All Eyes are on the Senate’s Attempt to Repeal and Repair the Affordable Care Act (ACA)

Senate Majority Leader Mitch McConnell’s announcement that the Senate would scrap the first two weeks of its traditional August recess to finish the repeal and repair of Obamacare is important not only for healthcare coverage for Americans, but also for clearing the path for tax reform and infrastructure after the August recess. Additionally, it may provide an opening for Senate energy legislation and confirmation of FERC nominees.

But the passage of the repeal and repair bill in the Senate is still not certain. After the Majority Leader introduced a new version of the health plan, by that afternoon, Republican senators Rand Paul of Kentucky and Susan Collins of Maine had come out in opposition. Several others, including Rob Portman of Ohio, Dan Sullivan of Alaska and Bill Cassidy of Louisiana are still looking at the new bill. That leaves the Majority Leader with a very thin margin with one more defection derailing the bill. The new bill would still dismantle much of the ACA, setting up a new system of tax credits to help some people buy insurance and dramatically curbing federal spending on Medicaid. It would allow insurers to sell cheaper, less comprehensive plans. It also adds $45 billion to combat the opioid epidemic and retains two of the ACA’s taxes on high-income household, a 0.9% payroll tax and a 3.8% tax on investment income, which applies only to individuals with incomes above $200,000 and married couples making over $250,000.

The Senate’s retention of these two tax provisions also directly impacts tax reform, because the House version of repair and repeal eliminated those taxes, making it easier (cheaper) to pass a steep cut in tax rates in tax reform. And if the Senate cannot pass a bill at all, it will seriously undermine their ability to move on to tax reform at all after the congressional August recess.

The tax-writing committees are moving ahead in preparation for such a mark-up, while still keeping an eye on healthcare action. The Senate Finance Committee has asked for input on tax reform as well as will hold a hearing before they go out in August, and the House Ways and Means Committee continues to hold hearings on their draft.

Timing is also critical because even if the Congress were to start in the Fall with a mark-up, it is unlikely to finish before the end of the year. And for the economy to get the kick-start hoped for by a tax reform bill passing, it needs to apply to 2017. This week, members of the House Ways and Means Committee confirmed that if tax reform was passed in the first half of 2018 it likely would be retroactively applied, at least in part, to investments made in 2017.

This additional time provided in the Senate to work on the ACA repeal and repair bill may also be a boon for the Senate’s bipartisan energy package S. 1460 (115). Senate Energy and Natural Resources Chairwoman Lisa Murkowski said she’s “hoping” she can secure floor time this work period. The bill includes provisions to expedite LNG exports, safeguard the electricity grid from cyber attacks, boost energy efficiency and make changes to Energy Department national labs. Leader McConnell has already agreed that the legislation will be brought directly to Senate floor, although it has not been decided when. There will be a procedural move to place the bill directly on Senate calendar, set in motion by Majority Leader Mitch McConnell. The bill is substantially similar to energy legislation from last year that was approved by Senate on an 85-12 vote in April 2016, but died during conference with House.

It may also be an opportunity to get FERC nominees that have passed out of the Committee, confirmed by the Senate, as the President this week named the new Chair of the Commission and has also recently named a Democrat to fill that other vacancy.














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                    FROM THE CHART ROOM

                    Electricity Overtook Fossil Fuels in Push for Investment in 2016



                    Electricity drew in more investment than fossil fuel supply for the first time last year as the energy industry prepared for electrification of everything from cars to buildings and industrial processes. Power generation and electricity grid expansions took in $718 billion, 42 percent of the $1.7 trillion invested in energy last year, according to a report by the International Energy Agency. Oil, gas and coal supply by contrast reaped $708 billion, a drop from last year reflecting lower prices and profits by major oil companies. The findings are another milestone marking a shift in the world energy industry away from the most polluting fuels as governments respond to the threat of global warming and the cost of renewables such as wind and solar power plunges to compete with fossil fuels. “Oil and gas was the largest investment source for 100 years. This changed in 2016,” Laszlo Varro, chief economist of the IEA, said on a conference call. “With robust investment in renewable energy, increased investment into electricity networks, electricity is now the biggest area of capital investment.” Renewable energy and networks made up 80 percent of all electricity investment, according to the IEA’s calculations. New clean power projects attracted $297 billion in 2016, a decline of 3 percent from the previous year, caused by cheaper solar panels and wind turbines. Installations rose by 5 percent during that period. Energy projects are capital-intensive and take years to develop and construct, so decisions made and money spent today shine a light on what the energy system will look like in the decades to come. The shift of capital flows away from fossil fuels and towards electricity, particularly clean sources such as solar and wind, shows that the trend spurred by the Paris climate accord is seeping into the business of energy.

                     China received more than a fifth of global investment. The world’s most populous nation spent less on new coal-fired power stations as public pressure to limit smog reduced the appeal of the dirtiest fossil fuel. Companies spent their capital on low-carbon electricity generation and networks, making up 65 percent of the global total at $259 billion. Investment into the U.S.’s energy system rose 16 percent, mostly driven by renewable energy, the report said. The IEA doesn’t anticipate a revival of the coal industry, even with President Donald Trump’s promise to bolster mining, because of market forces that started under the last Republican president, George W. Bush. Europe’s offshore wind industry hit a record for investment decisions for new projects, rising to $20 billion for 5 gigawatts of capacity. That’s a 40 percent increase from the year before. Overall investment into the energy system in Europe declined by 10 percent as efficiency measures lowered demand. The region spent the most on efficiency globally, at $70 billion. India’s spending on energy rose by 7 percent, as the government sought to extend its electricity grid and improve access. Investment into coal stations rose 10 percent to $20 billion. Capital flowing into clean energy generation added 9 percent to $10 billion, bolstered by Prime Minister Modi’s plan to reduce pollution in the nation that hosts at least 30 of the world’s dirtiest cities.

                     Electric vehicle sales grew 38 percent in 2016 worldwide and made up 10 percent of all transport efficiency spending. About $6 billion was spent on EV charging stations worldwide.



                    Michael Best Strategies’ Energy Team

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