% CONGRESSIONAL RESEARCH SERVICE LIBRARY OF CONGRESS Issue Brief In-«J: an .-- -1- A5}-HNGTON VYJMEVERSETY NOV 171989 . gzztw 3‘ E7 35 \_.,‘\'r'?- xi-““ “”" O ;¢..;.;nmmm.*r »na»«vnmjr;u,»ua;nagmmia«»»«m O3 . ( _‘ ‘- 9:-~:.'f. ,~ _::‘r:,_i‘'' ‘ ‘ E-.=u."‘:~a--.‘5 1‘? Q‘ ENERGY MANAGEMENT AT THE STATE AND LOCAL LEVELS: BLOCK GRANTS ISSUE BRIEF NUMBER IB79064 AUTHOR: Parker, Larry B. Environment and Natural Resources Policy Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM DATE ORIGINATED 06/07/79 DATE UPDATED 02/16/82 FOR ADDITIONAL INFORMATION CALL 287-5700 0217 CRS- l IB79064 UPDATE-O2/16/82 SSUE DEFINITION What roles should State and local governments have in energy conservation programs? Currently, Federal programs to assist the States in providing energy conservation services are authorized from a variety of different laws. In an attempt to better coordinate these programs, several bills have been introduced into the Congress. In the 96th Congress, the Administration-backed bill was the Energy Management Partnership Act (8. 1280). An alternative bill was the Community Energy Act, introduced in the Senate (5. 2576). Related bills provided for grants to cities and counties (H.R. 5640, H.R. 5649, H.R. 59ll). In the 97th Congress, a new bill has been introduced by Rep. Aucoin to provide grants to local communities and Indian Tribes (H.R. 849). In July, the Reagan Administration introduced its energy block grant bill, S. 1544. These bills raise questions concerning Federal-State-local relations regarding energy planning and implementation. What is the proper interface between State-local-Federal energy policy groups? How much flexibility should State and local government have in implementing energy policy? BACKGROUND AND POLICY ANALYSIS The mixture of local-State-Federal governmental involvement in energy resources varies according to the resource. Nuclear power and natural gas are national fuels; the roles of State and local governments are limited. In sontrast, conservation is local. National laws, DOE regulations, and presidential-exhortations will not, by themselves, save energy. However, energy audits and revised housing codes might. To assist the State in providing energy conservation services, the Federal government has authorized a number of programs. There are currently five major pieces of legislation concerning Federal assistance to States for conservation: (1) Energy Policy and Conservation Act -- EPCA (P.L. 94-163); (2) Energy Conservation and Production Act -- ECPA (P.L. 94-385); (3) National Energy Extension Service Act (P.L. 95-39); (4) National Energy Conservation Policy Act (P.L. 95-619); and, (5) Emergency Energy Conservation Act (P.L. 96-102). EPCA prescribes the development of State Energy Conservation Plans with provisions for lighting efficiency standards, promotion of carpools, energy-efficient State procurement procedures, thermal efficiency standards, and provisions for permitting "right—turn on red after stop." ECPA expanded these provisions of EPCA to include a public education concerning all aspects of energy conservation. The Act provides for a "supplemental State Energy Conservation Plan" which may be submitted and developed regardless of whether the State has filed an approved Stat Energy Conservation Plan. — In l977, Congress enacted the National Energy Extension Service Act to provide a program of identification, development, and practical demonstration of conservation opportunities. The program has two major components. The first is the establishment of a technical support institute at one or more ‘olleges or universities within a State as designated by the governor. The second is the implementation of an Energy Extension Service within each State. The latter requires the States to draw up plans for implementing the Service. The final conservation plan required by the Federal government is CRS- 2 IB79064 UPDATE-O2/16/82 the State Residential Energy Conservation Plan required by the National Energy Conservation Policy Act. Finally, the Emergency Energy Conservation Act, requires States to submit a State Emergency Conservation Plan. To provide better coordination among these programs, the Carter Administration proposed the Energy Management Partnership Act (S. 1280/H.R. 4382). EMPA would have provided for Federal government grants to State ‘and local governments to administer Federal energy programs and their own. It was the successor to S. 3283, State Energy Management and Planning Act (SEMPA), introduced July 12, 1978. The Senate Committee on Energy and Natural Resources held hearings on SEMPA on Sept. 14, 1978 (S.Rept. 95-156), and on EMPA on Feb. 25 and 26, 1980. EMPA would have amended the Energy Policy and Conservation Act of 1975, providing for consolidated grants to the States including some pass-through to local governments. It would have authorized $105 million each year. The States would have had to contribute 20% of the total amount. This would have meant an average grant of $2 million per State. Combining the Federal grant with the State share would have given $2.4 million under this program for the average State. (See Senate Committee on Energy, "A Critique of the Energy Management and Partnership Act," July 1979, publication number 96-20.) In proposing EMPA, the Department of Energy sought to