to the federal government. CBO estimates that
implementing those provisions would cost $500 million over
the 2006-2010 period, subject to appropriation of the
necessary amounts. Most of those goals, such as reducing
energy use by 2 percent per year relative to 2003 consumption
and purchasing energy-efficient products when economical, are
being pursued under current executive orders. Where
practical, the bill would require that hourly electricity
meters be installed at all federal buildings by 2012. Such
meters would provide data at least once daily and measure
hourly consumption of electricity. The data would be
available to facility energy managers.
Based on information from the DOE, we assume that it would
only be economical to meter 20 percent of the government's
inventory of 500,000 buildings and that installing meters
would cost, on average, $4,000 per building. We assume that
meters would be installed in 20,000 buildings per year until
2012, when the project would be complete. We estimate that
implementing the metering provisions of the legislation would
cost $57 million in 2006 and $323 million over the 2006-2010
period. CBO estimates that other requirements in this title,
such as providing technical assistance to states,
establishing new programs and rules for making products more
energy-efficient, and monitoring the equipment installed
using energy savings performance contracts would cost $19
million in 2006 and $177 million over the next five years.
Based on experience in the private sector, metering the
hourly electricity use of buildings can lead to reduced
energy consumption and reduce costs enough to recoup the cost
of installing meters within two to four years. It is possible
that this requirement could lead to a future reduction in
appropriations for energy use in federal buildings, but any
such savings would depend on how metering information is used
by federal agencies. Additionally, metering can reveal where
energy use is high, but capital investment and other changes
in how federal buildings consume energy would likely be
needed to achieve savings. In any case, any savings are not
likely to be significant over the next five years because
most of the new metering and required capital investment
would not be completed until the end of that period or after
2010.
Loan Guarantees for Innovative Technologies. The bill would
establish a credit assistance program for energy production
technologies that reduce greenhouse gas emissions and employ
new or significantly improved technologies over those
currently available. Currently, DOE has no authority to
provide credit assistance and has developed no plans for how
it would use this authority. For this estimate, we assume DOE
would provide an 80 percent guarantee of loans worth about
$3.75 billion over the 2006-2010 period. Assuming
appropriation of the necessary amounts, CBO estimates that
implementing this provision would cost $400 million over the
2006-2010 period and an additional $200 million after that.
CBO assumes--after providing loan guarantees for $3.75
billion worth of projects over the next five years--that
DOE's credit assistance under the program would probably
accelerate after that period as the department gained
experience. The department could offer more or less credit
assistance than we have assumed here. All costs of such
credit assistance would be subject to appropriation.
Description of Loan Guarantee Program. The bill would
provide DOE with broad authority to make loan guarantees to a
variety of energy projects, ranging from renewable energy
systems, to advanced nuclear energy facilities, integrated
coal gasification combined-cycle technology, petroleum coke
gasification technology, and carbon sequestration technology,
as well as other new technologies. The legislation sets no
limits on the number of projects, or total principal that
could be guaranteed, nor does it indicate any priority for
one type of project over another.
Under the bill, DOE could not guarantee loans for more than
80 percent of a project's cost; it could sell, manage, or
hire contractors to take over a facility to recoup losses in
the event of a default, or it could take over a loan and make
payments on behalf of borrowers prior to a default. Such
payments could result in DOE effectively providing a direct
loan with as much as a 100 percent subsidy rate--essentially
a grant--that could be used by the borrower to payoff its
debts.
Under the Federal Credit Reform Act, funds must be
appropriated in advance to cover the subsidy cost of loan
guarantees, measured on a present value basis. The costs of
such subsidies could vary widely depending on the terms of
the contracts and the financial and technical risk associated
with different types of projects. According to Standard and
Poor's, the cumulative default risk for projects rated as
speculative investments can range from about 20 percent to
almost 60 percent, depending on a project's cash flows and
contractual terms. Subsidy costs also are affected by amounts
that could be recovered by the government in the event of
default, which in turn depend on the value of the security
backing the guarantee as well as contractual protections. For
this estimate, CBO assumes that, over the next five years,
DOE would not provide guarantees to projects with a subsidy
cost greater than 20 percent.
The bill would authorize DOE to accept payments from
borrowers sufficient to cover the subsidy cost of loan
guarantees. However, because the technologies covered by the
program would be new and would be seeking government backing,
CBO expects that projects seeking a guarantee would not be in
a position to fund the federal subsidy cost of a loan
guarantee. The bill specifies that DOE shall charge fees to
cover the costs of administering the credit program.
Types of Projects Guaranteed. The legislation contains
general guidelines that projects must meet to qualify for
credit assistance and specifies criteria for selecting at
least two coal gasification projects. For purposes of this
estimate, we assume that DOE would guarantee about $3 billion
in coal gasification projects, which would include the two
specified in the legislation and at least one other project.
We also assume that the department would use the authority in
the bill to provide loan guarantees for $625 million worth of
renewable energy systems, such as biomass or geothermal
electricity plants.
Coal Gasification. Gasification projects require large
capital investments, ranging from over $500 million for a 400
megawatt gasification plant to $1 billion or more for a plant
that would produce electric power and other fuels using
petroleum coke. Such gasification technologies are not new--
they have been tested and deployed to some extent in other
countries--but they have not been proven economically
competitive in the United States. Profitability would depend
on numerous factors, including future electricity and fuel
prices; the price, quality, and availability of feedstocks;
and various regulatory approvals.
