Fueling Reform : New Law Means Lower Prices, Bigger Role for Natural Gas, Executives Say

Incentives to buy alternative-fuel vehicles and energy-efficient homes are among the ways that the nation’s sweeping new energy law will touch the daily lives of consumers.

But the National Energy Policy Act of 1992--signed into law by President Bush last week--also mandates broad changes that will have a growing effect on consumers in the decades ahead. And utility executives foresee both lower prices for energy and a different mix of energy sources.

“The legislation gives natural gas a greater role in our country’s energy future,” says Richard D. Farman, chairman and chief executive of Southern California Gas Co. “The legislation means increased use of natural gas in many applications--electric power and in commercial and industrial sectors.”

Indeed, Texas oil and gas entrepreneur T. Boone Pickens, who is also chairman of the Natural Gas Vehicle Coalition, has predicted that the new law will increase the number of natural gas vehicles on American highways from 50,000 now to 200,000 by 1994. The law also gives substantial support to research and development of other natural gas technologies.

Renewable energy sources from solar to geothermal will get federal support in a variety of ways, including new funding for research and development.

The law gives independent power producers access to electricity transmission lines--until now largely controlled by the big utilities--allowing them to better compete as energy suppliers. Ultimately, this competition is expected to lower energy costs to ratepayers.

“The whole trend is toward independent power generation,” says Michael R. Peevey, president of Southern California Edison Co. “And the evidence by and large is clear that competition inspires lower costs” in energy production.

The law provides a potentially significant boost for commercial development of non-gasoline vehicles by requiring that, by the year 2000, up to 75% of the cars and trucks purchased annually by federal and state agencies run on alternative fuels. This should encourage car makers to invest in new factories and, eventually, bring these vehicles to market for the general public.

The law’s support for energy-efficiency programs, in which utilities help subsidize purchases of high-efficiency appliances and commercial and industrial equipment, could also help California as the state struggles to rebuild its economy and stop business from fleeing to other states.

“Our demand-side management programs are geared to helping our customers become more efficient and to help them be more competitive in a world market,” says Donald J. Wood, senior program planner at San Diego Gas & Electric Co.

“And we know there have been cases where our customers have improved their efficiency and have been able to stay in California because of that.”

Slowing the Growth

While demand is projected to continue to increase, the U.S. Department of Energy estimates a slowing of the growth from conservation provisions in the National Energy Policy Act of 1992.

U.S. energy use in quadrillion British thermal units (BTUs) Current policy: 1950: 33 1960: 44 1970: 66 1980: 76 1990: 81 2000: 100 2010: 118 Under new energy bill: 2000: 99 2010: 110 Source: U.S. Department of Energy

What the Energy Law Means to Consumers

Electricity generation: Provisions that increase competition in electricity production, including increased use of natural gas, will save the average household $750 over the next 15 years, according to the U.S. Department of Energy.

Alternative-fuel vehicles: Buyers can take tax deductions up to $2,000 for alternative-fuel vehicles. Electric car buyers get an even bigger boost--a tax credit of 10% of the price, up to $4,000. Service stations installing alternative-fuel refilling facilities get up to a $100,000 tax deduction.

Tax credits: These are extended for electric power generation from wind, biomass, solar and geothermal resources. Advocates say this will lower rates to consumers over the long term.

Rebate taxes: Consumers who get rebates from their utilities for increasing their home’s energy efficiency no longer pay taxes on the rebates.

Mass transit: Employers can now subsidize employees’ costs by up to $60 a month--from the previous maximum of $21--without having to pay taxes on the subsidy. Cost remains fully deductible for the employer.

Employee parking: To encourage mass transit, an employee will now have to pay taxes on employer-subsidized parking when the subsidy is more than $155 per space. In the past, the subsidy in effect gave the employee free parking.

Energy-efficient mortgages: Home buyers can get better mortgage terms for buying energy-efficient homes, which will be rated much as refrigerators now are. Good insulation, for example, lowers home utility bills and qualifies the home buyer for a higher monthly mortgage.

Research and development: Plans call for more programs to improve technology for natural gas, ethanol, renewable energies and coal used in homes, transportation and industrial settings. Improvements are expected to reduce natural gas prices to consumers by 12% by the year 2010.

Sources: Southern California Edison, Southern California Gas, U.S. Dept. of Energy