consolidate program administration at the Federal and State levels; to simplify grant procedures; to encourage a comprehensive and coherent energy planning and management system within each State; to guarantee, within the context of national goals, that flexibility of approach that unique State and local conditions demand; and to provide for the coordination of State and local efforts with national policies and Federal programs. In his transmittal letter, President Carter noted: Congress in recent years has established a number of energy programs designed to assist States and local governments in achieving more efficient use of energy. Two State conservation planning programs were separately established by the Energy Policy and Conservation Act lenacted in late 1975 and the Energy Conservation and Production Act adopted in 1976. with enactment of the National Energy Act (NEA), still other responsibilities must be assumed by States and local governments although Federal funding for some NEA programs is not provided. Experience strongly suggests that these programs could be made more effective if they, as well as other State energy-related initiatives, were carried out as part of an overall State energy plan. The effectiveness of these programs could be increased by assisting States in establishing a mechanism for their integration at the State level. This legislation addresses the concerns which Governors, local officials and others have raised regarding the need for better coordination in energy activities carried on at every level of government. Much more can be done if State and local energy agencies, working in partnership with the Federal government, are permitted to seek their own solutions to their energy problems. In the 97th Congress, Congressman Aucoin introduced H.R. 849 to provide CRS- 3 IB79064 UPDATE-O2/l6/82 for grants to local governments for development of conservation plans and programs. These direct grants to localities would diminish the role of State governments, responding to local governments’ complaints that the States do ot pass through enough funds. The Community Energy Act (S. 2576) was an alternative measure introduced to increase the role of local government in energy conservation. The Community Energy Act was the successor to the Local Energy Management Act (8. 1537) and the Community Efficiency Act (S. 1829). The bill had three parts: (1) Community Energy Block Grants; (2) Community Energy Project Grants; and (3) Technical Assistance Programs. The Community Block Grants of S. 2576 were direct Federal-local grants, bypassing the States, similar to grants now proposed under H.R. 849. As stated by Senator Tsongas: The Community Energy Act represents a pioneering effort to go beyond where we are today in terms of implementing a national policy. It is clear that local government -— not Washington -- has the greatest capacity to identify local energy needs and problems. The Federal Government lacks public confidence and credibility. It cannot match local government in using the ingenuity of our human resources. This legislation recognizes that the best national energy policy is one designed and implemented in the town hall, the city council chamber or the neighborhood. The new Administration's initial response to these programs and their proposed consolidation was to recommend termination of them. The component vrograms under EMPA, the Energy Extension ‘Service and State Energy gonservation Programs, were to be "zeroed out" for FY82. As stated in the DOE revised budget justification: "These programs have created new bureaucracies while doing little to promote conservation." The belief of the new Administration is that higher prices will promote conservation more efficiently than government programs. As stated by OMB Director Stockman: ...we believe that more far-reaching reforms can and must be taken to address the concerns we share. The President's budget reform plan has sought to consolidate as many narrow categorical grants as possible into a few block grants to facilitate reduction of State and local overhead and to permit State and local officials to allocate funds to the most urgent areas of need. In keeping with this principle, and in light of the powerful market incentives being created by higher energy prices, the Administration has proposed to terminate the categorical grant programs that would be reauthorized by S. ll66. Such an argument, proponents of such programs will suggest, ignore significant social and institutional barriers to conservation. Congress has not agreed E0 the Administration's proposal for elimination ‘f these programs. In the Reconciliation Act, the Congress authorized 376 iillion dollars to fund these various programs and recommended that they all continue. iln recognition of this congressional support, the Administration in July backtracked from its original position. Faced With an attempt t0 CRS- 4 A 1379054 UPDATE-O2/l6/82 reauthorize all DOE categorical grant programs (S. ll66), the Administration introduced a counterproposal entitled the "State and Local Energy Block Grant Act of l98l" (S. l544).f As stated by OMB Director Stockman: ...Under these circumstances reconciliation funding for grant programs , in a spirit of compromise, the Administration would not oppose legislation authorizing