For this estimate, CBO assumes that DOE would provide an 80
percent guarantee on investments totaling about $3 billion
over the next five years, which would include the planning
and construction of the two coal gasification plants
specifically mentioned in the legislation and additional
investment in other clean coal technologies.
Given the current outlook for energy prices, CBO expects
that the credit risk of gasification loans would likely fall
within the middle of the range for speculative investments,
but the risk of default could be higher or lower depending on
the contract terms and specific technology. CBO estimates
that loan guarantees for such projects would probably
involve a 20 percent subsidy. Thus, we estimate that
implementing this provision would cost $350 million over
the 2006-2010 period, assuming appropriation of the
necessary amounts. Additional outlays of $150 million
would occur after 2010 as construction progressed on such
projects.
Renewable Energy. The legislation also would authorize DOE
to make loan guarantees for renewable energy projects such as
biomass and geothermal sources for electricity generation.
Such projects could range in cost from $10 million for a
small 5 megawatt geothermal plant to $250 million for an
ethanol production plant. We expect that subsidy rates for
loans guaranteed under this title would be 20 percent. For
this estimate, we assume that $625 million worth of renewable
energy projects would receive an 80 percent loan guarantee
over the next 5 years. Such loan guarantees for renewable
energy systems would cost $50 million over the 2006-2010
period, and an additional $50 million after that period.
Nuclear Energy. Because of DOE's support of emerging
nuclear technology through a current program called Nuclear
Power 2010, we expect that the department would use the
program to provide a guarantee to at least one new nuclear
facility over the 2011-2015 period. Such a guarantee could be
for more than $2 billion and carry a significant subsidy cost
(perhaps as much as 30 percent).
Indian Energy Programs. Title V would authorize the
Department of the Interior to provide grants and loans to
Indian tribes for energy resource development projects. That
title also would authorize DOE to provide loan guarantees for
energy development projects on Indian land and to establish
an Office of Indian Energy Policy and Programs. In total, CBO
estimates that these programs would cost $21 million in 2006
and $244 million over the 2006-2010 period.
DOI Grants and Loans. The bill would authorize DOI to
provide loans and grants to Indian tribes for energy resource
development and integration and regulation of tribal energy
resources and to develop energy resource agreements through
leases, business agreements, and rights-of-way. Based on
information from DOI, CBO estimates that such grants and
loans would cost about $11 million in 2006 and $97 million
over the 2006-2010 period.
DOE Loan Guarantees. Title V would authorize the Secretary
of Energy to guarantee up to $2 billion in loans for energy
projects on Indian lands. Based on information from the
Council of Energy Resource Tribes, CBO expects that DOE would
provide loan guarantees for a variety of projects on Indian
lands, including electricity transmission lines, fossil fuel
electricity generation, and renewable fuels. CBO expects that
the subsidy cost of loans guaranteed under this program could
range from 2 or 3 percent for routine conventional projects
to 50 percent or more for unproven technologies.
For this estimate, CBO assumes that about half of the
program would provide loan guarantees for electricity
transmission lines,
[[Page S6395]]
which should pose relatively little credit risk under
standard contract terms. We assume that the remaining loan
guarantees would be divided between fossil fuel electricity
generation and renewable fuel projects. Under these
assumptions, we estimate that the average subsidy cost for
loans guaranteed under the program would be 10 percent. CBO
expects that loans would be disbursed over the next 10 years,
and we estimate that the loan guarantee program would cost $7
million in 2006 and $132 million over the 2006-2010 period,
assuming appropriation of the necessary amounts for the
estimated subsidy costs.
Office of Indian Energy Policy and Programs. The bill also
would authorize DOE to establish a new office that would be
responsible for promotion and development of Indian tribal
energy concerns. Based on information from DOE, CBO estimates
that the salaries, expenses, benefits, space, and travel
costs of the DOE employees that would administer such
programs would be about $3 million annually.
Renewable Energy Production Incentive (REPI). The REPI
program currently provides cash payments to public utilities
and electric cooperatives that generate energy using
renewable sources. The payment is based on the annual
kilowatt-hours of electricity generated using qualified
renewable energy sources. Section 202 would reauthorize the
REPI program for an additional 20 years, and make Indian
tribes eligible for the program. Annual funding appropriated
for the program has not kept pace with applications for
payment from eligible utilities. Specifically, eligible
utilities have generated electricity from renewable resources
since 1994 in an amount that qualifies for about $76 million
in REPI payments that have not been appropriated. Based on
information from DOE, CBO estimates that fully funding this
program, including the backlog of applications, would cost
$70 million in 2006 and $163 million over the 2006-2010
period.
Cellulosic Biomass and Cane Sugar Loan Guarantee Program.
Section 204 would authorize DOE to issue loan guarantees to
help finance the construction of facilities to produce fuel
ethanol from agricultural residue. The development of such
facilities poses some risk mainly because the technology that
would be used to process ethanol from such sources is new and
is not well-proven.
