Fortnightly
Budget Crunch Hits Climate Programs, EPRI/DOE Partnership
November 15, 1994
What does the Clinton Administration's global warming program have in common with a resourceful industry organization like the Electric Power Research Institute (EPRI)?
Money, for one thing. That filthy lucre. They both need those scarce federal dollars.
President Clinton unveiled his ambitious plan to reduce greenhouse gas emissions 13 months ago.
But while there has been progress toward its goal \(em to reduce U.S. greenhouse gas emissions to 1990 levels by 2000 \(em some are concerned over whether there will be enough funding to sustain the effort. The climate change action plan carries a hefty price
tag of about $1.9 billion in federal outlays through fiscal 2000.
The program made a tenuous start this year when a budget-conscious Congress halved its budget for fiscal year (FY) 1995, which began October 1 and runs through September 31, 1995. The Department of Energy (DOE) received only $107 million of its $208 million request.
Energy Secretary Hazel R. O'Leary calls the funding "sufficient" for the first year, but acknowledges, "We did not fare as well in the appropriations process as we had hoped due to the tight budget climate."
Reports are circulating that DOE and the Environmental Protection Agency (EPA) have submitted preliminary budgets for FY '96 that fall below the
FY '95 requests. The agencies won't comment, but they note that budget numbers will be crunched and revised for many more weeks, probably right up until January, when Clinton is required to submit his FY '96 budget to Congress.
Daniel Lashof, a senior scientist with the Natural Resources Defense Council (NRDC) and former EPA environmental scientist, is dismayed: "If such a budget were to emerge from the Administration, it would represent a retreat from the leadership that the President provided in the FY '95 budget . . .," which began to shift energy priorities away from nuclear and defense programs to energy efficiency and renewable energy programs.
The Administration will be under pressure from environmental groups like NRDC to take a stronger stand at the next global summit, the so-called First Conference of Parties, to be held in March in Berlin. They want the United States to join a handful of other nations in endorsing a protocol that calls for emissions reductions of 20 percent below 1990 levels by 2005.
The electric utility industry is warning Clinton not to go beyond what was already agreed at the 1992 Rio summit, saying it could jeopardize the nascent federal/industry partnership and voluntary programs. Dale E. Heydlauff, vice president of environmental affairs for American Electric Power Service Corp., says the inclination of U.S. utilities "might be to wait and make their business decisions based on the new requirements."
More than 800 utilities have committed to specific targets and projects to reduce or capture greenhouse gas emissions. This voluntary program, known as Climate Challenge, represents over 80 percent of U.S. generating capacity. In the next few months, utilities will begin to sign individual agreements with DOE, making specific commitments.
Heydlauff, chairman of the utility industry's coordinating committee for the Climate Challenge program, says companies are committing big bucks: $65 million over seven years to develop a geothermal heat pump, $50 to $150 million in venture capital for electrotechnologies to replace fossil fuels, and $12 million on the EV America program to put 5,000 electric fleet vehicles on the road by 1997. Federal contributions to these programs must be sustained in future years, Heydlauff says.
EPRI's Future
The Electric Power Research Institute (EPRI), feeling the pinch just like its utility members, has found a way to leverage its voluntary corporate funding by joining forces with DOE in a federal/
private partnership.
Last month, O'Leary and EPRI president Richard E. Balzhiser signed a formal "sustainable electric partnership" agreement. At the signing ceremony, they both emphasized the need for better cooperation; the prime reason, spelled M-O-N-E-Y, was never mentioned.
DOE funds approximately $2.5 billion a year in research related to utilities. EPRI, founded in 1972, has a $570-million budget this year, from approximately 700 member utilities.
Just as utilities are reinventing themselves to prepare for an era of increased competition, EPRI has downsized its staff and developed a new set of funding options for its members. Utilities are asked to pay 80 to 100 percent of their dues under EPRI's funding formula, which officials project will reduce next year's budget by 10 to 15 percent. As for program changes, EPRI will concentrate more on transmission, power delivery, and customer services, as opposed to the generation side of the business. EPRI's staff \(em 850 full-time employees \(em will be 15-percent smaller by the end of this year as a result of attrition and voluntary retirements.
The membership fluctuates, but two large utilities, Pacific Gas & Electric Co. and Arizona Public Service Co., have said they intend to drop out next year as they cut costs to the bone. "I think it is going to be difficult for utilities facing increased competition to sustain funding levels as they have in the past," Balzhiser said in a briefing with reporters.
That's why EPRI is restructuring itself to become more "agile" and still provide "the electricity technology leadership crucial for the next century," Balzhiser says. He sees the EPRI\DOE partnership as "a way to leverage money."
It's not just electric utilities that are facing the brutal forces of increased competition in the marketplace either. In May, the Gas Research Institute (GRI) signed a similar joint research agreement with DOE, after interstate pipelines threatened to stop funding the institute unless more segments of the gas industry helped pick up the tab.
Joining forces with DOE will not be a panacea for EPRI, however. When questioned about funding levels, O'Leary said she doesn't expect to ask Congress for any additional money for the EPRI/DOE partnership, beyond what is needed for ongoing programs. Seems that everyone is on a budget these days. t
W. Lynn Garner is senior writer of PUBLIC UTILITIES FORTNIGHTLY.
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