a State and Local Energy Block Grant for energy supply, conservation, and low-income weatherization activities which would repeal and replace all the existing categorical conservation grant programs, including the Residential Conservation Service, and for which funding would be authorized at a level not in excess of $200 million per year. While the Administration has stated it will not oppose this legislation, it has refused to commit itself to funding it when the appropriation bills are debated. ' This "no strings attached" block grant approach differs sharply with the approach President Carter suggested in EMPA. Some of the questions this approach raises are discussed below. A " A if A f f""”‘" ‘” A “if if 1. EFFECTIVENESS. A principal reason given for State energy block grants is that they will improve the administration of the various programs. Categorical grants are seen as too restrictive to meet actual need and impose heavy monitoring burdens on the States and localities. It is asserted that State and local management will increase the effectiveness of these programs at less cost. However, there is no guarantee that money will be so allocated by the State. S. l544 does not require the State to have a State energy plan or other document to indicate needs and suggest allocation of resources. Hence, certain programs which are not politically attractive -- such as low-income weatherization —- but are very cost effective, may lose out. This problem is exacerbated by the inclusion of energy supply with energy conservation in S. l544. Second, some of the programs a block grant would replace require a significant technical capacity which most States currently do not have. It would probably take States a year or more to develop such a capability, delaying the implementation of some programs and reducing effectiveness. Third, the effectiveness of the Nation's conservation effort may be hampered by the funding level suggested and the inclusion of energy supply into the block grant. There is little evidence that States will be able to make up the difference in current funding levels and those proposed by S. 1544 through increased efficiency. Most States are in a serious financial bind and are cutting services to their citizens. With the low funding level recommended in S. l544, combined with increased matching formulas for State participation, the national energy conservation effort could be seriously hampered. Finally, opponents of block grants maintain that the State is a“ inappropriate level at which to deal with energy. They note that the energ market is national, not local. It transcends State boundaries. Attempts to deal with it at a State level will be meaningless, ineffective, or harmful. For example, most of the refineries for the Northeast are located in New Z:-\ CRS- 5 IB79064 UPDATE-O2/16/82 Jersey and ‘Pennsylvania. There seems no logical rule, Connecticut or Maryland State plan with respect to refining. say coal is a fuel for which State planning is not appropriate. Dundaries are irrelevant to markets for coal and petroleum, S. for, say, a Similarly, they while State l544 allows «States to include such energy supply sources in grants. It is feared that reliance on States to implement national energy policy will lead to excessive localism. The 1973-74 oil boycott showed some of the ill effects of localism. Because the Federal Energy, Office allocated gasoline by state, states competed against each other for supplies. Similar competition occurred in the spring of 1979. Governor Brown flew, to Washington to seek more gasoline for California. Nevada planned to buy gasoline so tourists could continue to drive to and from its resorts. Autarky is the term economists use to describe self-sufficiency., While energy autarky has some validity for a nation concerned with its military and economic security, it would be fatuous for each of the 50 States to seek autarchy. Yet, this is a danger opponents see in energy management at a State level. 2. EQUITY. An energy block grant approach to funding energy conservation also raises a question of equity. A principal reason behind some Federal conservation programs is to assist low-income persons in coping with rising energy prices. This facet of energy conservation has become more important as government policy promotes increased costs for energy to encourage conservation and domestic production. Over have Many problems beset market incentives to assist low-income families. one—half of low-income households live in rental housing, and landlords «little financial incentive to save energy since the cost can be transfered to "he tenant. There is concern that, without a Federal States .ill overlook this important aspect of energy policy. mandate, some Besides low-income persons, other interests which do not respond to market incentives -- schools, hospitals, and universities -- will be competing for block grant monies. However, 25 States have constitutional prohibitions against the use of State funds for private or sectarian institutions. Hence, some institutions that need money for energy conservation may be prohibited from getting it. Besides coordinating activities with the Federal State energy agencies must also interface with local communities. 