For this estimate, we expect that such facilities would be
debt-financed and sponsors would recover costs through the
sale of ethanol. Prices for ethanol have a history of
fluctuating widely and the likelihood of future fluctuations
could contribute additional credit risk for such a project.
Moreover, the cash flow for these projects also would rely
heavily on the cost of purchasing feedstock. According to
DOE, a plant's reliance on feedstock from these sources would
increase a project's credit risk because prices for feedstock
can become competitive if demand for such products increases.
Under credit reform procedures, funds must be appropriated
in advance to cover the subsidy cost of loan guarantees,
measured on a present value basis. Because of the significant
level of risk associated with these types of projects, the
costs of subsidizing such loan guarantees could vary widely.
At worst, the government could absorb all of the risk,
effectively converting the loan guarantees into grants. This
provision would authorize DOE to issue loan guarantees
limited to $250 million per project. However, the provision
does not set any limits on the number of loan guarantees that
could be made. Under this legislation, an applicant for a
loan guarantee would have to be currently operating an
existing facility that produces at least 50,000 gallons of
ethanol per year.
CBO estimates that, over the next five years, DOE would
probably provide loan guarantees for three projects, each
with a total construction cost of about $250 million. Because
the bill also would require applicants to contribute at least
20 percent of the project's total cost, CBO estimates that
the value of each loan guarantee would be about $200 million.
In addition, based on information from DOE, CBO assumes that
the department would seek projects with a financial outlook
similar to those of bonds rated B- or better by companies
such as Standard and Poor's and Moody's. Projects with this
rating typically have a cumulative default risk of over 40
percent. Under those assumptions, CBO estimates that loans
guaranteed under the bill would be likely to have a subsidy
rate between 15 percent and 20 percent and would cost $110
million over the 2006-2010 period.
Electricity Regulations. Title XII would require the
Federal Energy Regulatory Commission (FERC) to establish
several new rules for managing the nation's electricity
system and governing the business practices of the
electricity industry. Such rules would affect transmission
services, construction and siting permits for building new
transmission lines, and the reliability of the nation's
electricity transmission infrastructure. The bill also would
repeal the Public Utility Holding Company Act of 1935,
require FERC to take over certain regulatory procedures
currently undertaken by the Securities and Exchange
Commission, and amend the Public Utilities Regulatory
Policies Act.
Based on information from FERC, CBO estimates that
implementing these provisions would cost $11 million in 2006
and $47 million over the 2006-2010 period. Such costs would
cover additional data processing and storage, additional
staff, and travel related to the agency's new duties. Because
FERC recovers 100 percent of its costs through user fees,
such additional costs would be offset by an equal change in
fees that the commission charges. Hence, these provisions
would have no net budgetary impact.
Other Provisions. The bill includes several provisions that
would authorize various new studies, reports, and activities
related to energy consumption and production. Those
provisions would authorize federal agencies to:
Establish new programs related to federal oil and natural
gas resources;
Authorize a direct loan to upgrade a nonoperational clean-
coal technology plant in Alaska to a traditional coal-fired
electricity plant;
Reorganize certain offices within DOE; and
Prepare several other studies and reports on energy
resources and efficiency.
Based on information from the agencies that would be
responsible for implementing these provisions, CBO estimates
that these activities would cost $43 million in 2006 and $176
million over the 2006-2010 period, subject to the
availability of appropriated funds.
Direct spending and revenues
Several provisions in the bill would affect direct spending
and revenues. The estimated effects of these provisions are
shown in Table 3. The bill would establish a mandate for the
use of renewable motor fuels, provide permanent authorization
for the use of energy savings performance contracts;
establish an Electric Reliability Organization to manage the
reliability of the nation's electricity system; allow the
Western Area and Southwestern Power Administrations to accept
up to $100 million in financing from private sources for
electricity transmission projects; make changes to federal
programs related to oil and natural gas; and require the
Rural Utilities Service to change the terms of certain loans.
CBO estimates that enacting the bill also would increase
direct spending by $728 million over the 2005-2010 period but
would reduce direct spending by $591 million over the 2005-
2015 period. CBO estimates that enacting the bill would
increase net revenues by $75 million in 2006 and would result
in a net loss of revenues totaling $1.2 billion over the
2006-2010 period and $1 billion over the 2006-2015 period. In
addition, we estimate that new civil penalties imposed by the
bill would result in an increase in revenues of less than
$500,000 annually.
