	Introduction

Policymakers have several options when considering legislation that would result in reducing carbon dioxide (CO 2 ) emissions from the U.S. electricity sector. A federal clean energy standard (CES), such as that proposed in the Clean Energy Standard Act of 2012 ( S. 2146 ), is an alternative approach that requires certain utility companies to provide a prescribed amount of electricity from qualified clean energy sources based on a percentage of each utility company's annual electricity sales to consumers. According to the Energy Information Administration (EIA), the electric power sector represents approximately 41% of U.S. energy-related CO 2 emissions. The concept of a U.S. clean energy standard was proposed by President Barack Obama in his 2011 State of the Union address, and the White House subsequently published a proposed framework for a federal CES. On March 1, 2012, the Clean Energy Standard Act of 2012 ( S. 2146 ) was introduced in the Senate. Entities Required to Comply

Some utility companies that sell electricity to consumers in U.S. states, except Alaska and Hawaii, plus the District of Columbia and Puerto Rico, would be required to obtain a certain percentage of electricity sales from qualified clean energy generators. Whether or not a utility company is required to comply with the CES depends on the total amount of its annual electricity sales to consumers, in megawatthours (MWh). The annual sales threshold for utility compliance declines by 100,000 MWh each year from 2015 to 2025, after which the level remains constant at 1 million MWh of annual electricity sales. This electricity sales threshold exempts the majority of utility companies from having to comply with the CES. Clean Energy Compliance Requirements

Starting in 2015, S. 2146 would require non-exempt utilities, as described above, to obtain a percentage of their total electricity sales to consumers—less applicable deductions of certain hydropower and nuclear power electricity—from qualified clean energy generators. S. 2146 provides a four-part definition of the term "clean energy." 1. Electricity generation from facilities placed in service after 1991 that use the following energy sources: renewable energy, renewable biomass, natural gas, hydropower, nuclear power, or waste-to-energy. Electricity generation from facilities placed in service after the date of enactment that use either combined heat and power or non-biomass energy sources that emit less than 0.82 metric tons of CO 2 per MWh. 3. Electricity generation that results from efficiency or capacity additions made after 1991 to nuclear or hydropower facilities that were originally placed in service before 1992. 4. Clean Energy Standard Compliance

Utility companies required to comply with the CES have two compliance options: (1) submit clean energy credits to the Secretary of Energy, and/or (2) make alternative compliance payments to the Secretary of Energy. The ACP design element essentially places a cap on the cost of CES compliance. S. 2146 sets the initial ACP level at three cents ($0.03) per kilowatthour in 2015. In 2035, electricity generated from coal would decrease by 54%, nuclear power would increase by 62%, and non-hydro renewables would increase by 34% relative to reference case projections. With regard to the potential impact on electricity prices, EIA projects that average U.S. electricity prices would increase, compared to EIA reference case projections, by approximately 4% in 2025 and 18% in 2035. EIA also notes that the provision in S. 2146 to exempt certain utility companies from CES compliance requirements could create some degree of regional price disparity between exempt and non-exempt utilities.
U.S. policymakers have considered and deliberated on several policy designs that could potentially reduce energy-related carbon emissions. In his 2011 State of the Union address, President Obama proposed the concept of a Clean Energy Standard (CES) that would result in 80% of U.S. electricity generation from clean energy sources by 2035. In March of 2012, the Clean Energy Standard Act of 2012 (S. 2146) was introduced in the Senate.
The primary goal of S. 2146 is to reduce carbon dioxide (CO2) emissions from the U.S. electricity sector, which represents approximately 41% of total U.S. CO2 emissions. Generally, the approach used to achieve this goal is to require certain utility companies to source a portion of their electricity generation from qualified clean energy generators. Utilities located in either Alaska or Hawaii are exempted from CES requirements.
Some utility companies that sell electricity directly to consumers (retail sales) would be required to comply with the CES. Determining which utilities have to comply is based on each utility company's total amount of annual retail sales. Starting in 2015, a utility company that sold more than 2 million megawatthours (MWh) of electricity to consumers would be required to comply. The retail sales level for compliance decreases by 100,000 MWh each year until 2025, where it remains constant at 1 million MWh. These thresholds represent a minority of electric utilities but a majority of U.S. electricity sales.
Utilities required to comply with the CES would need to obtain a percentage of their electricity from qualified clean energy generators. In 2015 the minimum percentage is 24% and rises to 84% by 2035. The percentage is applied to a utility company's total retail sales; however, all electricity obtained from hydropower and nuclear power facilities placed in service before 1992 can be deducted from the sales base, potentially making compliance easier.
The bill provides a four-part definition of electricity that would qualify as "clean energy": (1) electricity from renewable energy, biomass, natural gas, hydropower, nuclear power, or waste-to-energy facilities placed in service after 1991, (2) electricity from combined heat and power (CHP) systems or any non-biomass energy source that emits less than 0.82 metric tons of CO2 per MWh, (3) certain efficiency or capacity additions to nuclear or hydropower facilities that were placed in service before 1992, and (4) electricity from facilities that capture and store CO2.
Utility companies can comply with the CES requirement by submitting clean energy credits, making alternative compliance payments (ACP), or a combination thereof. The ACP design element essentially caps the cost of CES compliance. ACP levels start at three cents per kilowatthour in 2015 and increase by 5% annually thereafter.
Analysis by the Energy Information Administration (EIA) projects that enactment of S. 2146 could result in the following changes to the U.S. power sector in 2035, compared to EIA's reference case projections: (1) CO2 emissions from electric power facilities decline 44%, (2) electricity from coal decreases by 54%, (3) nuclear power and non-hydro renewable electricity increases by 62% and 34%, respectively, and (4) average electricity prices increase by 18%. EIA also notes that regional price disparity among exempt and non-exempt utilities could range between 3% and 30%. However, it should be noted that any projections over such a long time frame are difficult to accurately predict due to uncertainties associated with assumptions used to make such estimates.