Bipartisan American Energy Innovation Act Being Considered on Floor of U.S. Senate

On March 5, 2020, the United States Senate approved a motion to proceed on the American Energy Innovation Act (“AEIA”), S. 2657, after a cloture vote was called on the motion by Senate Majority Leader Mitch McConnell (R-Ky.) in order to move the bill to the Senate floor. However, on March 9, 2020, at least two measures to limit debate on the bill itself were rejected—opening the door for numerous floor amendments, including legislative language to limit greenhouse gas emissions that is projected to be offered by Senate Democrats.

The AEIA is a compendium of energy-related statutory provisions which was released in an omnibus, bipartisan legislative package on February 27, 2020 by Energy and Natural Resources Committee Chair Senator Lisa Murkowski (R-Alaska) and Ranking Member Senator Joe Manchin (D-W. Va.). Senators Murkowski and Manchin offered a substitute amendment featuring the full text of the AEIA (Amendment 1407) after the motion to proceed was voted-out affirmatively, and they are acting as floor managers for the bill.

Among other things, the bill focuses on advancements and development of energy storage and hydropower resources. In particular, as described in greater detail below, the bill directs FERC to initiate a rulemaking on cost recovery for energy storage assets and extends authorization for certain incentives to develop generation at non-powered or already-powered dams. The Committee held approximately 12 months of hearings on many of the proposed legislation’s components. If enacted, the bill would constitute the first major piece of national energy legislation since the Energy Policy Act of 2005, after a twelve-year hiatus in significant congressional activity.

Senate Bill Amendments & Prognostication for Enactment of Energy Legislation

Senate Majority Leader Mitch McConnell’s decision to move the AEIA for a floor vote indicated the Republican majority believed there was a good chance a bipartisan energy measure could make it through the Senate without significant debate on controversial issues such as climate change. However, the defeat of cloture motions on the bill this week shows that goal is likely unattainable. As of last week, over 180 amendments to the bill were up for consideration, including extensions of offshore-Florida oil-drilling moratoriums, caps on electric vehicle tax credits, and reintroduction of Obama-era methane regulations. Notably, there are two bipartisan measures aimed at greenhouse gas reduction that appear to have across-the-aisle support. The first is an amendment that would phase out hydrofluorocarbons (offered by Sens. John Kennedy (R-La.) and Tom Carper (D-Del.)), and the second is an amendment to foster energy-efficient buildings (offered by Senators Jeanne Shaheen (D-N.H.) and Rob Portman (R-Ohio)).

Perhaps more importantly for WER readers, a bipartisan group of Senators has committed to introduce amendments that would legislatively overturn certain, recent FERC decisions affirming Regional Transmission Operator price floors, known as the “Minimum Offer Price Rule (“MOPR”) in PJM, and “Buyer-Side Mitigation” (“BSM”) in NYISO (see December 20, 2019 edition of the WER and February 26, 2020 edition of the WER). On March 5, 2020, Senator Chris Van Hollen (D-Md.) told reporters there is support on both sides of the aisle for legislation that would clarify states’ authority to establish their own generation resource portfolio mixes, without reference to whether such power plants meet the strictures of the FERC-approved MOPR/BSM rules.

On the House side, there has been no indication yet that Democratic leaders view the Green New Deal package, passed in 2019, as an appropriate vehicle for establishing a Conference Committee with the Senate, assuming passage of the AEIA. Capitol Hill analysts have posited that the AEIA is unacceptable to House Democrats due to its perceived support for fossil fuels and mining, and its general failure—in their view—to include targets or mandates for greenhouse gas emissions reductions. House Democrats, in particular, have signaled that AEIA is not acceptable because it does not extend renewable energy tax credits.

Energy Storage

Regarding energy storage, Subtitle C of the bill would establish RD&D programs for advancement of energy storage technologies, directing the Secretary of the Department of Energy to conduct a competitive pilot project grant program to carry out at least five demonstration projects. The bill further directs cooperation between the Department of Energy and Department of Defense for a storage “Long-Duration Demonstration Initiative and Joint Program.” The bill also sets aside technical assistance funding for municipals and cooperative utility involvement in storage, including hydro-pumped storage.

Hydroelectricity & Pumped Storage

Section 1302 of the AEIA would amend the Reclamation Project Act of 1939 (P.L. 57-161, as amended) to reserve to the Secretary of the Interior exclusive authority for the development of certain pumped storage hydropower projects that exclusively use Bureau of Reclamation (“Reclamation”) reservoirs. Presumably, this provision would require only a lease of power privilege from Reclamation, and not a related FERC-issued license, for pumped storage projects “exclusively using” Reclamation reservoirs.

The Senate bill also expands and extends the Hydroelectric Production Incentive Program, which expired as originally authorized by the Energy Policy Act of 2005 (EPAct 2005; Public Law 109-58). As currently drafted, AEIA provides that the Hydroelectric Incentive Program will re-commence in 2021 and continue through 2036. AEIA expands the Program to include not only hydropower that is added to an existing dam or conduit, but also hydropower that: (1) has a generating capacity of no more than 20 MW; (2) has received a construction authorization from FERC; and (3) is constructed in an area in which there is inadequate electric service, as determined by the DOE Secretary.