TABLE 3.--ESTIMATED DIRECT SPENDING AND REVENUE EFFECTS ON THE ENERGY POLICY ACT OF 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year in millions of dollars--
--------------------------------------------------------------------------------------------------
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Renewable Fuels Requirement and Agricultural Support
Programs:
Estimated Budget Authority....................... 0 0 -59 -164 -366 -569 -669 -697 -750 -768 -771
Estimated Outlays................................ 0 0 -59 -164 -366 -569 -669 -697 -750 -768 -771
Energy Savings Performance Contracts:
Estimated Budget Authority....................... 0 0 301 307 314 320 327 334 341 348 355
Estimated Outlays................................ 0 0 256 306 313 319 326 333 340 347 354
Electric Reliability Organization:
Estimated Budget Authority....................... 0 100 102 104 106 108 110 113 115 117 120
Estimated Outlays................................ 0 100 102 104 106 108 110 113 115 117 120
Financing of Federal Electricity Transmission
Projects:
Estimated Budget Authority....................... 0 0 50 0 50 0 0 0 0 0 0
Estimated Outlays................................ 0 0 10 20 30 20 20 0 0 0 0
Federal Oil and Natural Gas Programs:
Estimated Budget Authority....................... 0 8 7 10 9 12 5 11 8 10 7
Estimated Outlays................................ 0 8 7 10 9 12 5 11 8 10 7
Assistance for Rural Communities with High Energy
Costs:
Estimated Budget Authority....................... 46 0 0 0 0 0 0 0 0 0 0
Estimated Outlays................................ 46 0 0 0 0 0 0 0 0 0 0
Total Changes in Direct Spending Under the
Energy Policy Act of 2005:
Estimated Authorization Level................ 46 108 401 257 113 -129 -227 -239 -286 -293 -289
Estimated Outlays............................ 46 108 316 276 92 -110 -208 -240 -287 -294 -290
[[Page S6396]]
CHANGES IN REVENUES \1\
Renewable Fuels Requirement.......................... 0 0 -64 -264 -509 -754 -262 0 0 0 0
Electric Reliability Organization--Fees Charged on 0 75 77 78 80 81 83 84 86 87 89
Electricity Consumers...............................
Total Changes in Revenues Under the Energy Policy 0 75 13 -186 -429 -673 -179 84 86 87 89
Act of 2005.....................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Net of income and payroll tax offsets.
Renewable Fuels Requirement and Agricultural Support
Programs. CBO estimates that enacting section 204 would lower
direct spending by about $4.8 billion over the next 10 years
and lower revenues by about $1.9 billion over the same
period.
Section 204 would require that motor fuels sold by a
refiner, blender, or importer contain specified amounts of
renewable fuel. The required volume of renewable fuel would
start at 4 billion gallons in 2006, escalate to 8 billion
gallons for 2012, and increase thereafter at the rate of
growth in gasoline consumption. CBO expects that the use of
renewable fuels would be significantly affected starting in
2007, when the bill's renewable fuel requirement would exceed
the amount of renewable fuel use CBO estimates under current
law.
CBO expects that most of the fuel produced to meet the
requirements under the bill would be ethanol. Because ethanol
is primarily derived from corn, demand for corn would rise
with the requirement to use more ethanol. CBO expects that
com prices would increase up to 10 percent by the end of the
2007-2015 period. Accordingly, the costs of federal programs
to support farm prices and provide income support to
agricultural producers would fall over the 2007-2015 period.
CBO estimates that spending for farm price and income
supports would decline by about $4.8 billion over the 2007-
2015 period.
Section 204 also would affect revenues. Because ethanol-
blended fuels are taxed at a lower rate than gasoline,
receipts from taxes on motor fuels would change when ethanol
use changes. CBO estimates that increased ethanol use would
reduce revenues starting in 2007, and continue affecting
revenues through part of 2011. Although ethanol use would
increase significantly under the bill, the special tax
treatment of ethanol fuels under current law will expire at
the end of calendar year 2010. Therefore, changes in ethanol
use would not significantly affect federal revenues after
that time.
Energy Savings Performance Contracts (ESPCs). The bill
would provide authorization for the use of energy savings
performance contracts through 2016. Under current law, the
authority to enter into such contracts expires at the end of
fiscal year 2006. Overall, CBO estimates that entering into
ESPCs would increase direct spending by $256 million in 2007
and $2.9 billion over the 2005-2015 period.
ESPCs enable federal agencies to enter into long-term
contracts with an energy savings company (ESCO) for the
acquisition of energy-efficient equipment, such as new
windows, lighting, and heating, ventilation, and air-
conditioning systems. Using such equipment can reduce the
energy costs for a facility, and the savings from reduced
utility payments can be used to pay the contractor for the
equipment over time. Because the government does not pay for
the equipment at the time it is acquired, the ESCO borrows
money from a nonfederal lender to finance the acquisition and
installation ofthe equipment. When it signs the ESPC, the
government commits to paying for the full cost of the
equipment as well as the interest costs on the ESCO's
borrowing for the project. Since the ESCO faces higher
borrowing costs than the U.S. Treasury, total interest
payments for the equipment acquisition will be higher than
if the government financed the acquisition of the
equipment directly with appropriated funds.
The obligation to make payments for the equipment and the
financing costs is incurred when the government signs the
ESPC. Under current law, agencies can use ESPCs to acquire
new energy-efficient equipment, paying over a period of up to
25 years without an appropriation for the full amount of the
purchase price. Thus, consistent with government accounting
principles, CBO believes that the budget should reflect that
commitment as new obligations at the time that an ESPC is
signed and that the authority to enter into these contracts
without budget authority for the full amount of the purchase
price constitutes direct spending.
CBO's estimate of direct spending reflects an amount equal
to the cost of the energy conservation measures as installed,
plus the portion of borrowing costs attributable to contract
interest rates that exceed U.S. Treasury interest rates.
(Borrowing costs equivalent to the amount of Treasury
interest that would be paid if the equipment were financed
with appropriated funds are not counted against this
authority, consistent with the budget scorekeeping of regular
interest costs associated with federal spending; that is,
Treasury interest effects are not counted as a direct cost or
savings to any particular legislative provision.)
