by Roger Feldman -- Bingham, Dana L.L.P.
Many serious energy policy issues loom over our country, as this is written in the high summer of ’03. Gas prices are rising. IPPs are still crumbling. Threats of power shortages loom up, despite the well-advertised capacity glut. (Who knows, there might even be a blackout of the whole Northeast-Midwest quadrant!) Iraqi oil is not flowing and, more fundamentally, the consequences of America’s Mid-East overdependence vividly streaks every aspect of U.S. foreign policy.
Fortunately, innovations in government – both at the Federal and state levels – suggest novel effective approaches to energy issues that can resolve these and other thorny issues. I call them the “4Rs”: reruns, recalls, retrade and repo.
TV, of course, discovered re-runs years ago; environmentalists discovered recycling; but Washington bureaucrats have failed to take into account the extent to which old policies, white papers, and even (though far less often) future projections can be reused. Consider, “Natural Gas Crises” (circa 1975), Project Independence (circa 1973), nuclear power revitalization (circus maximus). Indeed, not all statistical studies need to be scrapped. Old ones pejoratively labeled “outdated” – like those on automobile fuel consumption, air emissions and utilities – can be reissued with snappy new titles, like “I SUV Oil,” “Coal Busters,” “Rate-based Regulation: Key to Cost Control” (per-haps even, “Closing the Grid funding Gap”). Thus shall the recycled old give strength to the perilous new?
"Mr. Cheney, who was at the energy strategy summit you chaired?” “I don’t recall.”
Having done that, we can turn to how the California model can be laser-targeted to energy policy. Recall deregulation: focus the Terminator on national security needs and appease the ex-Exterminator from Texas by proving that energy policy has not gone soft. Vote yes or no for your current Energy Team. Then vote for anybody at all to replace it. Surely for the public at-large, no one could be grayer than Gray Davis, except perhaps the current energy brain trust. “What Wood/Abraham have done” has not yet become a policy benchmark in the world of uncertain energy policy to assure the perpetuation of the Administration’s program.
So who will the write-ins be? Beside the losing California write-in candidates, we might see Ken Lay, the author of CERA’s forward cost projections, S. David Freeman, Amory Lovins and various other scholars of the medium. The hydrogen crowd will back General Clark; the nuclear crowd the shades of Admiral Rickover. (There might even be a write-in for the author of “NERC’s Last Look.”) There are skeptics who might suggest that this would not place a strong enough hand at the tiller of energy policy. How can a single person possibly know when and where disaster may befall our energy economy, and where we should apply our scarce resources to avert it?
Retrade Fortunately, the folks at DoD’s DARPA, until recently under Admiral Poindexter’s guidance, have discovered an approach to that issue of which systems planners would be proud. Set up an exchange where people can bet what will go wrong next: where follow-the-money, smart (or in-the-know) people know what to put their bets on. Modeled on the wisdom gained from the sadly aborted experiment of a Terrorism Exchange, the new Blackout Exchange will provide opportunities for informed speculators to bet on when the grid will next go down, where, and for how long. With this information, system operators should be better able to assist national security (or make small change on the side by “shorting” the market). It may be linked as well to financial trading market forecast systems.
For them, there is yet another governmental innovation – “Repo” – recently tried out in Texas, where they sent the Texas Rangers (the cops, not the president’s old ball team) to capture legislators fleeing a gerrymander steamroller; and in Washington, D.C. itself, where the Capitol Police were sent after legislators boycotting a legislative blitzkrieg. (Gives “reliability standard” a new meaning.) What energy law needs is a little more “law and order” enforcement.
In the coming months, we look forward to an energy bill really suited to our national problems, and to renewed civility in government. Reruns (along with the other Rs) are for summer. Just in case, however, we have a very large battery with us in our insulated cave to run our DVD.
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.