Tuesday, August 30, 2005

The Energy Bill And Your Bills

WSJ.com - The Energy Bill And Your Bills

Law Heading Toward Passage
Includes Incentives to Change
Appliances, Windows and Cars
July 28, 2005; Page D1

After five years of trying, Congress is expected to clear an energy bill this week that provides a range of incentives for consumers to rein in energy use.

While the $14.5 billion in tax breaks and incentives over 10 years are primarily targeted at energy companies, there are a number of consumer provisions, including tax breaks on energy-efficient appliances, cars and even solar power for homes.

The changes won't likely lead to significant conservation efforts, and Energy Secretary Sam Bodman says the bill would do little to ease gasoline prices in the near future. Still, consumer and environmental groups say a number of provisions will provide a nice break for those who already were thinking about buying a hybrid vehicle or installing a solar-power system at home.

Stuffed with all sorts of provisions, the bill is one of the most sweeping pieces of energy legislation in years. It also represents a compromise that drops some long-contentious issues, including a Bush-backed effort to open the Arctic National Wildlife reserve to oil drilling. Critics say it doesn't do enough to wean the nation off its dependence on imported oil.

For consumers, one of the biggest changes appears to be a four-week extension of daylight-saving time -- a provision that excites a wide range of companies, from candy makers, who see better Halloween sales, to the charcoal industry, which sees consumers spending more of their twilight hours barbecuing in the backyard.


Here's how the energy bill could affect what we buy:

• Incentives to buy fuel-efficient appliances

• Incentives to buy hybrid vehicles

• The extension of daylight-saving time

• Expanded use of ethanol as a gasoline additive

• Reliability standards for power grid (aimed at preventing blackouts)

• Incentives for installing solar power at home

Here is a rundown of the consumer provisions -- and how to make the most of them:

Energy-Efficient Homes

Most of the tax breaks are for upgrading heating, air conditioning and appliances.

In addition, consumers could get a tax credit of 10%, as much as $500, on the amount they spend to upgrade thermostats, to caulk leaks or to take other steps to stop energy waste. To keep down the overall cost of the provision, there is a $200 limit on the credit for replacing windows. The credits go into effect Jan. 1, 2006.

Steve Baden, executive director of the Residential Energy Services Network, a nonprofit company that creates programs to save energy for many federal and business office buildings, suggests that consumers get an energy rating for their homes. The cost of an energy audit for most two or three-bedroom homes is about $400. Mr. Baden says the rating will pinpoint the areas the consumer should fix; he generally recommends making the repairs or upgrades that will lead to significant savings on heating and electric bills.

The bill also gives tax breaks on purchases of some new energy-efficient appliances. Brian Castelli, executive vice president and chief operator of Alliance to Save Energy, cautions that consumers will want to make sure the appliance actually saves them more in energy costs than the premium price costs them.

The bill also gives a tax credit of 30% of a consumer's expenditures on solar energy, with a cap of $2,000. The break, however, specifically excludes solar systems to heat swimming pools.

Tax Credits for Hybrid Cars

One of the biggest new tax breaks is an auto industry-backed tax credit, valued at thousands of dollars for some vehicles, for buying a hybrid car -- one that uses both gasoline and electricity -- or a vehicle powered by electricity or fuel cells. The tax credit, which replaces a less generous tax deduction, is linked to the weight and fuel efficiency of the vehicles.

For fuel-cell-powered vehicles weighing less than 8,500 pounds, for instance, the base credit will be $8,000; heavier vehicles will get bigger credits. Additional credits are offered for cars and light trucks that are more fuel-efficient than 2002 models. (A tax credit gives the taxpayer a dollar-for-dollar reduction in his or her taxes.)

The tax breaks for hybrids are smaller, and the bill limits the number of hybrids sold by any one manufacturer that can claim the credit. The pending highway bill has additional incentives to encourage the purchase of hybrids, which in general are $3,500 to $5,000 more expensive than standard vehicles. Most of the credits apply to vehicles purchased or leased from the beginning of 2006 through the end of 2009.

For cars powered by natural gas, liquefied natural gas, any liquid fuel that is at least 85% methanol or certain other alternative fuels, the tax credit is based on a complex formula that factors in the cost, weight, emissions and fuel efficiency of the vehicle.

The energy bill also extends an existing tax credit, for as much as $4,000, for buyers of electric cars or those powered by rechargeable batteries.

Daylight-Saving Time Extension

Daylight-saving time would be extended by four weeks, beginning in 2007. In the spring, it would begin on the second Sunday in March instead of the first Sunday in April; in the fall, it would be extended for one week, ending on the first Sunday in November.

Opponents talk about how schoolchildren will walk in the dark to get to school. The proponents talk about getting more days of sunshine, a Halloween where children can trick or treat before dark and more cookouts and barbecues. It also is expected to save each household 1% of its energy bill.

The airline industry fought the provision and says it is likely to result in higher ticket costs. The airline industry would have to adjust its schedules and might not be able to operate as many flights.


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