President George W. Bush signed the federal Energy Policy Act of 2005 into law on August 8, 2005.  This Act is the most comprehensive energy bill passed in more than a decade and will affect almost every facet of the energy business.

The new law is very complex, taking up 1724 pages of text.  Some of its principal provisions of interest to New Yorkers are the following:

Energy Infrastructure >

• Repeals outdated rules that discourage investment in new infrastructure, offers tax incentives for new transmission construction, and encourages the development of new technologies, such as superconducting power lines, to make the grid more efficient.
• Mandates enforceable transmission grid reliability standards that have been voluntary up to now.  The patchwork of standards around the country was found to be a contributing factor in the Northeast blackout that occurred in August of 2003.  The law specifically permits New York State to retain its own more comprehensive grid reliability standards.
• Creates incentives for new construction of natural gas pipelines.
• Clarifies federal jurisdiction to site new receiving terminals for liquefied natural gas (LNG) imports.
• Repeals the 1930’s era Public Utility Holding Company Act.  This will almost certainly mean an increased pace of electric utility company mergers in the next few years.

Energy Efficiency >

• Provides a tax deduction for new energy-efficient commercial buildings.  Authorizes deduction up to $1.80/square foot for buildings designed to achieve a 50% annual energy cost reduction for the end user as compared to a base building as defined by the 2001 model commercial code.
• Offers consumers tax credits of up to $500 on the amount they spend to upgrade thermostats, to caulk leaks, or to stop energy waste (maximum of  $200 credit for installation of new exterior windows, $300 credit for purchases of a highly efficient central air conditioner, heat pump or water heater, $150 for installation of a highly efficient furnace or boiler).
• Provides a 10% investment tax credit for expenditures with respect to improvements to building envelope. [The elements of the building, including all external building materials, windows, and walls, that enclose the internal space].
• Offers tax credits for contractors who build energy-efficient homes and manufacturers who make energy-efficient appliances that could lower prices for consumers ($50-$200 per refrigerator, $100 for clothes washers, and up to $100 for dishwashers).
• Provides builders a credit up to $2,000 for a home that saves at least 50% compared to the 2004 International Energy Conservation Code (IECC) code, and $1,000 for an Energy Star manufactured home.
• Provides homeowners a credit for 10%, for up to $500, of the cost of installing building envelope components consistent with the 2000 IECC. The building envelope includes the elements of the building, including all external building materials, windows, and walls, that enclose the internal space.
• Extends Daylight Savings Time for two months starting in 2007 to maximize daylight hours and reduce the need for artificial lighting. 
• Creates new DOE initiatives for encouraging greater use of electric real-time pricing and demand response programs through public education and funding of technology pilots.
• Sets new minimum energy efficiency standards not previously covered under federal law for a range of consumer and commercial products, including heaters, refrigerators, and lighting units.  In general, these provisions are not as stringent as the New York State appliance and electrical equipment requirements enacted earlier this year.
• Authorizes a study by federal agencies and other entities of state and regional policies to promote cost-effective programs to increase end-use energy efficiency.
• Authorizes 3-7 state pilot programs, with $25 million in funding, to develop plans and programs designed to reduce electricity and natural gas consumption or demand by at least 0.75% per year.

Low-Income >

• Increases the authorized funding level for the Low Income Home Energy Assistance Program (LIHEAP) from the current level of $2.0 billion to $5.1 billion per year.  LIHEAP, which is administered by the State, assists low-income families with paying their energy bills.
• Increases the authorized funding level for the Weatherization Assistance Program (WAP) to $700 million per year by FY 2008.  WAP, which is administered by the State, helps fund energy efficiency investments for low-income homes.

Governmental Action >

• Provides $30 million per year in grants to local governments to assist in planning, designing and financing of new and existing energy efficient public buildings.
• Provides $30 million per year to local governments and nonprofits to plan and promote adoption of energy efficiency, renewable energy, and distributed energy resources in urban and low-income communities.
• Provides $90 million per year for partnerships with local governments and other entities for public education programs for promoting energy efficiency.

Renewable Energy >

• Offers consumers a tax credit of up to 30% of the cost, or up to $2,000, for installing solar-powered hot-water systems used exclusively for purposes other than heating swimming pools and hot tubs.
• Provides production tax credits for wind, solar, and biomass energy through 2007.
• Provides tax credits for installing fuel cells or micro-turbines: 30% credit up to $500 per 0.5 square foot installation.
• Expands research into developing hydrogen technologies and establishes a flexible, national Renewable Fuels Standard to encourage greater use of renewable fuels like ethanol and biodiesel.
• Reforms hydropower licensing process.
• Requires an annual assessment of all renewable energy resources including solar, wind, biomass, ocean, geothermal, and hydroelectric energy sources.

Vehicles >

• Offers, starting in 2006, hybrid-car buyers and advanced lean-burn technology vehicles tax credits of up to $3,400 per vehicle in tax credits to consumers for purchase of these cars, based on their fuel savings potential.
• Provides tax credit up to $12,000 to businesses for buying large hybrid vehicles.
• Provides tax credit of $8,000 for fuel cell powered vehicles weighing less than 8500 pounds.
• Sets a new national minimum requirement for the use of biofuels, particularly corn-based ethanol: 4 billion gallons in 2006, and 7.5 billion gallons in 2012.
• Provides various tax incentives for producers of ethanol and biodiesel.

Other Energy Sources >

• Offers a new form of federal risk insurance for the first six (6) builders of new nuclear power plants.
• Authorizes research on shale and tar sands as sources of petroleum.
• Offers incentives for oil refineries to expand their capacity.

Federal Government Energy Usage >

• Reauthorizes the Energy Savings Performance Contract program, which allows private contractors to help federal agencies improve the energy efficiency of their facilities.
• Sets aggressive new goals for federal energy efficiency (reduction by 20% below 2003 energy use levels by 2015).
• Directs DOE to set standards for new federal buildings to at least 30% below existing standards if cost-effective.
• Directs all federal buildings to be metered or submetered.
• Allows agencies to retain energy cost savings to invest back into energy efficiency or renewable energy projects, and requires agencies to purchase efficient Energy Star products.
• Requires the federal government to buy at least 7.5% of its electricity from renewable energy sources by 2013.

Issues of General Public Interest Not Addressed in the New Law >

• No mandatory provisions on greenhouse gas limits or global warming.
• No change in corporate average fuel economy requirements for motor vehicles.
• No provision permitting oil drilling in the Arctic National Wildlife Refuge (ANWR).
• No provision on liability protection for producers of MTBE.  MTBE, or methyl tertiary butyl ether, is a gasoline additive used to reduce air emissions, but which has been found to seriously compromise groundwater when it leaks from gasoline storage tanks.
• No renewable portfolio standard (RPS) that would mandate targets for use of renewable energy sources.  New York State already has such a target: 25% of energy used in 2013 is to be derived from renewables, primarily hydroelectric and wind power.  The current level of renewable power use is approximately 18%, almost all of it from large upstate hydropower projects.
• No replacement tire standards that would set minimum fuel economy requirements for tires, such that replacement tires on average are at least as efficient as tires on new vehicles. 
  No provisions for testing, labeling, information or incentives.
• No provision to develop and implement measures that would set target reductions in U.S. oil demand.