Volts podcast: Sen. Tina Smith on the promise of a Clean Electricity Payment Program

In this episode, Sen. Tina Smith (D-MN) discusses a policy that
she has proposed in the Senate and is working to get included in
the upcoming reconciliation bill: a Clean Electricity Payment
Program (CEPP), which would aim to reduce carbon emissions in the
US electricity sector 80 percent by 2030. She also shares some
excellent thoughts on the filibuster!


Full transcript of Volts podcast featuring Sen. Tina Smith
(D-MN), September 1, 2021


(PDF version)


David Roberts:


There are lots and lots of policies being discussed for inclusion
in the Democrats’ upcoming budget reconciliation bill, from a
childcare tax credit to universal pre-K to a wide range of
climate and clean-energy measures.


According to the office of Senate Majority Leader Chuck Schumer
(D-NY), the climate provisions in the bill would collectively
reduce total US greenhouse gas emissions 45 percent below 2005
levels by 2030 — getting us close to America’s Paris agreement
pledge.


Schumer’s numbers have not yet been backed up by outside
analysts, so they should be taken with a grain of salt for now.
But what’s clear, and unlikely to change, is that the bulk of the
emission reductions will come from the electricity sector —
specifically, from the clean-energy tax credits and the Clean
Electricity Payment Program.


As regular Volts readers know, the Clean Electricity Payment
Program is a version of the more familiar Clean Energy Standard
that has been modified to fit within the rules of budget
reconciliation. It would set up a federal program that would
offer utilities financial incentives to increase their proportion
of clean energy and levy fines on those that failed to do so. Its
goal would be to reduce emissions from the US electricity sector
80 percent by 2030.


As Schumer’s graph shows, the Clean Electricity Payment Program,
in combination with the extension and expansion of the
clean-energy tax credits, would be responsible for almost 42
percent of the bill’s total reductions.


To hear more about the program and how it will work, I talked
with Minnesota Senator Tina Smith (D), the policy’s sponsor and
its greatest champion in the Senate. Smith is one of the handful
of senators with in-depth knowledge of the dynamics in the US
electricity sector, and she’s deeply involved in budget
negotiations, so I was excited to ask her about how the program
would work, what kinds of jobs and projects it might produce, how
it might affect coal states, and of course, because I am me, what
she thinks about the filibuster.


Senator Tina Smith, thank you so much for coming on Volts. 


Sen. Tina Smith:


Well, thank you, David. It is terrific to be with you. 


David Roberts:


We're going to talk today about clean electricity policy and the
politics of getting it passed, which are two of my very favorite
subjects in the world, so let's just dive right in.


Senator Smith, I’m pretty confident that Volts listeners are
familiar with state-level policies, renewable portfolio standards
or clean energy standards at the state level, that mandate that
utilities in the state increase their proportion of clean energy.
It’s a regulatory mandate passed by the state government; these
are familiar, there are dozens of them across the country.


The Clean Electricity Payment Program that you have proposed is
not quite that. So why don't you start by telling us what it is
and how it is similar and different to these more familiar state
policies? 


Sen. Tina Smith: 


Well, the basic goal is the same. We want to move the power
generating sector so that it is adding clean energy. One way of
doing that is to have a regulatory framework that says, you will
add clean energy, and if you don't, you'll pay a penalty. But
another way of achieving that goal of adding clean power is to do
what we're doing with the Clean Electricity Payment
Program. 


This is a plan that says: We will provide financial incentives to
utilities to add clean power; there'll be a fee if you fail to
add clean power; and our goal is to get, on a national average,
80 percent of our power generation from clean energy sources by
2030.


So the goal is the same: adding clean power. The mechanism is a
little bit different. 


I think this mechanism has some real advantages, because under a
regulatory framework, adding that clean power costs money in the
short term (though it saves money in the long term) and often
those costs are passed on to ratepayers. With the clean
electricity plan that we're proposing, this federal incentive
would defray the costs that utility ratepayers would normally
pay. That's the real advantage of this approach.


