➤ Democrats in Congress are pursuing a clean power incentive program to help transition to 80% carbon-free generation by 2030.

➤ Party leaders still need to resolve differences among Senate Democrats on how the program will be structured.

➤ The proposal "is not about eliminating coal, it is about adding clean power."

U.S. Sen. Tina Smith, D-Minn., is leading efforts in the Senate to add a national clean electricity performance program to the budget reconciliation package Democrats are working to advance through Congress. S&P Global Market Intelligence on Sept. 24 spoke to Smith about how the program would work and the political hurdles to enacting the policy. The following conversation was edited for clarity and length.

S&P Global Market Intelligence: You're leading the charge in the Senate to develop this nationwide clean power program. What details can you give on what the Senate will propose?

Sen. Tina Smith: It essentially is an incentive program that incentivizes power-generating utilities to add clean power in order to get to, on a national average, 80% clean in about 10 years. And the purpose of the incentive is to make sure that utility rates for households and for businesses stay steady as utilities are going through this process of adding clean [generation].

And it is based on the concept that every utility is going to start from where they are ... that those [utilities that currently have less clean capacity] aren't penalized. Also, we have a broad definition of clean, which is very, very important to accommodate regional differences. So clean includes nuclear and hydro and geothermal. And it also includes the traditional renewable resources that people think of, like wind and solar. And as the technology improves and expands, it also would include carbon capture and storage or clean hydrogen or other new clean technologies.

So this program is not structured like a traditional clean electricity standard?

The original idea was a clean electricity standard, which is really a regulatory approach. And this [new approach] is different. It is a budget-based approach. And so what it would do specifically is pay an incentive to utilities after they have added a specific percentage of clean power. So in a given year, for example, [if a utility] added 4% clean power, they would get the full benefit of the incentive. And, of course, the benefit of that to ratepayers is that, rather than ratepayers bearing the capital cost of that clean power being added, the incentive would help to cover that cost. And I should also say that some utilities may elect to use that incentive to pay for energy efficiency improvements. ... So what I think is important to convey is how flexible it is for utilities to be able to do what makes the most sense, given their market and their ratepayers.

This proposal sounds pretty similar to the U.S. House of Representatives' plan released Sept. 9.

It is. The House plan was designed from our same platform, but of course, in the legislative process, what the House does comes to the Senate, and the Senate will make it our own. ... We will put it together in a way that is able to get 50 votes in the Senate.

The House proposal had a specific amount dedicated to this program. Would the Senate be pursuing the same amount?

In the draft budget resolution, the amount that was set aside for the clean electricity plan was in the neighborhood of $150 billion. And that number was identified as kind of what would be required in terms of incentives to achieve the 80% clean energy by 2030 goal that [President Joe Biden] laid out.

Sen. Joe Manchin, D-W.Va., who chairs the Senate Energy and Natural Resources Committee, has expressed concerns about how such a program could affect fossil fuel-based energy. Have you discussed this plan with him?

I've had many conversations with Sen. Manchin, and we've worked closely with his staff and the staff of the Energy and Natural Resources Committee. We continue to work in good faith with him to come up with a plan that makes sense to him, that would work in West Virginia and would work around the country. And we're just continuing that process of negotiation.

Do you have an estimate for when we could see a Senate draft of the clean power program?

We don't have a specific Senate draft yet because we continue to work with Sen. Manchin and others in the Senate. At this point, I think this is all part of the broader negotiations that we are going through in order to reach an agreement between the House and the Senate and President Biden about what we want to see included in the Build Back Better budget. From my perspective, having a strong, robust strategy for addressing the climate crisis is crucially important. And I see the clean electricity plan as really the foundation for that work, but it goes hand in glove with the other parts of the strategy, including the clean energy tax incentives, the push around energy efficiency and other kinds of climate-friendly policies that we think will be included in the final bill.

Democrats are trying to include this program in the reconciliation package. Some Republicans say the proposal might not comply with the Byrd rule, which limits the inclusion of extraneous measures that have no budgetary effect. What do you say to that?

Over the last six months, we have designed the clean electricity plan specifically to fit within reconciliation as a budget-based strategy. So I'm optimistic that it will fit within the constraints of the reconciliation process. ... And I'll also just point out that there's often some give-and-take and back-and-forth to make sure that [reconciliation proposals] fit. And we'll do that, just as all of the other parts of the reconciliation bill will go through that process to make sure that they fit.

If reconciliation negotiations fall apart, what would come next for the clean electricity performance program? Or a clean electricity standard in Congress?

I'm determined that the reconciliation process won't fall apart. It's inextricably linked with the good work that will be accomplished by the infrastructure bill. One of the things that attracted me initially to doing this work was that it was bipartisan. The original clean electricity standard concept was a bipartisan concept. So I think that's really important.

And let me just add one other thing, because I think there's a misunderstanding sometimes about how the clean electricity plan would work. It is not about eliminating coal, it is about adding clean power. And this is extremely important as you think about where the different utilities are around the country, particularly if you think about the opportunity to move the United States to the cutting edge of innovation and technology around carbon capture, for example. It actually in the long run could be very advantageous.

Any other closing points?

As we have worked on this over many months, we have been in close contact with utilities around the country to get their feedback and input. I'm really grateful for that. That's helped us to put together something that I think is practical. And also understanding that you've got large investor-owned utilities, and then you also have [municipal utilities] and co-ops, and we've also been working closely with them to devise something that is not only going to help us achieve our climate, carbon reduction goals but also is going to work.