Does the U.S. Need a Federal Reserve for Energy?

Is the Federal Reserve a good model for oversight of energy policy? John Hofmeister, founder and CEO of Citizens for Affordable Energy, certainly thinks so. He told an audience at the Berkeley Energy Symposium Monday afternoon that the current political system governing energy policy in the U.S. is dysfunctional and should be replaced with a Federal Reserve-type independent board.

While energy policy currently moves on “political time” — the several years it takes officials to get elected — it needs to move on “energy time,” or the decades it takes to plan and build energy assets like fossil fuel generation plants and nuclear facilities, Hofmeister said. An independent Fed-type board would have a more long-term view of energy policy because its board members would be made up of energy experts with terms that outlast those of elected officials, explained Hofmeister. Partisan politics is crippling energy policy and we need to create such a board to move “beyond politics,” he said.

The result of such a system, Hofmeister claimed, would be a stabilizing of energy markets — for example, the board could help with the dramatic price spikes and drops of gas prices. Such a board could also help energy regulation move away from short-term policies, like the current tax credits that give funds for clean power projects, but that are routinely extended by only a couple years at a time.

While many at the conference applauded Hofmeister’s suggestion, ultimately he didn’t give very many details of what such a board would actually do or what steps it would take to reform energy policy. And that was despite repeated questioning and prodding from the audience. In particular Severin Borenstein, the director of the University of California Energy Institute, pointed out in a Q&A session with Hofmeister that there could be real problems with an energy board that wanted to manage U.S. energy prices without regard to those of the rest of the world.

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