David Roberts: 


It’s worth pointing out something I've heard from a couple of the
architects: costs on ratepayers tend to be regressive, whereas
federal money comes from more progressive income taxes. So you
get a progressivity advantage by drawing the money from the
federal pot.


Sen. Tina Smith: 


Absolutely. That's exactly right.


We need to be on this path to a clean energy transition, but what
you don't want to have happen is for the cost of that transition
to be disproportionately borne by people who can least afford it.
This is especially important to me, because the costs of the
fossil fuel economy have been disproportionately borne — in bad
health outcomes and in all sorts of other external costs — by
poor people, Black and brown people, people who are sited right
next to freeways or right next to that coal-burning power plant.


David Roberts:


The details of this thing obviously matter. I'm curious, to what
extent are the details of the program fixed and in place vs.
being negotiated right now? Do we know the size of the payments?
Are we sure that the target is going to stay the same through
negotiations? What's in place and what's still up in the air?


Sen. Tina Smith: 


Well, of course, everything is in the midst of being negotiated
all the time, as you well know. Negotiations will be finalized
when the budget reconciliation bill is completed. 


But for me, there are a couple of key aspects of this. One, the
goal of achieving 80 percent clean power in the power sector
nationally, on average, is set in stone. That was described in
the Democratic budget resolutions that we passed at the end of
the last session. That is described as the goal of the president.
So to me, that's the starting point. 


Then there are a couple of other things that are crucial to this.
One is that this clean electricity plan is technology neutral,
which means we don't say this kind of clean energy is better than
that kind of clean energy, or it must be renewables vs. carbon
capture, for example. That technology neutrality is clear. 


Also clear is the core idea that each utility starts from where
they are, and they improve from there. This is a big deal,
because some utilities and regions are already well along the
path of adding clean power, and others are just starting. You
don't want to unfairly penalize that utility that maybe is only
at 10 percent clean power. 


David Roberts:


Can you expand on that a little bit? Utilities are at very
different places — financially, in terms of power mix, etc. How
is the plan customized on a per-utility basis? If I'm a
coal-heavy utility, what does it look like to me?


Sen. Tina Smith:


If you are a coal-heavy utility, this is very much in your favor,
because you need to figure out how to add clean while you have a
lot of assets in coal power. Rather than having your utility
ratepayers end up having higher rates in the short term because
you're adding new, clean power capital infrastructure, this would
help you to add clean.


You may be a utility that's only 10 to 20 percent clean; so under
our plan, we would still ask you to add clean power every year at
a percentage level yet to be negotiated, at a pace that is moving
you strongly and speedily in the right direction. 


But there's no expectation that a utility that starts at, say, a
10 percent clean power percentage must catch up with a utility in
the Pacific Northwest that relies heavily on hydropower and may
easily get to 85 or 90 percent clean within a 10-year period.


At the end of that 10-year period, you're going to have some
utilities that are over 80 percent, and some that are below 80
percent. The utilities I speak to that are farther along will
probably argue that it's harder for them to add that incremental
20 percent of clean, whereas the utility that’s starting with
ample, untapped renewable resources, you could argue that they
could add quicker.


David Roberts: 


So there's a national average target, but it's not that each
utility has to hit that same target.


Sen. Tina Smith:


That is exactly right. That's the flexibility. It makes it much
more appealing to utilities that are not as far along the
curve. 


David Roberts:


This brings up another question. You're trying to figure out from
our present vantage point what level of payments and what pace of
change would yield 80 percent by 2030. It seems like it's hard to
know right now exactly what those numbers are.


So if the program is put in place, and payments are at a certain
level, and the pace of change is set at a certain level, and it
turns out in 2024 we find out we're not on track to hit the
national target, are there provisions in place to adjust those
numbers as we go?


Sen. Tina Smith: 


That is a great and interesting question. I'm now going to get
really wonky into the details about Senate process, because what
we're using here is a process called budget reconciliation, which
is a budget-driven process. What that means in practical terms is
that much of the implementation and the rules around how this
plan gets implemented will be left to the Department of Energy.
They are writing the rules, because this is a budget process,
it's not a regular process. 


