April 26, 2005--The House of Representatives passed an energy bill on Thursday that increases energy reliability, but favors the established energy industry over innovative firms.
The energy plan, which passed 249-183, aims to increase the reliability of electrical energy, a boost to all businesses concerned about disruptions to production. The majority of the bill's tax breaks, however, favor large, established industries, like coal and gas, which could leave small firms with new technologies at a disadvantage. Moreover, the bill is unlikely to reduce the price of oil, particularly if the government purchases 300 million barrels of oil to place in the national reserve, as the House intends.
The Senate will now draft its version of the bill. After both bills go through a joint committee, one version will be sent to President Bush to be signed into law.
In an effort to increase the reliability of the nation's electrical grid, which has been a concern since the Northeast Blackout in 2003, the House repealed the 1935 Public Utility Holding Company Act (PUHCA). Without PUHCA, the utility industry will be free to consolidate.
An industry consolidation would be the first step to a truly national electrical grid and would leader to greater efficiencies, said Sean O'Leary, the CEO of Louisville-based Genscape, an Inc. 500 company that monitors the nation's power plants. But consolidation, he warned, could put too much power in the hands of only a few.
O'Leary, however, doesn't believe change in the electrical industry is imperative. "The industry does a good job of maintaining reliability today," he said. "Aside from what happened a few years ago, which was an anomaly, I would be surprised if we have another blackout in our lifetimes."
In the short term, a comprehensive energy plan that increases energy reliability will benefit small business, said Thomas Sullivan, chief counsel for the Small Business Administration (SBA). "A comprehensive energy policy that ties-in the way people get their energy always leads to greater reliability--it's a one-to-one relationship," he said
The long-term affects of the House's version, however, could harm small businesses, said Jon Coifman, a spokesperson for the National Resource Defense Council(NRDC).
"The overwhelming amount of the bill's tax breaks going to established energy suppliers not only keeps the nation dependent on traditional energy sources, but puts newer technologies at a disadvantage," Coifman said.
The coal and oil industry receive the lion's share of the bill's $8.1 billion in tax-breaks. Add to that the soaring prices of energy, and these traditional suppliers will be able to out-compete any small business with a new technology, said Coifman.
The House's energy bill is unlikely to abate the price of oil, which closed around $55 a barrel on Friday.
"An energy bill wouldn't change the price at the pump today," said President Bush in a speech on Wednesday. "I know that and you know that."
One portion of the bill, in particular, could send the price of energy up. The bill authorizes the Secretary of Energy to increase the Strategic Petroleum Reserve to 1 billion barrels, which would require the government to purchase nearly 300 million barrels.
"While it would be great to have that extra oil in our back pocket, you have to wonder how much it will affect prices, strictly in terms of supply and demand," said O'Leary.
The government's decision to buy oil now could be a sign that oil prices are going up, not down.
"This might mean that oil is a good buy today, and that the price is going to rise--which means we must now worker harder to reduce our dependency," said Coifman.
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