Avista Corp. is voicing its support for swift enactment of federal greenhouse-gas cap-and-trade and renewable-electricity legislation and helped formulate a key part of a bill the U.S. House passed last month.

The Spokane company says the bill would reduce adverse effects on consumers from compliance costs because of the way it would allocate carbon-emission allowances to local electric distribution companies.

The company is on the right track.

Daniel M. Adamson, an Avista lobbyist and Washington, D.C.-based partner in the Davis Wright Tremaine LLP law firm, said in an interview here recently that people don't understand cap-and-trade or even know what it is. Yet, he says, "In D.C. for about the last 25 years, this is the biggest thing in energy and environmental legislation."

In a nutshell, cap-and-trade would cap all carbon emissions and allocate allowances at no cost to emitters to cover their current discharges of greenhouse gases. Later, companies would need to meet targets for reducing emissions by cutting their own emissions, buying allowances from others, or doing both.

Under the House bill, electric distribution companies would receive allowances based both on the amount of electricity they sell and on their emissions, Adamson says. He says that would be better than auctioning allowances, which would favor those with deep pockets, or allocating them based only on emissions, which would penalize companies like Avista that have relatively few emissions.

Avista Chairman, President, and CEO Scott Morris and other utility CEOs, working through the Edison Electric Institute, backed the allocation system. Assuming that system is enacted into law, Adamson says, "Our rates will still go up, but most of the cost of compliance will be covered by the allowances we get. We solve the problem at the least cost to customers. We're looking at it from a real bottom-line perspective."

The approach "is preferable to a 'command-and-control' system, where the EPA comes in and tells you how much you can emit, the technology you'll use, and how you'll run it. Most owners of a power plant are going to know what the most cost-effective way to reduce emissions is better than a regulator."

It's expected that a cap-and-trade system would spark tremendous innovation, Adamson says. "There's a history of the United States, when we're presented with a challenge and an opportunity to solve the challenge, we come up with alternatives."

He says the 2010 mid-term election will determine whether the talk radio hosts who lead the opposition to cap-and-trade will have an impact, but believes they'll argue such a system would harm the economy, rather than attacking the scientific conclusion that man's activities are altering the climate. Other countries must commit to climate change, or "what we do is moot," Adamson adds.

Tom Paine, Avista's director of governmental relations, says the company favors amending the bill to put upper and lower price limits on sales of carbon allowances, so such sales don't harm the economy, and to exempt biomass generation, such as Avista uses at its Kettle Falls, Wash., wood-fired plant, from regulation under cap-and-trade. Avista also favors pre-empting state and regional cap-and-trade systems.

Paine and Adamson expect cap-and-trade will be enacted in the next three years because President Obama and congressional Democrats are willing to spend political capital on it. Paine says if Congress doesn't act, the EPA can launch a command-and-control system. "Costs are not as big a consideration if EPA does it," but it's believed that cap-and-trade slashed by 80 percent the costs of acid-rain reduction efforts required by federal law in 1990, Paine says. Still, emissions allowances were based solely on emissions then. Let's hope the ideas of Avista and other low-emitting utilities will prevail this time.