But let me see if I can answer your question a little bit at
least. One thing I would point out is that historically, the cost
curve of clean power has gone down more quickly than we
anticipated. So it seems to me that, particularly for solar, for
which we know the cost is going down really dramatically, we are
just as likely to see power added more quickly than we originally
anticipated as taking longer than we anticipated. 


The overall question about how the Department of Energy would
write the rules to accomplish this would probably end up being
addressed in rulemaking. It gets to the question of: what do you
anticipate? What do you think is going to happen? The way that
we've designed this is based on a ton of modeling from the
Department of Energy, and also from outside groups who have
expertise in modeling.


That gives us a good framework for making some assumptions about
how this is going to pan out in the real world.


David Roberts:


You've said before that you don't actually expect utilities to be
fined very often, since they'd be dumb not to take incentives
that are on the table. But are there protections written in about
where the fines come from? And how the incentive payments are
used? How closely is that specified in the bill?


Sen. Tina Smith:


This gets at a real strength of the policy. First of all, the
answer is yes, we want to write into this what are allowable uses
for the incentive payments. It could be building out clean
resources. It could be deploying carbon capture technology. It
could be adding energy efficiency resources to a system, because
if you think about it, if you are reducing electricity demand at
the same time that you're adding clean, the percentage of clean
of your overall system goes up faster. So that would be an
allowable use.


I speak to utilities and power generators that have coal power
plants or natural gas plants that they want to phase out, but
they have a stranded asset; you could potentially use these
resources to help to retire those resources more quickly. 


Then, similarly, we need to have rules around who bears the cost
of the penalties, in order to protect ratepayers as much as
possible.


But as I said, this isn't like the old cap-and-trade mentality,
where a utility is looking at this and saying, my cost of paying
the fee is lower than making the investment — this just isn't set
up that way. That's a strength.


David Roberts:


It's a little bit more transparent than cap-and-trade; the money
is more in the headline and less something you have to
deduce. 


How do you pitch this program to a person — say, for instance, a
friend of yours named Joe — in a coal-heavy state, with a lot of
coal-related jobs? Fossil fuel-heavy states have traditionally
been resistant to things like this because they feel like they're
starting on the back foot. In terms of both the power mix and the
job mix, how do you pitch this program to a coal state?


Sen. Tina Smith:


It's interesting. I think about answering that question from the
perspective of a place in Minnesota that is similar in many ways
to parts of West Virginia, which is Minnesota’s Iron Range. This
is a part of my state where the bread and butter of the economy,
and historically the culture and the source of pride, has been
mining iron, and then taconite, and producing the iron that has
driven the economy of the United States.


There is a real sense in that part of Minnesota, just as I think
there is in West Virginia — though Joe Manchin knows way more
about West Virginia than anybody — that this economy is getting
passed by. There are new opportunities out there, but is it ever
going to come to me, to my community, to my world? 


That is one of the real strengths of this idea. First of all,
clean power, including renewable energy, is rural energy. That's
where it is most likely developed. In fact, West Virginia has
abundant renewable energy assets that are waiting to be
developed. If you care about wanting to be a part of this
clean-energy transition — which is, by the way, going to happen —
the question is: Do you want to lead? Do you want to be in the
forefront of that? Or do you want to be behind?


The opportunities for West Virginia, and other states that are
part of the traditional fossil fuel economy, to seize this
moment, to move forward with the kinds of proposals that Joe
Manchin has put forward, like the American Jobs in Energy
Manufacturing Act, and deploying carbon capture and storage
technology, and taking advantage of the skills and expertise of
the working folks in West Virginia to drive those innovations —
to me, that's all about being in the forefront.


In fact, the West Virginia University Law School just put out a
really excellent summary of what moving to this clean energy
future could mean for West Virginia in terms of increase in
employment, growth, and state GDP, opportunity for new investment
that creates new jobs. It demonstrates where the opportunity is,
in West Virginia and other places.


David Roberts:


As a matter of fact, I just posted a piece yesterday about West
Virginia and that study. One of the interesting things about that
study is it shows pretty substantial benefits for West Virginia,
but the analysis was done before the Clean Electricity Payment
Program was on the table. So the Clean Electricity Payment
Program would more than double all those benefits; the amount of
money that could flow into the state from federal coffers just
through the Clean Electricity Payment Program is pretty enormous.