Since 1988, the Department of Energy estimates that
agencies have entered into ESPCs valued over $800 million,
$252 million of that in 2003 alone. CBO estimates that,
because the federal building inventory is aging, those
contracts would continue to be used--over time at roughly the
same rate as currently used--about $300 million in 2007 and
increasing with anticipated inflation in each of the
following years. Thus, we estimate that extending the
authorization for ESPCs would increase direct spending by
$2.9 billion over the 2007-2015 period.
Electric Reliability Organization. The bill would authorize
the Federal Energy Regulatory Commission (FERC) to exercise
authority over the reliability of the nation's electricity
transmission system through the establishment of an Electric
Reliability Organization (ERO). Under the bill, FERC would
select an organization to become the ERO based on several
criteria, including the ability of the organization to charge
fees to end users of the electricity system to cover its
costs. CBO believes the ERO's collections and spending should
be included in the federal budget because this new entity
would conduct inherently governmental activities that could
not be undertaken by a purely private organization. FERC
would approve and enforce the collection of fees charged by
the ERO.
Based on information from the North American Electric
Reliability Council (NERC), CBO estimates that the newly
formed ERO and its regional affiliates would spend between
$75 million and $150 million a year. For this estimate, CBO
assumes that spending by the ERO and its regional affiliates
would start at $100 million a year and increase by the rate
of anticipated inflation. Thus, we estimate that spending by
the ERO would total about $100 million in 2006 and $1.1
billion over the next 10 years.
Because the ERO and the regional organizations created by
it would be governmental in nature, CBO believes that the
collection of these fees should be recorded as revenues in
the budget. Based on information from NERC, CBO estimates
that net revenues collected by an ERO and its regional
organizations would total $75 million in 2006, $391 million
over the 2006-2010 period, and $820 million over the 2006-
2015 period.
Currently, the federal power marketing administrations,
including the Tennessee Valley Authority and the Bonneville
Power Administration, pay dues to the regional affiliates of
NERC. We would expect that those payments would continue and
would increase under the new regulatory scheme established by
the ERO. Any increase in those fees would be offset by
changes in the rates charged to customers of the federal
agencies.
Financing of Federal Electricity Transmission Projects. The
bill would authorize DOE's Western Area and Southwestern
Power Administrations to accept from private entities up to
$100 million to assist in the design, development,
construction, and operation of transmission projects that
would contribute to reducing congestion on existing
electricity lines. Such financing would be equivalent to
incurring new federal debt, and the spending of such borrowed
amounts should be recorded in the budget as direct spending.
We estimate that such spending would cost $10 million in 2007
and $100 million over the 2007-2015 period.
Federal Oil and Natural Gas Programs. Title III would make
several changes to federal programs related to the production
of oil and natural gas. Several ofthese provisions would
provide private producers of those resources with various
forms of royalty relief or other credits that would reduce
federal receipts, particularly over the next few years. By
creating incentives for greater production of oil and natural
gas, CBO expects that net receipts from royalties would
eventually increase under some of those provisions, but not
for several years. Based on information from DOl, CBO
estimates that these provisions would result in a net loss of
offsetting receipts (a credit against direct spending)
totaling $8 million in 2006 and $87 million over the next 10
years.
Assistance for Rural Communities with High Energy Costs.
Section 210 of the bill would require the Rural Utilities
Service (RUS) to change the loan terms offered to eligible
electric cooperatives in Alaska that currently have loans
provided by that agency. The bill would require that the term
of loans be changed to reduce the electricity rates charged
to customers. Under the Federal Credit Reform Act, the cost
of a loan modification is the change in the subsidy cost of
the loan (on a present value basis) because of the modified
loan terms. CBO estimates that the cost of this provision
would be $46 million and would be recorded in 2005, the
assumed year of enactment.
Based on information from RUS, CBO estimates that six
utilities would be eligible for the assistance authorized by
the bill. The bill would require that the agency provide
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such assistance through deferrals, extensions, or reductions
of loans. Currently, the six eligible borrowers have a total
outstanding principal of $57 million, at an average interest
rate of about 3.5 percent. It is possible that the agency
could decide to provide zero-interest loans, or lengthen the
term of loans, thereby reducing payments owed to the
government. The legislation would authorize the agency to
forgive the full amount of the outstanding principal without
recourse to the borrowers. CBO assumes that the cooperatives
in the highest distress areas would apply for loan
forgiveness and the remaining cooperatives would apply to
receive zero-interest loans. CBO estimates that the net
present value for all payments that would have been provided
under current law results in a cost to the government of $46
million, which would be recorded in 2005, the assumed year of
enactment.
Civil Penalties. The bill also could affect governmental
receipts and direct spending by establishing and increasing
certain civil and criminal penalties. CBO estimates that any
resulting increase in receipts and spending would be less
than $500,000 annually. Such penalties would be established
for violations of regulations relating to: Violations of the
Price-Anderson Act, Nuclear safety at nonprofit institutions,
willful destruction of a nuclear facility, the reliability of
the nation's electricity system, market trading of
electricity, and the sale of renewable fuels.
