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---------------------- Forwarded by Cynthia Sandherr/Corp/Enron on 04/21/2000
04:03 PM --------------------------- From: Allison Navin 04/21/2000 02:19 PM To: Cynthia Sandherr/Corp/Enron@ENRON cc: Subject: CQ Weekly article on electricity restructuring Here's the electronic version of the electricity restructuring article that will appear in Monday's CQ Weekly in case you would like to forward (there is a hard copy in your box). CQ WEEKLY - ENERGY Apr. 22, 2000 Page 949 Pressure Surges to a New High To Legislate Electric< Deregulation By James C. Benton, CQ Staff At the dawn of the year, it seemed Congress would be content to let the current session end without moving legislation to encourage further deregulation of the nation's $220 billion <electric< market. But developments in the past few weeks suggest that groups interested in seeing deregulation, as well as the Clinton administration, are building a consensus that will put pressure on Congress to move some kind of bill this year. On April 6, a group called the <Electricity< Restructuring Stakeholders -- representing consumers, <electric< generating companies, senior citizens and others -- released a set of goals they believe should be included in restructuring legislation. The principles include repeal of the Public Utility Holding Company Act of 1935 (<PUHCA<) and changes to a 1978 law (PL 95-617) that required state utility commissions and <utilities< to reform their <electric< rates and take other measures to even out daily <electric< consumption. (1978 CQ Almanac, p. 639) The group plans to meet with environmental groups and regulators to identify other areas where common ground can be reached, said Joe Nipper, chief lobbyist for the American Public Power Association. A smaller trade group, composed mainly of investor-owned <utilities<, is working on its own set of principles. Energy Secretary Bill Richardson acknowledged the stakeholder progress in an April 17 speech to the National Energy Marketers Association, and he urged Congress to pass an <electric< restructuring bill. "Our interstate <electricity< markets are in need of repair," Richardson said, adding that <transmission< access and generation capacity are decreasing as demand for <electricity< grows. "If Congress fails to act -- and act soon -- on restructuring legislation, it will strangle the development of competitive <electricity< markets." The two committee chairmen who will have to spearhead a restructuring plan have stated their intent to pass a bill by the end of the 106th Congress. But they must navigate past obstacles that include the compressed calendar, election-year politics and a general lack of knowledge among their colleagues on how to rewrite or repeal <PUHCA<. On April 27, Senate Energy Chairman Frank H. Murkowski, R-Alaska, will hold the last of three hearings on eight <electric< deregulation-related measures. On the House side, retiring Commerce Committee Chairman Thomas J. Bliley Jr., R-Va., has vowed to work toward enacting a bill (HR 2944) to encourage further state deregulation of the <electric< utility market. That measure, which would effectively allow consumers to buy their power from anyone, not just the nearest utility, was approved by the House Commerce Subcommittee on Energy and Power on Oct. 27. (CQ Weekly, p. 478; 1999 CQ Weekly, p. 2599) The bill also would give states the authority to handle their transition to a competitive market but contains no deadline, or "date certain," by which states would have to restructure. Moving a Senate Bill Some are skeptical that the political and practical hurdles can be overcome this year. For example, while they have made progress on principles, the key negotiators -- representing investor-owned <utilities<; <electric< cooperatives; municipal <electric< <utilities<; large <electricity< consumers; labor unions, and environmental groups -- still must reach consensus on details the legislation should address, as well as the legislative language to implement any agreement. "I think the chances of getting a bill enacted this year are low, not from the lack of trying," Nipper said. The best chance appears to lie in the Senate, where Murkowski's committee is considering eight bills. "I am committed to getting something meaningful out of my committee," Murkowski said in an April 14 interview. Murkowski acknowledged, though, that the congressional schedule and narrow consensus on each of the bills pose challenges to his goal -- developing a comprehensive deregulation bill, not one that only addresses portions of <electric< restructuring. The path in the House appears more difficult, although one key supporter said there is behind-the-scenes movement. Bliley has promised to hold a markup of HR 2944 before Memorial Day, and he has named a task force of six members to help move the bill through committee. Joe L. Barton, R-Texas, the sponsor of HR 2944, said meetings are taking place among Bliley, Republican House staffers and some interested groups. "There is some action; it's just