Sen. Tina Smith:


It is. It's such a perfect case study of how, the way that this
is structured, along with the other clean and renewable energy
tax credits, is actually a giant boost to employment and jobs,
and not a gloom and doom, “we're going to all have to sacrifice
because the climate is warming” mindset that has too often been
the way that these issues have been approached.


David Roberts:  


Of course, the question for West Virginia is: compared to what?
What is the alternative? Coal is on its way out, according to the
markets, so it’s now or never. 


Sen. Tina Smith:


That's exactly right. Coal demand has gone down substantially,
and as I said, this transition is occurring. A lot of times
people will point to, why should we make sacrifices in the United
States when we see China increasingly being a source of carbon
pollution? What I like to point out is that China added
substantially more wind and solar resources than the United
States over the last 10 years or so. They are making significant
investments in wind and solar, not to mention electric vehicles
and other new energy technologies. So, let's lead on this.


David Roberts:


How much of a sacrifice is it, really, to get more GDP and more
jobs and less air pollution and better health outcomes? Pretty
nice sacrifice as sacrifices go.


Sen. Tina Smith:


But I think we also can acknowledge that, as a very dear friend
always loved to say, everybody loves change as long as it happens
to somebody else. You could understand why Minnesotans who live
on the Iron Range, or coal miners that live in Wyoming or West
Virginia, are questioning whether at the end of the day these
benefits are actually going to come to them and their
communities. So it is incumbent upon us to make sure that we're
putting in place the policies that make sure that happens. 


I've spoken with Secretary Granholm about this a lot. She gets
this, not only from being head of the Department of Energy, but
being a former governor. You have to have a real place-based
strategy for making sure that these benefits don't just happen
anywhere, but they happen specifically where they need to. It’s
the same issue as the environmental justice needs we have as
well.


David Roberts: 


A couple of broader questions about the politics of this. One of
the vexations about US policy these days is that it seems to
swing back and forth wildly depending on who's in charge. We saw
Obama pass a bunch of stuff, and then Trump take over and spend
four years frantically undoing it all, and now it's being redone.
Is there anything about the Clean Electricity Payment Program
that will make it resilient, even if Republicans take back over
Congress and/or the presidency?


Sen. Tina Smith:


What you just said makes the strong argument for why it is so
important to make these kinds of policy and budgetary decisions
legislatively, rather than through executive action. You're
absolutely right. When Obama was so tired of being stymied by a
recalcitrant Congress, he took steps through his executive power
with the Clean Power Plan, for example; that and other steps that
he took around renewable fuel standards and so forth are
relatively easy to wind back. 


But I think there's another lesson here, which is when you
legislatively pass budget bills that are not only smart policy
but are broadly approved of by the public, it becomes very
difficult to unwind them. I look at the case of the Affordable
Care Act — the Republican Party opposed that, spent how many
years, over and over and over again, tried to unwind it, with no
policy to replace it, because they really didn't know what their
other idea was — that became more and more popular. Ultimately,
they failed in unwinding it because people liked it. 


The same can be said of this clean electricity plan, because
polling data shows that this is the direction people want.
Businesses know this too. This is why businesses like Walmart,
and Kroger, and others, are saying, oh, our customers want more
clean power. This is what they want. There's a lot of public
pressure to move in this direction. 


David Roberts:


Notably, both large employers in the state of West Virginia.


Sen. Tina Smith:


Yes. It's interesting, I was just looking at this: The percentage
of people in West Virginia that are employed in coal is 2
percent. So again, similar to Minnesota's Iron Range, it looms
large in the history and the economic foundation of the state,
but it's a relatively small percentage.


David Roberts:


In some ways this is the energy analogue of Medicaid expansion,
in that it is the federal government saying: you need to do this;
let us pay for it. Some states have resisted Medicaid expansion,
but none who have accepted it have reversed it. Once you're
getting it, you don't want to stop getting it.


