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I’ve long had a tradition of taking time on July 4th to reflect on our State of the Union. In past years, for example, I’ve read Howard Zinn’s, A People’s History of the United States. It’s a very good book with an entirely different perspective on the historical development of our nation. Zinn provides us, as educator Kathy Emery suggests, with a sense of “the human impact, the human cost of decisions made by politicians and businessmen.” I highly recommend it to everyone within our policy community. And this year, perhaps for obvious reasons, I decided to focus on the court case, National Federation of Independent Business v. Sebelius. This, of course, refers to the Supreme Court decision on the Affordable Care Act, a k a Obamacare.
There is a lot to study in the 193 pages that form the opinions found in this decision. Yes, a lot to read, and I have not done so. Instead, I’ve read a series of Op Eds by David Brooks, Paul Krugman, Linda Greenhouse (who reported on the U.S. Supreme Court for The New York Times from 1978 to 2008), Steve Chapman (a member of the Chicago Tribune’s editorial board), and Richard W. Garnett (University of Notre Dame law professor who clerked for former Chief Justice William Rehnquist). Among others. And more critically, I’ve read what I can of those various opinions to see how the Supreme Court decision might shape future policies and legislation about energy efficiency and climate policies. Right away I conclude that we have a problem.
The five national telephone surveys done immediately following the decision found Americans as divided as ever on Obamacare. Despite the large number of clear winners (with few losers as Krugman suggests), the Supreme Court’s ruling seems to assure that the debate surrounding the law will rage on for the foreseeable future. And how is it, we may ask, that this does not bode well for energy efficiency and climate change policies? The reasons are two-fold: First, the decision restrains the power of the federal government to sanction the states. And, perhaps most important, it appears to restrain future Congressional power. Second, it has inflamed conservatives disappointed by the ruling, but who are delighted with the language on the commerce clause. If we think about it, a good bit of the policies that we advocate rely on the commerce clause.
As David Brooks writes, “over the years, the commerce clause in the Constitution has been distorted beyond recognition, giving Congress power to regulate all manner of activity (or inactivity). [Chief Justice Roberts and the decision] redefined the commerce clause in a way that limits the power of Washington. Congress is now going to have to be very careful when it tries to use the tax code and other measures to delve into areas that have, until now, been beyond its domain.” That argument, and now a supreme court interpretation, may eventually impact everything from food and product safety to energy efficiency performance standards – or at least make it that much harder for us to advocate broad policies promoting energy efficiency at the scale necessary to enhance our economy and protect both climate and the environment.
As a result of this decision we have an unexpected outcome – that the interpretation of the Constitution may play a much more prominent role in shaping all future domestic policies. It will be even harder to pass smart legislation. Law Professor Richard Garnett writes: “We confront, as a political community, many pressing challenges, and it is easy — too easy — to think that what matters most is that good policies are enacted, now, and ‘by any means necessary.’ But our Constitution has a lot more to say about how decisions are made than about which decisions are made.”
What might be the implications of all this? The word ‘government’ comes from the word ‘governance’ that, in turn, derives from the Greek verb kubernáo which means to steer or navigate. If we really believe in the economic imperative of energy efficiency then we may need to actively explore new mechanisms of governance – including incentives as technology prizes, real and meaningful feedback, and well beyond Nudge, the shifting of our norms, our behavior and our culture at scale and in China time. Yes, we absolutely must use various forms of government to ensure our social and economic well-being, but we also must learn to steer in many other ways. We cannot do this merely by laying out the idea of cost-effectiveness. We must look at the problem anew. We must be willing to explore the human condition in new ways and examine how it is that people and societies might shift from the old 19th century paradigm of energy supply to a more appropriate paradigm that embraces the appropriate and sustainable use of energy, water, and resources.
How to follow up on this outcome? My thought is that ACEEE and others develop a new set of governing principles and model legislation that relies less on conventional governmental solutions and more on new ways to promote energy efficiency at scale. If we really value the work we all do, and if we really believe in the vital contribution of energy efficiency, I then suggest the policy community develop the equivalent of a War Room strategy (perhaps framed differently). The strategy should anticipate and articulate the need for a dramatically different approach to ‘governance’ (not just government) than we have traditionally followed. If neither ACEEE nor others are successful in that respect, then to paraphrase Tom Friedman, we are all in for a hard decade that will lead to a bad century. Yes, I think it is that critical.
Energy and Resource Economist
See The Desert Year More By Waste Than Ingenuity?
This blog post does not reflect the official opinion or views of ACEEE, its board or its staff.
By Danielle Rodabaugh
The utilities and energy sector is a booming market. Of course there will always be plenty of demand for the services provided by companies in the industry. To ensure the market continues to thrive, though, utility companies must ensure they’re fully paid for the energy they supply. So how do energy providers ensure that they’ll be paid, especially when working with clients who consume enormous amounts of energy?
There’s a special type of insurance called surety bond insurance that most people, including those in the utilities and energy sector, know little about. Most commercial bond types function as license and permit bonds that guarantee professionals work according to industry regulations. Utility bonds, however, function as financial guarantees. Whereas most surety bond types protect government agencies and the general public, the financial guarantees provided by utility bonds protect utility companies.
A simple definition explains that surety bonds bring together three separate entities to ensure a specific task is performed. When it comes to utility bonds, the principal is the client who purchases the bond as a promise that all future utility bills will be paid on time and in full. The bond’s obligee is the utility company that requires the bond as a way to prevent financial loss when clients fail to make appropriate payments. The surety is the insurance company that underwrites the bond and provides a financial guarantee that the client will pay all utility bills.
When a client is expected to consume a significant amount of energy each month, the utility provider might require the company to purchase a bond before turning power on in the building(s). For this reason utility bonds are typically required of large corporations such as manufacturing companies. Deciding which clients need to purchase utility bonds is ultimately up to the discretion of individual utility companies.
If a bonded client does fail to make a payment, then the utility company can make a claim against the bond. If the claim is found to be valid, the surety will use the bond’s funds to reimburse the utility company in an amount not to exceed the bond’s penal sum. Surety bond insurance does not work as does traditional insurance, however, as the insurance company will seek reimbursement from the principal if a claim is paid out to the utility company. This serves to keep large companies from skirting their utility bills under the assumption that their surety will simply pay a claim. All claims paid are expected to be reimbursed, so sureties pursue collection from those who fail to uphold their payment obligations.
Due to the losses they’ve incurred from recent claims, surety providers are currently hesitant to issue many utility bonds. This means that clients can have trouble getting surety bonds as required by their energy providers. Because insurance companies intend to avoid claims, they’re extremely picky when reviewing surety bond applications. If an applicant’s financial credentials suggest the client might default or fail to pay future utility bills, the surety simply won’t issue a bond. When large consumers of energy, such as warehouses or manufacturing plants, are unable to get utility bonds as required, utility companies will not take them on as clients.
Danielle Rodabaugh is the chief editor of the Surety Bonds Insider, a publication that tracks developments within the surety industry. As a part of the publication’s educational outreach program, Danielle provides information to leading industry professionals to help them better understand surety bond intricacies.