June 2001

"--Through A Spectrally Selective Glazing System, Darkly"

by Roger Feldman  --   Bingham, Dana L.L.P.
(originally published by PMA OnLine Magazine: 2001/10/06)

We have recently swept through (in terms of sound byte attention span) the (real) California Crisis, the first sighting of the (Administration manufactured) "Energy Crisis" and now have reached the Cheney Crisis Fix, which neatly ties the two crises together in a boundlessly disingenuous way. You see, California caused its crisis by relying on conservation and Cheney will fix it for all of us by production – anywhere and anything that burns. Real men don’t do conservation; instead, they absorb America’s our boundless resources. Transmission problems? Now we can have Federal eminent domain for transmission lines. No more NIMBY – no more backyard – no libertarian lament, though, since the Federal takings will not be based on enforcement of environmental laws. Anyway, the President has assured us that his tax refund will help us cover those rising energy prices (Knew there was a secret reason for it all along.)

Beneath this calculated balderdash, three key underlying energy policy issues are obscured from the public eye, and possibly from the Administration’s cognizance (after all, if Star Wars II is good, even if it doesn’t really work as we have been advised, why not Energy Policy also):

Unfortunately, the answers lie buried under political code words. Under the guise of emergency in the West, the Democratic cry for "caps" or "Price control" has morphed into the championing of re-regulation. For Republicans "caps" means interference with the (ultimately) supply-inducing free market system; "free markets" means, well, whatever system that’s not California that states devise (because free markets somehow are tied to States Rights, and the rights of some utilities to continue to monopolize their markets). Fair and efficient electric energy provision will now be achieved simply by repealing PUHCA , trusting that market forces will be with us.

As for efficiency – that approach that DOE just said could save 600 powerplants equivalent by 2020. The code word in the debate is "balance." The catch is what it means. For Republicans, it simply [means] principally to be eyewash. Throw in some tax incentives for biomass and announce the energy plan to recycle nuclear fuel at an alfalfa and turkey manure fueled plant. Roll back the air conditioner efficiency standards. They’re just another kind of irrelevant endangered species, at best, or weak-kneed, personally masochistic conservation at worst. For Democrats, "balance" still seems more like an effort to wear a White Hat than a coherent program to address the industrial and commercial requirements of consumers in a more businesslike manner. It is "gored" as an also ran solution, rather than an approach which, if fueled by incentives anywhere near the proposed production incentives, would have a much higher near-term energy balance return.

As for tying free markets and conservation together, you really don’t have to look farther than Title I of the House Electric Emergency Relief Act. For a limited time only – since demand resource management is, of course, only for hard times – FERC would be empowered to establish a clearinghouse to facilitate agreements between those wholesale sellers and wholesale buyers of power who are willing to sell "megawatts" (i.e. forego purchase rights for a mutually agreed upon price, which FERC statutorily directed to deem "just and reasonable." Sounds like a (gasp) conservation incentive to me: what deregulation was originally trying to achieve through price signals. Might even be temporarily compatible with price caps. . .

But enough carping. To justify energy efficiency in this politicized, code word-ridden environment, we must speak in the free market jargon of our time: that of those who are selling energy guarantees for new homes. (Even some utilities are doing this, although as the program manager of one of them put it, "(I)t was a risk. But we set our faith in science. . .) Think of America as a thermal envelope (your house) and consider its "infiltration rates" (how fast your house is leaking) – or where we’re squandering our bountiful energy heritage. Consider where are the "undesigned holes" (places where air shouldn’t be entering your home) – or where government is punching holes, rather than plugging them in your energy use profile. In short, see the world through "spectrally selective glazing systems" (energy efficient windows). And beware being buffaloed by "backdrafting of combustion appliances" (which is what happens when your house is badly ventilated) – or when your Thermal Envelope of Representatives is marching lockstep to a myopic producer’s (oil) drum.

ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon Markets Group has practiced law related to the finance of environmental and energy projects and companies for 40 years.  In particular, he has analyzed and executed a wide variety and substantial value of project financings.  He chairs the American Bar Association’s Committee on Carbon Trading and Finance, serves on the Board of the American Council for Renewable Energy, and has been a senior official in the Federal Energy Administration.  He is a graduate of Brown University, Yale Law School and Harvard Business School.