Sen. Tina Smith:


That's right. To further that analogy: We could conceivably have
designed a plan that would have been state-based rather than
power generator-based, and I think that your point is one of the
reasons why it's good that this is power generator-based. They're
going to be making investment decisions and economic decisions
that will support advancing this. 


David Roberts:


Right, and it’ll be hard to unwind those. 


On a broader level, some people in the Senate have raised worries
about spending too much money and running up the deficit and
exacerbating inflation. One, do you worry about that at all?
What's your take on the worry about deficit spending? And two, if
the overall spending number gets haggled down, how safe do you
feel that the energy money is in those negotiations? Is it going
to be on the chopping block if there are cuts to be made?


Sen. Tina Smith:


Well, not if I can help it.


Broadly speaking, when we are looking at the overall size of the
Build Back Better budget, I don't hear people in Minnesota
saying, “Oh, Tina, this amount of money is too much, $3.5
trillion is too much, but $3.1 trillion would be OK.” I don't
think that that's how people are thinking about it. They're
thinking about, how is this going to affect me and my family?
That's sort of the cliche of talking about legislative policy,
but I actually think that it's real. 


Certainly, as we go through this negotiation, and we have to come
up with a plan that is agreeable to all 50 Democratic senators,
there's going to be some haggling and some back-and-forth. To me,
the most important thing is that we don't give really strong
policy and budget proposals like this a haircut so that they
don't work anymore. We’ve got to make sure we don't do
that. 


But the other question you asked is an interesting one too, about
budgets and deficit spending and so forth. I would just point out
that when we write this bill, at whatever size it is, it's going
to be paid for. So that's a good thing. In fact, when you look at
how Americans feel about the Democrats’ budget bill, one of the
things that they like the most is that it is paid for by asking
the wealthiest Americans and big corporations to pay their fair
share. That seems fair to them, and it seems right. It generates
resources in order to do these things that are going to build up
our economy and lift up our communities in powerful ways.


David Roberts:


I have been somewhat confused that the deficit concern seems to
come up again and again, even in the context of a bill that is
explicitly paid for. It seems like something people say almost by
instinct now in DC.


Sen. Tina Smith: 


That's right. In Washington, David, maybe you've noticed, there
is sometimes a disconnect between rhetoric and reality.


David Roberts:


What?! Yes, I'm skeptical that there is any human being that has
genuine concern about the deficit as a primary motive in their
heart. That always sounds like an excuse to get at something
else.


Sen. Tina Smith: 


Right. The bipartisan infrastructure bill that is moving through
Congress, that passed the Senate with 69 votes, is about
investing in infrastructure, including some important strategies
for advancing this clean energy transition with electric vehicles
and charging stations — that was bipartisan, and probably not
completely paid for. I would say, shoot, you're investing in
roads and bridges and broadband infrastructure that's going to be
around for 60 or 70 years; that's what states do all the time, is
borrow to pay for long-term assets. So to me, that's not a big
deal.


David Roberts: 


Right, and putting in place long-term assets drives economic
growth, which is the best thing for wiping out a deficit. OK, we
won’t get stuck ranting about deficits, I could do this all
day. 


Also on the broader politics of this: energy and climate people
are watching this unfold from the outside with white knuckles.
There's this two-track strategy: you’ve got the bipartisan
infrastructure bill, and then you’ve got the reconciliation bill,
which together are supposed to be the full agenda, the full
package.


But there's been a lot of fights and strains lately about whether
to keep those two bills linked; there was a fight in the House
about it just last week. Do you think that linking those two
bills is the right way to go, and do you think that you're going
to be able to keep them linked?


Sen. Tina Smith: 


It is absolutely right to link these two bills. To me, they're
rafted together. My support for the infrastructure bill, which I
think is a good bill, is contingent on understanding that we have
all agreed that we're going to move forward the reconciliation
bill together. The two-track process divided up a broad agenda
into two chunks, but we still need to pass that broad agenda for
the good of the American people and for the good of people in my
state. 


One of the things that I've learned about legislating in the
relatively short time that I've been in the Senate is that you
have to have a clear idea of where you're heading. In this case,
the Democrats are heading towards passing these two big bills.
Then you have to be flexible and incremental about how that
happens as you move through the process.