3. IMPLEMENTABILITY. government, In the past, this interface has sometimes been unsatisfactory to local governments which are seeking a larger role in management. Harvey Ruvin of the National Association of Counties has given two reasons for this larger role: (1) local governments are closer to the people and (2) local governments have the regulatory tools (building codes, zoning, etc.) to implement and enforce the policy. Agreeing with this position, proponents of H.R. 849 have provided for a direct Federal-local connection for the processing of community block grants. Opponents of this provisions feel that the State should be involved in the activities of its local communities and that some State flexibility in developing State-local interactions% ought to bet allowed. This question was a major consideration during Senate deliberations on S. 1280. Senators wishing to give States some role in the administering of community block grants proposed a "pass-through" provision o the grants. This pass-through" provision would provide that all money -eceived by local communities would be passed through the States, informing them of local activities. The amendment was defeated on the Senate floor. CRS- 6 , IB79O64 UPDATE-O2/l6/82 The Reagan Administration block grant approach leaves the question of State/local interface to the States. Although grant blocks provide flexibility to the States in shaping State/local relationship, pas experience does not indicate the resulting relationship will be any more satisfactory than the current situation. A second question of implementability is the coordination of these bills with other Federal programs. How will the proposed bills meshi with other laws, such as the Clean Air Act, the Natural Gas Policy Act, the Coastal Zone Management Act, and so forth? How will they relate to programs like impact assistance, "208" water planning, and others? LEGISLATION H.R. 849 (Aucoin) Provides for grants by the Secretary of Housing and Urban Development to local governmental units and Indian tribes for the development of energy conservation plans and programs. Introduced Jan. 16, 1981; referred jointly to the Committees on Banking, Finance and Urban Affairs and on Energy and Commerce. 9 I S. 1544 (McClure) Provides for block grants by the’ Secretary of Energy for energy conservation and supply activities. Introduced July 30, 1981; referred to Committee on Energy and Natural Resources. HEARINGS U.S. Congress. House. Committee on Interstate and Foreign Commerce. Subcommittee on Energy and Power. Local energy policies. Hearings, 95th Congress, 2d session. Washington, U.S. Govt. Print. Off., 1978. 657 p. "Serial no. 95-135" Hearings held May 22, June 5 and 9, I978. --—-- State Energy Management and Planning Act. Hearing, 95th Congress, 2d session, on S. 3283. Sept. 14, 1978. Washington, U.S. Govt. Print. Off., 1978. l27 p. . "Publication no. 95-156" U.S. Congress. Senate. Committee on Energy and Natural Resources. Subcommittee on Energy Conservation and Supply. Community Energy Efficiency Act of 1979. Hearings, 96th Congress, lst session. Washington, U.S. Govt. Print. Off., 1980. 68 p. "Publication no. 96-84" —-~-- Energy Management Partnership Act of I979. Hearings, 96th Congress, lst session. Washington, U.S. Govt. Print. Off., 1980. 74 p. "Publication no. 96-92" CRS- 7 IB79064 UPDATE-O2/l6/82 SPORTS AND CONGRESSIONAL DOCUMENTS Stockman, David. Letter to Senator Mcclure, July 17, 1981. Printed in Congressional Record, July 30: 1981: _S8862. U.S. Congress. Senate. Committee on Energy and Natural Resources. A critique of the Energy Management Partnership Act (EMPA). Washington, U.S. Govt. Print. Off., 1979. At head of title: 96th Congress, lst session. Committee print. . "Publication no. 96-20" ----- Energy Impact assistance: a background report. Washington, U.S. Govt. Print. Off., 1979. At head of title: 96th Congress, 1st session. Committee print.i 7 OTHER CONGRESSIONAL ACTION N/A~ CHRONOLOGY or EVENTS N/A ADDITIONAL REFERENCE SOURCES Aron, Joan. jntergovernmental Politics of Energy. Policy Analysis 5(l979): 451-469. Cortner, Hanna J. Formulating and implementing energy policy: the inadequacy of the state response. Policy Studies Journal, v. 7, Autumn 1978: 24-29. Council of State Governments. State energy organization charts. Lexington, Ky. 1976. 46 p. Northeastern Legislative Leaders Energy Project. Energy policy making in the northeast: a directory of state programs and institutions. _washington, National Science Foundation 1977. 102 p. "NSF/RA-770213" Nye, Peter. How city hall conserves energy and tax dollars. Nation's Cities, v. 15, February 1977: 18-19, 22. Describes the energy conservation programs initiated by U.S. city governments. The conservation efforts focus on the use of energy in municipal buildings, by city vehicles, and in public works projects. R. Rycroft. Bureaucrat responsibility in the Federal Energy Administration. The Bureaucrat, v. 6, Fall 1977. CRS- 8 IB79064 UPDATE;Q2/l6f82 sorenson,aJayWfi., Greenfield, Rand. New Mexican nationalism and the evolution of energy policy in New Mexico. Natural Resourcesaflournal, v. 17, April 1977: 283-300. U.S. Dept. of Energy. Energy impact assistance; report to the President. Washington, U.S. Dept. of Energy, Assistant Secretary for Intergovernmental and Institutional Relations, l978. l v., (various pagings) "DOE/IR—OOO9"