not visible," Barton said late last month. "I think what's happening there is that [stakeholders are] jockeying for position." Barton said he anticipated that a "fairly good bill" could be moved by the middle of May if stakeholders and members come together. One complication: Democrats, in the midst of the battle to regain control of the House, may not move toward a consensus with Republicans. Staff aides for several Democratic members have already complained they have not heard from the committee staff in trying to work out differences raised in subcommittee. But others point to a 1992 energy law (PL 102-486) that cleared Congress in the weeks before that year's election. It contained provisions allowing < utilities< and independent producers to compete in the wholesale power market; that law has been credited with the current wave of deregulation in some markets. So far, 25 states and the District of Columbia have either restructured their markets or enacted laws to begin retail competition in coming years. (1992 Almanac, p. 231) Mark Stultz, a spokesman for the <Electric< <Power< Supply Association, a group of competitive power suppliers and power marketers, said the 1992 law was enacted after the <electric< industry quickly built up a consensus among members and educated them on what the bill would do. "The industry was able to access that in a very short time," Stultz said. As far as getting a restructuring bill through this year, Stultz said it is "not an impossible, unrealizable goal to assume that we could get consensus," since key stakeholders have reached agreement on several issues. They include blocking "market power" -- the ability of a few companies to stunt competition by effectively using its assets to manipulate the deregulated market to its advantage. While the House bill contains many issues stakeholders agree with, Stultz said it also contains some fatal flaws. He cited as an example its lack of federal agency jurisdiction over "bundled" services in a regulated market, in which <electric< generation, <transmission< and distribution rates are combined in an <electric< bill, and "unbundled" services in a deregulated market, in which the generation rates are broken apart from <transmission< and distribution rates and other temporary charges brought on by deregulation are included. Best Bets in the Senate Of the eight bills pending in the Senate, Nipper said the one with the best chance of passing is S 2071, sponsored by Slade Gorton, R-Wash., which is intended to encourage greater <electric< <reliability<. Nipper said the Gorton bill would replace the North American <Electric< <Reliability< Council, a group in which utility participation is voluntary, with the < Electric< <Reliability< Organization, a board that would require participation by <utilities<. The Federal Energy Regulatory Commission would have jurisdiction over the board, as well as the power to enforce its policies on <utilities<. The reliability issue is likely to intensify in coming months, due to problems <electric< <utilities< faced each of the past two summers. While some plants were undergoing needed maintenance, some <utilities< were caught with their generation capacity down during periods of extremely high demand. The resulting shortage triggered a spike in bulk <electric< prices, driving the price of a megawatt-hour of <electricity< in a few places from $30 to as high as $7,000. <Utilities< enforced rotating blackouts on customers, asked consumers to reduce <electric< use and passed on surcharges for the higher cost of <electricity<. Hoping to avoid outages this summer, the Department of Energy has scheduled four regional "summits" on <electric< <reliability< on April 24 and 28. Jim Owen, a spokesman for the Edison <Electric< Institute, said a third consecutive summer of service interruptions and significant price increases could motivate Congress to move on the deregulation bill. "It might push this thing up further on the congressional radar screen," although a law enacted immediately would not have a quick impact on generation and <transmission< reliability, he said. Other thorny issues include: ? How to handle taxation issues between publicly owned <utilities<, <electric < cooperatives and municipal <utilities<, and whether <utilities< should voluntarily join, or be forced to join, "regional <transmission< organizations" designed to allow more efficient transfer of <electricity< across the national grid. ? Whether the federal government should be involved in regulating the interstate <transmission< of <electric< <power<. Some stakeholders argue federal regulation is necessary to prevent one state or region from protecting its customers at the expense of others. ? Environmental groups' desire for stronger anti-pollution restrictions on < utilities< that produce pollutants while generating <electricity<. And labor groups, wary that deregulation could trigger massive layoffs through corporate mergers and acquisitions, want to make sure their union members are protected.
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