And then there's just a pileup at the end, and then you get it
done. I'm not looking forward to the pileup, but I expect that
it’ll happen. That is the reality of working in a democratic
process, where there's 100 people in the Senate and 435 people in
the House that all have very clear ideas about how they want to
get things done.


David Roberts: 


In my political lifetime, I’ve never seen a situation quite like
this, where there are 50 Democrats and every single one of them
has to agree.


Sen. Tina Smith


I know. It's kind of terrifying.


David Roberts:


It gives every single one of them the ability to blow the whole
thing up. People are focusing on Manchin and Sinema, but really,
every senator could blow it up. But at the same time, if they
blow it up, they all go down together. There's going to be a game
theory study about this some day. 


Sen. Tina Smith:


That’s right. But at the end of the day, this broad agenda is
broadly popular. It is what Joe Biden ran on; it’s not like it
got pulled out of thin air. It's what he talks about, and what so
many of us talked about during our campaigns in 2020. So you're
right: the price of taking this down because you didn't get
absolutely everything you wanted, because it's a little bit more
money than you wanted to spend, that seems to me to be a heavy
price.


David Roberts:


There's no half failure here. It's all success or all failure.


Sen. Tina Smith: 


One for all and all for one.


David Roberts:


Along the lines of unity, and the question of how to legislate in
today's politically dysfunctional atmosphere: What is your take
on the filibuster? This is not directly related to the
reconciliation bill, but in a sense, Democrats are forced now to
basically run the vast majority of their agenda through the
reconciliation process because of the filibuster. That shapes
what policies they're capable of doing and excludes some policies
that people would like to see, like voting reform, potentially
immigration reform, etc. So what's your take on the filibuster
personally, and the attitude of the Democratic caucus about the
filibuster? Do you see that changing at all or shifting?


Sen. Tina Smith:


Personally, I believe that the filibuster rule ought to be thrown
out, and I didn't come to that easily. I believed for a long time
that it was important that hard-won rights couldn't be taken away
by a simple majority in the Senate. I cared about that one,
because I spent a lot of my life working on women's reproductive
rights, and I imagined a world where a majority of the Senate
could strip away those incredibly precious rights. 


But my perspective on this has really changed. I came to
understand how fundamentally undemocratic it is to require a
supermajority to get anything done. I also came to see that the
filibuster, which is the right, basically, to debate or to talk
as long as you want to — that that isn't really happening in the
Senate these days. It's not as if Mr. Smith is going to
Washington and making impassioned speeches on the floor of the
Senate. Mr. Smith is sending his staff member down to say, “I’m
putting a hold on that piece of legislation.”


David Roberts:  


Right. It's a memo.


Sen. Tina Smith:


Exactly. Truth be told, the Senate already structurally leans
towards giving strong power to less than a majority of the
voices, because the 50 Republicans in the United States Senate
represent only about 43 percent of the American public. So what
do we do because of the unwillingness of some to change these
rules that also have an ignominious history? We develop
workarounds like the reconciliation package, that allows us to
pass significant and important legislation with a simple majority
at the end of the day. It doesn't make any sense.


David Roberts:


It's not what you would write out if you were sitting down to
write out a coherent legislative process. How common do you think
that opinion is in your caucus? It’s either got to be done in the
next two years or not at all. Do you think there's any chance of
opinion thawing or shifting within that timeframe? Or is this
just something people should write off?


Sen. Tina Smith:


It’s hard for me to see a world where people just change their
minds on the filibuster. However, I would look for other ways
that Senate rules could be reformed so that they make more sense,
so that the Senate can function better, and maybe, possibly,
changing the rules around ending debate for particular pieces of
policy — though that's maybe more my wishful thinking than
anything else. We have to seize this moment that we have to take
action on climate, a moment that I don't think will be replicated
for many years. We don't have time to waste. There is an urgency
of seizing this moment, and that's what a lot of us are working
really hard to do.


David Roberts: 


Well, on that note, thank you for your work. Thank you for
pushing so hard for this, and thank you for taking the time
today. 


Sen. Tina Smith:


It's great to talk with you. Thanks a lot.


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