1 TPPA PRESENTATION Robert Talley Talley & Associates, Inc July 22, 2014
Today’s Presentation Speed Review of Policy Issues Congress • Congressional Activity • Regulatory Activity • What’s Wrong? • GHG Regulation • Underlying Causes • Texas Delegation Assets Election Outlook • House Closing Thoughts • Senate • Impacts of Election
3 REVIEW OF CONGRESS
4 Congressional Overview • Partisan Divide Stalls Many Issues • House Passed Bills DOA in Senate • 2015 Appropriations Bills in process now; outlook uncertain • Lame Duck Anticipated Key Take-away: The 113 th Legislative Failure to Launch!
5 Congressional Overview • Understanding the Partisan divide • Voting blocks within the Senate and House have hardened • Magic 60: Threshold in Senate harder to attain Key Take-away: Partisanship in Senate can’t get worse
6 Congressional Overview Impact of Partisan Redistricting Increasingly Obvious: Partisan “Safe” districts increasingly the norm Key Take-away: Electoral map shaping Congressional voting
7 113 th Texas House Power Ranking • 3 rd Most Powerful State Delegation (behind CA & FL) • Of the 21 Standing Committees in the House: • House Science Committee Chairman Lamar Smith (R- TX) • House Homeland Security Chairman Mike McCaul (R- TX) • House Financial Services Committee Jim Henserling (R-TX) • House Rules Committee Pete Sessions (R-TX) • House Ethics Committee Mike Conaway (R-TX) • 3 of 12 Powerful Appropriation Subcommittee ‘Cardinals’ are Texans • Controlling spending on military construction, veterans affairs, foreign operations, and homeland security Key Take-away: Texas well placed to influence new laws if they were happening
8 POLICY ISSUES
9 Utility Policy Issues in 113 th Congress • Energy Efficiency Legislation • Broad, bipartisan support • Delayed in Senate due to procedural issues • Pent up demand for consideration of energy issues • Considered dead for year • Cybersecurity & Physical Security • House has passed legislation directing better information sharing and coordination between industry and the government • Senate Majority Leader Reid in mid-April said legislation was unlikely but in late April directed Committees to develop new legislation • Next Step: Senate Floor & then Conference Key Take-away: Uncertainty in legislative process even for popular items
10 Utility Policy Issues in 113 th Congress • Financial Issues • Tax Reform & Municipal Financing • House Tax package attacks muni tax exemption • Senate proposal never got momentum • Tax reform dead for year • Tax Extender package • Credits for Renewable Energy • Energy Efficiency Tax Credits • Considered likely in Lame Duck • Appropriations • October 1 Fiscal Year End • No Appropriations bills anticipated to pass prior to elections Key Take-away: risk for key financial tool lowered for near term but still real
11 Key Regulatory Issues • Greenhouse Gas Regulations • EPA’s Clean Power Plan • Traditional Pollutant Regulations • Cross State Air Pollution Rule • Ozone Standards • Solid Waste and Water • Coal Combustion Residuals • Effluent Guidelines • Cooling Water Intake Guidelines • Physical/Cyber Security Considerations • Gas/Electric market interaction – Reliability? • Quadrennial Energy Review Key Take-away: Regulatory risks exist but are identified and manageable
12 GHG Regulation • What it does: • 17% national reduction from 2012 emissions starting in 2020 • Reductions, calculated as emissions rate, vary by state • Built on four pillars of reduction culminating in 2030 reduction goal • Largely implemented at state level • Result is considerable uncertainty as to specifics • State’s don’t have to follow EPA model • Some early questions regarding legality of EPA’s approach • Decision to go ‘outside the fence’ in setting goals • Does SCOTUS Decision on Tailoring Rule ‘speak’ to EPA? Key Take-away: This is a marathon, not a sprint
13 GHG Regulation % TX CO 2 Rate Contribution Reduction Measure to Goal Improve coal efficiency 9% Increase natural gas 45% cc generation Increase renewables 31% Increase energy 14% efficiency Include at-risk nuclear 1% Source: Van Ness Feldman Law Firm Key Take-away: State reductions are significant; are they attainable?
What Might It Mean For Your Utility? State Options for Meeting EPA Goals Where Will Compliance Obligation Rest? Plant Efficiency • Wholesale Providers? • Retail providers? • Distribution Utilities? 30% Reduction Increased Env in GHG EE Dispatch Reporting Obligation? from 2005 by 2030 • Who will have to report what? • What will it entail? Increased RE/ARN Key Take-away: Uncertainty
15 ELECTION OUTLOOK
16 Election Outlook: House • 217 votes necessary to control House • Likely stays in Republican Control (198 “safe” R seats) • 42 Members Retiring (2R & 2D seats likely switch) • Less than 20 seats deemed ‘toss-up’ • Likely scenario suggests R’s retain 230-245 seats • No major leadership shake-ups seen • Loss of institutional Knowledge • 35% of House has less than 4 years experience • Potential for a majority of House to be in 4 th year or newer (62 or more Freshmen) Key Take-away: loss of institutional knowledge creates multiple problems
17 Election Outlook: Senate • Republicans need 6 seats to regain control of the Senate • Polling shows Obama approval at all time low; Republican voter ‘intensity’ much higher than Democratic ‘intensity’ • Democrats defending 21 of 36 seats; 7 in states carried by Romney Source: Larry Sabato’s Crystal Ball, July 7 Key Take-away: 3 months is an eternity in politics
18 Election Outlook: Senate • A Republican Senate; what happens ? • Significant change in national political dynamic • Messaging Issues for 2016 Presidential election: Supreme Court, Obamacare and women’s reproduction rights, EPA regulations, Energy development, Deregulation of Wall Street and Consumer Protection • Leadership changes: TX Senator John Cornyn #2 in Senate Leadership Key Take-away: 3 months is STILL an eternity in politics
19 Policy Issues in 114 th Congress Pent up demand to address a number of energy issues • Greenhouse gas emission • EPA regulation of electric concerns utilities • Natural gas fracking • Electric reliability issues related issues • Nuclear waste disposal • Energy infrastructure issues issues • National security issues • Energy market issues • Energy efficiency issues • Energy export policy • Long term energy tax issues policy issues Key Take-away: increasing pressure for energy legislation?
20 114 th Texas Committee Power Ranking • In addition to retaining most of the 113 th Committees • Retirement and Term Limit Impacts • House Ways & Means Committee Chairman Camp Retiring • Next in Line? Sam Johnson (R-TX), Kevin Brady (R-TX) or dark horse candidate Paul Ryan (R-WI) • House Armed Services Chairman Buck McKeon (R- CA) term limited • Next in line: Mac Thornberry (R-TX) • House Agriculture Chair Lucas (R-OK) term limited • Next in line: Ethics Chair Mike Conaway (R-TX) • Conaway loses Ethics Chair Key Take-away: Texas clout only increases in 2015
21 WRAPPING UP
Closing Thoughts • Just because the system SEEMS broken, doesn’t mean it is! • Congressional oversight will continue • Fewer laws doesn’t necessarily mean less policy change • Regulators continue to plug away • An Once of Prevention is Worth a Pound of Cure • Communications on utility priorities remain critical • Federal • State • Local Key Take-away: Ignore the Federal Government at your own risk!
23 Questions? Robert Talley Talley & Associates, Inc.
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