Bingaman draft outlines utility-only climate approach

It would mandate that electric utilities participate in a cap-and-trade program by 2012 but allow manufacturers and other industrial sources to elect to “opt in” to the program. While some manufacturers who do not participate would not receive free emission allowances to offset higher electricity costs, local distribution company allowances would go to residential consumers and certain industrials regardless.

The draft also would preempt industrial sources who participate from being regulated by the Environmental Protection Agency until 2018 and prevent a state from implementing or enforcing a comprehensive greenhouse gas reduction program with tradable emission allowances for the first five years.

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A “safety valve” — which Bingaman has also used in past climate bills he has drafted — would seek to limit the cost of a program to businesses. It would also establish an energy security dividend payment that resembles a cap-and-dividend approach favored by Sens. Maria Cantwell (D-Wash.) and Susan Collins (R-Maine). The dividends though would be based on energy intensity rather than on a per-capita basis.

On the other hand, utilities also would get fewer emissions allowances than under a House-passed cap-and-trade program, and some Midwestern utilities and lawmakers would balk at allowances being given based half on retail sales and half on historic emissions.

Bingaman spokesman Bill Wicker said the draft bill has gone through several iterations since the one written in April after talks on and off Capitol Hill, which he declined to detail. Bingaman also still has no plans yet to actually offer a plan, Wicker said.

But it does fall in line with what some have said is necessary to attract enough centrists in the two parties.

Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) have shifted from their initial push for a three-sector carbon pricing plan to one that focuses on utilities first and potentially later on manufacturers and other industrial sources.

“That would certainly be an ideal expression,” Kerry said Monday of the “utility first” option. But he added, “We’ve got to figure out where the votes are here, we can’t drive this exclusively by policy right now. It’s trickier than that.”

Kerry said a new plan “may have some voluntary components to it, some purely optional components to it.”

Centrist Republicans Lindsey Graham (R-S.C.) and Olympia Snowe (R-Maine) have advocated the utility-only approach, though both said this week they have yet to personally see any draft proposals.