Senate and House committees are preparing for tough negotiations after the Senate overwhelmingly passed an energy bill that promoted more conservation and halved energy industry subsidies compared to a parallel House of Representatives bill.

The Senate’s bill includes $14 billion in tax breaks for conservation and energy production and rejects plans to drill for oil in the Arctic National Wildlife Refuge. Amendments to the bill weakened energy-saving requirements for air conditioners and vehicles. Alaska has been a contentious issue recently, forming an integral part of president Bush’s energy plan. He recently cited Iraq’s threat to cut production as a reason to use domestic resources. Oil majors and Alaskans have been seeking congressional approval for exploration and drilling in the refuge for the last 20 years. The $14 bn energy tax package is evenly divided between benefits for energy producers and those advocating conservation and alternative fuels. This is less than half the tax break total already approved by the House of Representatives which focused more on benefits to producers. Informed opinion suggests that the final result will be a compromise, perhaps $22 bn.

The Senate bill includes $4.4 bn for gas and oil producers, $3.2 bn for electric utilities developing clean coal technologies and for nuclear power plants, $4 bn promoting energy conservation and vehicle fuel efficiency and $2.3 bn to encourage renewables. Homeowners would receive around $300 in tax credits for fuel-saving, insulation, more efficient air conditioners and heat pumps.

On the whole the electricity sector has done well out of a bill that seems to produce no huge outright winners or losers. One prayer that has been answered is repeal of the 1935 Public Utiities Holding Act, (‘Pucha’) which has limited investment and inhibited the formation of independent transmission companies. Its repeal should also make company mergers and expansions easier.

A new mechanism, the renewables portfolio standard, would help promote wind, solar, biomass and so on by requiring suppliers and utilties to include renewable energy resources in their mix by 2020. The same clause sets up trading arrangements among electricity providers and allows for the trading of emissions permits.