EIA's updated energy subsidy data: same research mandate as last time; same problems likely

My original information suggesting that Senator Lamar Alexander had put in a new request for EIA to update its work on energy subsidies turns out to have been incorrect.  The actual requestors this time were from the House side:  Congressmen Jason Chaffetz, Marsha Blackburn, and Roscoe Bartlett.  I'm grateful to the office of Congressman Chaffetz for providing a copy of the request they submitted to EIA in this matter.  That request is included below.

While not submitted by Alexander, the request is nonetheless almost identical to the letter Senator Alexander put in last time around.  Congressman Chaffetz' office said this was done purposefully so the data could be compared to earlier studies. In my view, replicating the old scoping is quite unfortunate.

While the comparability is certaintly a benefit, it is not inherently so.  First, as I documented last year there have already been substantial changes in EIA's methodology over time so the time series is already problematic.  Second, identical scoping means that the more troublesome of the assumptions and policy omissions in the 2007 study will be replicated in the 2011 release.  This is a far more important deficit than a time series between 2007 and 2011 is a benefit.  The Congressmen could just as easily have empowered a more robust research mandate for EIA, and asked the authors to highlight in a table or chapter how those changes affected the time series data.  A summary of how changes in assumptions, data, or other factors influence comparability from study-to-study would be a good thing for EIA to be including anyway.

Aside from the specific problems that using the Alexander research mandate will generate in understating the overall magnitude of energy subsidies and distorting their distribution across fuels, there are a number of broader policy issues that warrant consideration:

  • Does EIA or any other statistical or oversight agency (e.g., GAO) of the federal government have the right to enter into a dialog with Congressional requestors over the scope of work they are being asked to do, or are they mere order-takers?  This would be important both in terms of resources required to complete the requested task, and with respect to the relevance and accuracy of the results that this expenditure of governmental time and taxpayer resources will generate.
  • If EIA did have this right, but didn't exercise it, why not?  Clearly the subsidy study is widely cited and of interest to a much broader audience -- even within Congress -- than the three members who put in this particular request.
  • When such a request for a non-routine analysis of broad interest to the Congress is placed, should there be a process by which EIA or other statistical agency can vet the scope to a somewhat wider audience -- at least within Congress -- before embarking on the research?  Such input at the early stages could result in a much more robust and useful product, but becomes increasingly difficult to integrate once research is well underway and a delivery time has been commited to. 
  • Finally, if EIA did in fact work through the terms of reference with the requestors and determined the existing structure was appropriate, this too would be a problem.

 

Honorable Richard G. Newell
Administrator
U.S. Energy Information Administration
1000 Independence Ave, SW
Washington, DC 20585

Dear Dr. Newell:

I am writing to request that the Energy Information Administration (EIA) update the report entitled Federal Financial Interventions and Subsidies in Energy Markets 2007 with the latest available data, preferably for fiscal year 2010.  The information in this report has been used extensively by legislators and the public, providing a compendium of data on federal financial involvement in electricity markets that has proven invaluable.    An update using the same approach as the previous report would be very beneficial to Congress and the energy community.

As in the 2007 report, I am requesting that you provide a comparison of the subsidies in the electric power sector for each fuel type (oil, natural gas, coal, nuclear, wind, solar, geothermal, etc.), reporting both the overall annual cost of the subsidy and the annual cost per unit of electricity generated  (e.g. cost per megawatt hour).  As with the previous report, the scope of the study should be limited to subsidies provided by the federal government that are energy-specific and that provide a financial benefit with an identifiable federal budget impact. The analysis should include the following type of subsidies: tax expenditures, (e.g. deductions, credits, and loan guarantees), direct expenditures (e.g. direct grant programs), federal research and development programs targeting electricity and its fuel inputs, and federal electricity programs (e.g. support for the Bonneville Power Administration). If a significant change to the amount or scope of the subsidy since the 2007 report has occurred, a detailed explanation for the change should be documented in the report.

It would be most helpful if the updated report could be made available to the Congress no later than the beginning of 2011.

Thank you for your assistance in this matter.Should you have any questions, please contact Mike Jerman in Rep. Jason Chaffetz’ office at [email address] or [telephone number].

Sincerely,

[Signed Congressmen Jason Chaffetz, Marsha Blackburn, and Roscoe G. Bartlett]

 


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