Section 385 would raise the maximum civil and criminal
penalty amounts imposed for violations of the Natural Gas Act
(NGA) and the Natural Gas Policy Act of 1978. Currently the
maximum amount FERC may assess varies depending on the
violation, however, most fall between $500 and $25,000 per
violation. The bill would increase those amounts to as much
as $1 million for violations of the NGA. Based on information
from FERC, CBO expects that the penalty increases and the
additional civil penalty authority would serve as a
significant deterrent so that firms would very likely comply
with the regulations, resulting in no significant effect on
revenues.
Intergovernmental and private-sector impact: The bill
contains numerous mandates as defined in UMRA that would
affect both intergovernmental and private-sector entities.
CBO cannot determine the cost of all the mandates in the
bill because several of the requirements established by the
bill would hinge on future regulatory action about which
information is not available. Though CBO cannot estimate the
cost of each mandate, we expect that the total cost of
private-sector mandates in the bill would exceed the annual
threshold established in UMRA ($123 million in 2005, adjusted
annually for inflation). That conclusion is based on our
analysis of the renewable fuels standard, which would impose
II substantial costs on the motor fuels industry.
CBO estimates, however, that the total cost of complying
with intergovernmental mandates in the bill would not exceed
the threshold established in UMRA ($62 million in 2005,
adjusted annually for inflation). The bill also would
authorize numerous grants and initiatives that would benefit
state, local, and tribal governments; any costs those
governments incur for these projects and initiatives would
result from complying with conditions for receiving this
federal assistance.
Based on its review of the bill, CBO expects that the
mandates contained in the bill's titles lion renewable energy
(title II), nuclear energy (title VI), electricity (title
XII), and energy efficiency (title I) would have the greatest
impact on private-sector entities and state and local
governments.
Renewable Energy (Title II)--Renewable Fuels Standard
Section 204 would impose a private-sector mandate on
domestic refiners, blenders, and importers of gasoline by
requiring that gasoline sold or dispensed to consumers in the
contiguous United States contains a minimum volume of
renewable fuels. The bill also II would establish a credit
trading program for renewable fuels to allow producers who
use more ethanol than would be required to sell credits to
producers who would be in deficit. Those credits could only
be used in the same year they are generated. The required
volume of renewable fuel would start at 4.0 billion gallons
in 2006 and increase to 8.0 billion gallons by 2012. CBO
expects that the renewable fuels requirement would be met in
2006 without additional costs to the industry. The industry
would begin to experience additional costs in 2007 as it
begins to blend or purchase greater amounts of gasoline
containing renewable fuels than it would in the absence of a
standard. Based on Department of Energy estimates of the
price impacts of similar renewable fuels standards on
gasoline prices, CBO estimates that the direct costs of the
renewable fuel requirement on private-sector entities would
exceed UMRA's annual threshold for private-sector mandates.
Nuclear Matters (Title VI)--Increase in the Annual Premium
Under current law, in the event that losses from a nuclear
incident exceed the required amount of private insurance,
Nuclear Regulatory Commission licensees (both public and
private) are assessed a charge to cover the shortfall in
damage coverage. Section 603 would increase the maximum
annual premium from $10 million to $15 million. CBO has
determined that raising the maximum annual premium would
increase the costs of existing mandates and would thereby
impose both intergovernmental and private-sector mandates
under UMRA. Because the probability of a nuclear accident
resulting in losses exceeding the amount of private insurance
coverage is low, CBO estimates that the annual costs for
public and private entities of complying with the mandates
(in expected value terms) would not be substantial over the
next five years.
Electricity (Title XII)
Mandatory Reliability Standards. Section 1211 would require
users of the bulk-power system to comply with standards
issued by a newly established Electric Reliability
Organization designated by the Federal Energy Regulatory
Commission. Those users include intergovernmental entities
such as municipally owned utilities as well as private-sector
entities, including utilities, nonutility generators, and
marketers. Currently, the North American Electric Reliability
Council (NERC), a voluntary organization, promotes
electricity reliability. According to several industry
experts, almost all public and private-sector users of the
bulk power system voluntarily comply with standards issued by
NERC. The mandate would impose no significant additional
costs in the short term relative to current practice since
the ERO is not expected to significantly change current
standards. In the future, market conditions may prompt the
ERO to impose stricter standards to maintain reliability. In
that case, costs for users of the bulk power system-that
could otherwise elect to disregard NERC standards under
current law--could increase substantially.
Mandatory Assessments. Section 1211 would direct the ERO to
assess fees and dues to cover the costs of implementing and
enforcing ERO standards. Although there is some uncertainty
as to how those fees would be assessed, the most likely
scenario is that the ERO would assess fees on its members,
which is the current practice of NERC. As NERC members
include both public and private entities, such fees would
constitute intergovernmental and private-sector mandates as
defined in UMRA.
CBO estimates that the increment in fee collections for the
proposed compliance, monitoring, ``and enforcement activities
under the bill would be about $50 million annually. Based on
industry data, CBO assumes that roughly 80 percent to 85
percent of the collections would be borne by the private
sector and another 10 percent to 14 percent would be borne by
state and local government entities. The remainder would be
paid by federally owned entities.
