With the failure of cap-and-trade looming in Congress, U.S. utility companies that were lobbying heavily for the federal energy legislation are turning to the states to take advantage of emissions-reduction policies. The Wall Street Journal reports:

The industry has identified what it believes are opportunities to make lucrative investments in such things as transmission lines, advanced meters, enhancements to existing power plants, and electric vehicle infrastructure.

In a blueprint released last week, Exelon executives said their 13-state region could achieve reductions in greenhouse-gas emissions nearly equal to what federal legislation might have achieved in the next decade by pressing ahead with activities already encouraged by state and federal regulators.

Exelon plans to spend more than $5 billion by 2017 in ways that should cut its greenhouse-gas emissions. It includes as much as $290 million a year on energy-efficiency programs at utilities it owns in Illinois and Pennsylvania and $3.8 billion to increase the capacity of its existing nuclear plants by up to 1,500 megawatts.

Exelon announced earlier last week that it would focus its approach on 4 means of reducing greenhouse gases:

1) efficiency, 2) nuclear expansion, 3) the retirement of inefficient generating units, and 4) renewable energy.

The first three make sensible economic policy. The last, renewable energy, is included in the mix, because most states mandate a certain proportion of energy to come from renewable sources, and while subsidies are relatively modest, they are expected to increase over time. The economic high cost of renewable energy are born by consumers as states push for the wider use of an energy source that’s much more expensive and unreliable than other energy sources.

Like any smart business, Exelon who had been one of the main supporters of cap-and-trade didn’t put all its eggs into one basket. The company bet on the prospect of selling its carbon allocations to dirtier energy companies such as coal, and oil producers, expecting operating income to increase by as much as 36%, should the bill pass. Now, the company is focusing its efforts all the more on state policy, responding to the many incentives and mandates, dictating many aspects of energy provision and consumption changes. (For a list of 2010 state energy legislations, go to this site.)

With prospects for a cap-and-trade bill glum, those of us concerned with rising energy costs should also shift our focus to fighting against other costly energy mandates, subsidies, and regulations.

There are two other costly energy bills in the Senate at this time that should raise concern: the Promoting Natural Gas and Electric Vehicles Act of 2010, which would provide subsidies for natural gas and electric vehicles, and the Renewable Electricity Promotion Act of 2010 which would mandate that 15% of energy consumption in the U.S. come from renewable sources by 2021. Since the EPA has been given authority by the Supreme Court to regulate greenhouse gas emissions, we should also expect many more costly regulations to come out of the agency in the near future. Additionally, state policy is playing a bigger role in energy policy, a development that’s gradual but steady and that we should keep an eye on.