On June 3, 2011, the United States House of Representatives Committee on Energy and Commerce, Subcommittee on Energy and Power, held a hearing on H.R. 909, A Roadmap for America’s Energy Future, sponsored by Representative Devin Nunes (R-CA).  While H.R. 909 includes provisions that address issues like the Outer Continental Shelf, oil shale, nuclear concerns, the Arctic National Wildlife Refuge (“ANWR”), and Environmental Protection Agency’s Greenhouse Gas regulations, much of the discussion during the hearing focused on the reverse auction proposal contained in the bill. 

In his written testimony, Rep. Nunes stated that he was proposing the reverse auction approach because renewable energy companies are “frustrated” with the lack of “predictability” surrounding the existing Production Tax Credit (“PTC”).  Rep. Nunes explained that his proposed reverse auction program would provide such certainty by establishing a renewable energy Trust Fund to receive deposits from federal lease and royalty revenues, which would then be made available to renewable energy producers through a bidding process.  The reverse auction would be administered by the Department of Energy (“DOE”), and the lowest bidders would win.  Under Representative Nunes’ plan (H.R. 909), the reverse auction program would not end the PTC, but instead would require a winning bidder to make the choice of either the PTC or funding from the Trust Fund.  During his opening statement, Representative Nunes stated that he would be willing to separate the provisions for the reverse auction from the rest of H.R. 909 if it could gain bipartisan support. 

Representative Henry Waxman (D-CA) was initially critical of the reverse auction proposal, maintaining in his opening statement that the mechanism would be unlikely to support renewable energy because of its “flaws.”  However, during the hearing, Waxman seemed to change his position, stating that he may have been too harsh in his opening statement and that the reverse auction was “worth exploring.” 

Neil Auerbach, managing partner of Hudson Clean Energy Partners, testified at the Hearing in support of the reverse auction, which he believes “would provide for consistent and efficient support for renewable generation.”  While Auberbach supported the reverse auction approach, he offered “suggested improvements” to the mechanism in H.R. 909.  Auberbach suggested that the Reverse Auction Authority (“RAA”) purchase energy and the associated Renewable Energy Credits (“RECs”) from generators under long term Power Purchase Agreements (“PPAs”), in addition to allocating money from the trust fund.  The RAA would then sell the RECs to interested purchasers and sell the power into wholesale or bilateral power markets.  Auerbach testified that this approach could allow for the establishment of a truly national REC market, lowering the compliance burden on utilities and the cost to ratepayers, without the need for a Federal mandate.  Auerbach also recommended that the monies in the Trust Fund not be subject to annual appropriations, so that the Trust Fund would be able to provide renewable developers with a steady source of support without the need for any actions by Congress.

A link to prepared testimony and statements at the Hearing is available here.