Regulatory Fees. The bill would require FERC to assume
certain regulatory procedures that are currently under the
jurisdiction of the Securities and Exchange Commission. In
addition, the bill would require FERC to establish new rules
for managing the nation's electricity system and governing
the business practices of the electricity industry. Under
current law, FERC has the authority to collect fees from
investor-owned utility companies to offset its costs. The
duty to pay those fee increases would impose a private-sector
mandate on those entities. Based on information from FERC,
CBO expects that investor-owned utilities would have to pay
$11 million in 2006 and $47 million over the 2006-2010
period.
State Authority Over Electric Utilities. Section 1221 would
preempt state authority to take action to ensure the safety,
adequacy, and reliability of electric service within that
state if the state's actions are inconsistent with the
federal reliability standards. This preemption of state
authority would impose no additional costs on state
governments.
Sections 1251, 1252, and 1254 would require state
regulators to review the use of net metering, time-based
metering, demand-response systems, and interconnection
services before permitting electric utilities to implement
these federal standards. These sections contain
intergovernmental mandates because they would increase a
state's responsibilities under the existing mandates in the
Public Utilities Regulatory Policies Act. However, CBO
estimates that the states' costs to review additional
standards would not be significant.
Jurisdiction over the Termination Payments of Certain
Contracts. Section 1270 would grant the Federal Energy
Regulatory Commission exclusive jurisdiction to determine
whether the requirement to pay termination payments under
certain contracts entered into between sellers and buyers of
wholesale electricity was unjust and unreasonable. These
contracts are currently before the Bankruptcy Court in the
Southern District of New York. FERC has asserted jurisdiction
over termination payments under wholesale power contracts for
periods a seller was found to be in violation of Commission
orders. While legislative provisions that would severely
limit or extinguish a person's rights in court have been
considered to be mandates under UMRA, CBO cannot determine if
the language in this provision would extinguish the sellers'
rights before the Bankruptcy Court or would simply make clear
FERC's jurisdiction over the termination payments.
Energy Efficiency (Title I)
Energy Conservation. Section 135 would direct the Secretary
of Energy to prescribe energy conservation standards
restricting ``standby-mode'' energy consumption of household
and commercial appliances. According to industry sources and
DOE, up to
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9,000 types of household and commercial appliances could be
affected by this provision, and further, many such products
may require significant modification to meet the standard for
energy consumption in standby mode. DOE has not yet
determined how it would implement this provision. Therefore,
we cannot estimate the incremental cost to the industry of
meeting such requirements.
If DOE applies standards to the majority of products
potentially affected, costs to industry could be substantial.
The magnitude of the costs also depends on the stringency of
new standards that would affect the appliance manufacturers.
For example, the bill would require DOE to apply new energy
conservation standards to certain furnaces. Roughly three
million oil, gas, and electric furnaces would have to comply
with the new standards. According to a DOE report, the
incremental costs to manufacturers of improving energy
efficiency could range from $5 to $175 per unit, depending on
the level of the standard that must be met. If DOE applies
relatively high efficiency standards to the appliances
covered under the bill, the incremental costs to the industry
could be large, and thus could exceed UMRA's threshold for
private-sector mandates.
In prescribing the energy conservation standards required
under sections 135 and 136 for household appliances and
consumer products, the Secretary would preempt state and
local energy efficiency standards currently in place for
those products and appliances. CBO estimates that no costs
would result from this preemption.
Testing Requirements. Section 135 would direct the
Secretary of Energy to prescribe energy efficiency testing
requirements for appliances specified in the bill and future
appliances to be determined by the Secretary. The provision
would require manufacturers of those appliances to have their
appliances tested to determine energy efficiency ratings. The
testing and rating would be conducted by the DOE. CBO
estimates that the cost to comply with the mandate to have
appliances tested would not be large.
Ban of Mercury Vapor Lamp Ballasts. Section 135 would
prohibit the manufacturing and importing of mercury vapor
lamp ballasts after January 1, 2008. A ballast is an
electrical device for starting and regulating fluorescent and
certain other lamps. The mercury vapor lamp ballast has been
decreasing in its share of the market for ballasts during the
last 20 years. Moreover, according to industry contacts, few,
if any mercury vapor lamp ballasts are imported into the
United States. The majority of such ballasts are manufactured
in the United States for domestic use. According to industry
sources, mercury vapor lamp ballasts are now only
manufactured for rural street lights and residential
floodlights. Based on information provided by industry and
government sources, the value of annual shipments of such
ballasts amounts to about $15 million. The cost of the
mandate, measured in lost net income to the industry, would
be less than that amount.
Energy Efficiency Resources Program. Section 141 would
require ratemaking authorities for gas and electric utilities
(including states, local municipalities, or co-ops) to either
demonstrate that an energy efficiency resource program is in
effect or to hold a public hearing regarding the benefits and
feasibility of implementing an energy efficiency resources
program for electric and gas utilities. CBO estimates no
significant costs would result from this requirement.
Previous CBO estimates
Federal budget effects
On April 19, 2005, CBO transmitted a cost estimate for H.R.
1640, the Energy Policy Act of 2005, as ordered reported by
the House Committee on Energy and Commerce on April 13, 2005.
Like this legislation, H.R. 1640 would authorize
appropriations for a wide array of energy-related activities.
