On March 5, 2020, the United States Senate approved a motion to proceed on the American Energy Innovation Act (“AEIA”), S. 2657, after a cloture vote was called by Senate Majority Leader Mitch McConnell (R-Ky.) in order to move the bill to the Senate floor. The AEIA is a compendium of energy-related statutory provisions which was released in an omnibus, bi-partisan legislative package on February 27, 2020 by Energy and Natural Resources Committee Chair Senators Lisa Murkowski (R-Alaska) and Ranking Member Joe Manchin (D-W. Va.). Senators Murkowski and Manchin offered a substitute amendment featuring the full text of the AEIA (Amendment 1407) after the motion to proceed was voted-out affirmatively, and they are acting as floor managers for the bill.

Among other things, the bill focuses on advancements and development of energy storage and hydropower resources. In particular, as described in greater detail below, the bill directs FERC to initiate a rulemaking on cost recovery for storage assets and extends authorization for certain incentives to develop generation at non-powered or already-powered dams. The Committee held approximately 12 months of hearings on many of the proposed legislation’s components. If enacted, the bill would constitute the first major piece of national energy legislation since the Energy Policy Act of 2005, after a twelve-year hiatus in significant congressional activity.

Senate Bill Amendments & Prognostication for Enactment of Energy Legislation

Senate Majority Leader Mitch McConnell’s decision to move the AEIA for a floor vote is a strong indication that the bill, as introduced, will likely receive at least the votes of 51 Senators. That said, AEIA faces obstacles—as of the date of this blog, 182 amendments have been offered to the bill that are all over the political map, including extensions of offshore-Florida oil-drilling moratoriums, caps on electric vehicle tax credits, and reintroduction of Obama-era methane regulations. In particular, Senator John Kenney (R-La.), has threatened to object to each amendment unless his proposed legislation regarding proposed curbs on industry hydrofluorocarbon emissions is called for a vote.

Perhaps more importantly for WER readers, a bipartisan group of Senators has committed to introduce amendments that would legislatively overturn certain, recent FERC decisions affirming Regional Transmission Operator price floors, known as the “Minimum Offer Price Rule (“MOPR”) in PJM, and “Buyer-Side Mitigation” (“BSM”) in NYISO (see December 20, 2019 edition of the WER and February 26, 2020 edition of the WER). On March 5, 2020, Senator Chris Van Hollen (D-Md.) told reporters there is support on both sides of the aisle for legislation that would clarify states’ authority to establish their own generation resource portfolio mixes, without reference to whether such power plants meet the strictures of the FERC-approved MOPR/BSM rules.

On the House side, there has been no indication yet that Democratic leaders view the Green New Deal package, passed in 2019, as an appropriate vehicle for establishing a Conference Committee with the Senate, assuming passage of the AEIA. Capitol Hill analysts have posited that the AEIA is unacceptable to House Democrats due to its perceived support for fossil fuels and mining, and its general failure—in their view—to include targets or mandates for greenhouse gas emissions reductions. House Democrats, in particular, have signaled that AEIA is not acceptable because it does not extend renewable energy tax credits.

Energy Storage

Regarding energy storage, Subtitle C of the bill would establish RD&D programs for advancement of energy storage technologies, directing the DOE Secretary to conduct a competitive pilot project grant program to carry out at least five demonstration projects. The bill further directs cooperation between DOE and DOD for a storage “Long-Duration Demonstration Initiative and Joint Program.” The bill also sets aside technical assistance funding for municipals and cooperative utility involvement in storage.

Hydroelectricity & Pumped Storage

Section 1302 of the AEIA would amend the Reclamation Project Act of 1939 (P.L. 57-161, as amended) to reserve to the Secretary of the Interior exclusive authority for the development of certain pumped storage hydropower projects that exclusively use Bureau of Reclamation (“Reclamation”) reservoirs. Presumably, this provision would require only a lease of power privilege from Reclamation, and not a related FERC-issued license, for pumped storage projects “exclusively using” Reclamation reservoirs.

The Senate bill also expands and extends the Hydroelectric Production Incentive Program, which expired as originally authorized by the Energy Policy Act of 2005 (EPAct 2005; Public Law 109-58). As currently drafted, AEIA provides that the Hydroelectric Incentive Program will re-commence in 2021 and continue through 2036. AEIA expands the Program to include not only hydropower that is added to an existing dam or conduit, but also hydropower that: (1) has a generating capacity of no more than 20 MW; (2) has received a construction authorization from FERC; and (3) is constructed in an area in which there is inadequate electric service, as determined by the DOE Secretary.