Since September 11th, issues like domestic energy usage have been
eclipsed by more pressing concerns, and high gas prices and rolling
black-outs in California no longer make headlines. Yet our energy
needs lie at the heart of our foreign policy in the Middle East, and the
roots of the current conflict can be traced back to our long history of
economic and political involvement in the region.
Having a reliable and affordable energy supply is integral to our
economic stability. As the nation with one of the highest rates of per
capita energy consumption in the world, we also have a responsibility to
develop energy usage patterns that will minimize damage to the
To achieve this, we must find a way to balance our energy supply and
demand using environmentally friendly, sustainable, and cost-effective
The U.S. has such a high level of energy consumption that we have to
supplement our domestic oil production with foreign imports, primarily
from the Middle East. During the energy crisis of the 1970s, oil embargoes
jeopardized the security of the U.S. electricity supply and energy bills
skyrocketed. Congress began establishing energy efficiency programs in
1974, mainly through Department of Energy initiatives, in an effort to
reduce dependence on foreign energy imports. By the late 1980s, states and
electricity companies had also started funding energy conservation
programs. Their primary motivation was to reduce demand and avoid having
to construct new power plants.
The issue of global warming provided another incentive for energy
conservation. The electric industry's coal-fired power plants are a major
source of pollution and greenhouse gases, and reduction of these harmful
side-effects of industry is now seen as one of the major benefits of
reduced electricity use.
However, opinion in Washington is divided as to how to encourage the
conservation of energy. Recent debate has revolved around budget and
conservation issues, as detailed in the Congressional Research Service
report, Energy Efficiency: Budget, Oil
Conservation, and Electricity Conservation Issues (July 2001).
The Department of Energy, House of Representatives, and Environmental
Protection Agency (EPA) each suggested different amounts of funding for
Energy Efficiency research and grants, and for Climate Protection Energy
Efficiency Program initiatives, for fiscal year 2002.
The CRS report also describes a recently proposed energy bill in the
House of Representatives, H.R. 4. This bill includes many of the
recommendations of the Bush administration's National Energy Policy
Development Group report, and the provisions of several other energy bills
currently in the House, including authorization to fund more research and
development of energy conservation strategies, tax incentives for
energy-efficient homes and vehicles, and higher fuel economy requirements
There are many ways to ameliorate our energy problems, though none is
an easy or a complete solution on its own. Investment in alternative
energies, research and development to produce more efficient systems of
fuel usage, and consumer-oriented programs to encourage conservation are
Ironically, economic theory suggests that increasing energy efficiency
doesn't always reduce rates of consumption. As described in the CRS report
Energy Efficiency and the Rebound Effect: Does
Increasing Efficiency Decrease Demand? (July 2001), the rebound
effect occurs when increased efficiency of production translates to lower
costs for consumers, and consumers then feel able to use more energy while
still paying the same amount. The rebound effect can cause the anticipated
reduction in demand from an energy conservation strategy to fall short by
as much as 40%. It makes it much more difficult to estimate the effects of
improved efficiency on important end results like greenhouse gas
Electricity restructuring is a huge undertaking that has the power to
either pave the way for renewable energy production and emissions
reduction, or else shut down renewable energy technologies and create a
system that will generate more pollution.
Virtually a monopoly until 1935, electricity companies were reined in
by the Public Utility Holding Company Act (PUHCA) and the Federal Power
Act (FPA), which aimed to prevent abuses of power by regulating interstate
utility companies. Fifty years later, the Public Utility Regulatory
Policies Act of 1978 (PURPA) was enacted in response to the energy crisis
in the 1970s. PURPA was intended to increase production and efficiency of
electricity generation, while providing better prices to customers.
The CRS report Electricity: The Road Toward
Restructuring (September 2001), provides a description of the
issues behind proposed PUHCA and PURPA reforms, and retail wheeling
(allowing customers to buy their electricity from the supplier of their
choice). Currently, 24 states and the District of Columbia have
implemented retail wheeling, and some are calling for federal oversight of
The effect of retail wheeling on the environment is unknown.
Electricity restructuring is causing some power companies in California to
reduce their spending on demand-side management (programs that encourage
consumers to use less electricity), since these programs are no longer
profitable in a system of state-based retail competition. This is causing
a decline in energy conservation. Environmentalists fear that federal
management of electric power could reduce demand-side management programs
even further. In addition, increased demand in some regions might prompt
utility companies to renovate their older, coal-fired plants, which are
traditionally more polluting than alternative energies.
However, a recent report from the Heritage Foundation suggested that
deregulation would force some companies to meet higher standards of
efficiency and cleanliness. Current and proposed additions to the Clean
Air Act would tighten the regulations on existing coal-fired plants.
As domestic energy needs grow, energy usage and efficiency will become
a critical issue. Developing a strategy of production and consumption that
will be economically viable and minimally polluting should be one of our
top national priorities.
Written by Heather E. Lindsay.