Differences between the estimates of spending subject to
appropriation under this bill and H.R. 1640 reflect
differences in authorization levels, particularly for the
Low-Income Home Energy Assistance Program and activities
related to science and coastal impact assistance.
Like H.R. 1640, this legislation would authorize FERC to
establish an ERO to oversee the nation's electricity
transmission system. Both bills would authorize the new
organization to collect and spend fees (which would be
classified as revenues). However, H.R. 1640 would cap those
fees at $50 million a year. This legislation contains no such
cap; therefore, our estimates of direct spending and revenues
related to the proposed ERO are higher than under H.R. 1640.
CBO previously completed two cost estimates for bills that
would permanently authorize the use of ESPCs: H.R. 1640 and
H.R. 1533, the Federal Energy Management Improvement Act of
2005. CBO transmitted a cost estimate for H.R. 1533, as
ordered reported by the House Committee on Government Reform,
on April 13, 2005. Provisions of this legislation and H.R.
1533 related to ESPCs are similar; however, H.R. 1640 would
cap total payments under ESPCs at $500 million a year.
Therefore, our estimate of spending for ESPCs is lower under
H.R. 1640 than under this bill or H.R. 1533. Also, this bill
would authorize the use of ESPCs through 2016.
Finally, on May 23, 2005, CBO transmitted a cost estimate
for S. 606, the Reliable Fuels Act, as ordered reported by
the Senate Committee on Environment and Public Works on March
16, 2005. Like this legislation, S. 606 would require that
motor fuels sold by a refiner, blender, or importer contain
specified amounts of renewable fuel but with two key
differences. First, the required level of renewable fuels
under this bill would be higher than under S. 606. Second, S.
606 would allow producers of motor fuels to accumulate
ethanol-use credits for exceeding the ethanol target in any
year. Under S. 606, such credits could be used in subsequent
years to meet the ethanol target. In contrast, this
legislation contains no such provision for use of credits
over multiple years. As a result, CBO expects that demand for
corn-based ethanol under this bill would increase more than
under S. 606, leading to higher demand for corn and,
subsequently, a larger decrease in federal spending to
support farm prices and provide income to farmers.
Mandates
The bill includes many of the same state and local mandates
as in H.R. 6, the Energy Policy Act of 2005, as approved by
the House Committee on Resources on April 20, 2005. However,
the estimate of state and local mandates in this bill is not
identical to the statement included in CBO's cost estimate
for that earlier legislation. Section 1502 of H.R. 6 is not
included in this bill. That provision would shield
manufacturers of motor fuels and other persons from liability
for claims based on defective product relating to motor
vehicle fuel containing methyl tertiary butyl ether or
renewable fuel. That provision in H.R. 6 would impose an
intergovernmental mandate as it would limit existing rights
to seek compensation under current law.
The state and local mandates in this bill that are the same
as the mandates in H.R. 6 include the increase in the
retrospective premiums, the mandatory reliability standards
and assessments, the state authority over electric utilities,
and the energy conservation provision. In contrast, section
141 of the legislation was not included in H.R. 6. That
provision would require ratemaking authorities for gas and
electric utilities (including states, local municipalities,
or co-ops) to either demonstrate that an energy efficiency
resource program is in effect or to hold a public hearing
regarding the benefits and feasibility of implementing an
energy efficiency resources program for regulated and
nonregulated electric and gas utilities. CBO estimates that
no significant costs would result from this requirement.
Regarding private-sector mandates, most of the mandates
contained in the bill were also contained in the legislation
considered in the House. H.R. 6 and H.R. 1640 contain
a mandate establishing a renewable fuel standard for motor
fuels, which would impose costs on refiners, importers,
and blenders of gasoline similar to the one in the
Renewable Fuels title of this bill. However, the renewable
fuels standard in the House bills would require the
industry to use a lower yearly level of renewable fuels
than the standard contained in this bill. In the case of
the House bills, CBO found that the motor fuels industry
would be able to meet the renewable fuels requirement in
the first five years that the mandate is in effect without
significant additional costs to the industry. The House
bills also contain a mandate that would extend the
existing requirement for licensees to pay fees to offset
roughly 90 percent of the Nuclear Regulatory Commission's
annual appropriation. That provision is not included in
the bill.
Estimate prepared by: Federal Costs: Energy Savings
Performance Contracts: Lisa Cash Driskill and David Newman;
Oil and Natural Gas Resources: Lisa Cash Driskill and Megan
Carroll; Indian Energy Programs: Mike waters; EPA Provisions
and Loan Guarantee for Ethanol Production: Susanne Mehlman;
Renewable Fuels Requirement and Agriculture Support Programs:
David Hull; All Other Federal Costs: Lisa Cash Driskill;
revenues: Annabelle Bartsch and Laura Hanlon; impact on
state, local, and tribal governments: Lisa Ramirez-Branum;
impact on the private sector: Craig Cammarata, Jean Talarico,
Selena Caldera and Paige Piper/Bach.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis; G. Thomas Woodward Assistant
Director for Tax Analysis.
June 9, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S.
Senate, Washington, DC 20510
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for the Energy Policy Act
of 2005.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Lisa Cash
Driskill.
Sincerely,
Douglas Holtz-Eakin,
Director.
____________________