DOE Restructuring Bill Sent to Capitol Hill
Departing Energy Secretary Federico Pena made certain that he
would go out with a bang this week when he forwarded to Congress on
Friday the Clinton administration's much-awaited legislation to
enact customer choice for electricity users on a nationwide basis.
"I hope Congress will move quickly on this legislation to bring
competition and choice to the electricity industry and deliver
savings to consumers," said Pena in submitting the Comprehensive
Electricity Competition Plan to Capitol Hill. Pena, who is expected
to leave the Department of Energy (DOE) later this week, estimated
the proposed measure would save power consumers about $20 billion a
The legislation incorporates many of the same principles that
were included in the administration's customer-choice guidelines
that came out last March. The administration came under fire from
all sides then - Capitol Hill and the energy industry - because the
guidelines weren't presented in legislative form.
Not surprisingly, natural gas producers weren't too happy with
the bill because it would provide for a Renewable Portfolio
Standard that would ensure that by 2010 at least 5.5% of all
electricity sales would be generated by renewable energy sources.
The gas industry, particularly producers, is staunchly opposed to
this provision because it would guarantee renewable energy sources
a specific share of the all-important power generation market in
the years ahead.
First, the the Clinton administration extends the drilling ban
for most of the Outer Continental Shelf, and now it proposes
"harming the demand side as well by requiring mandated set-asides"
for renewables, said Nicholas Bush, president of the Natural Gas
Supply Association. "It is difficult to avoid the thought, 'with
friends like these...'"
The administration's proposal mandates customer choice in the
electricity industry by Jan. 1, 2003, but it gives states the
opportunity to opt out of retail competition if they believe their
customers would be better off under the status quo or under an
alternative state-crafted plan.
It also would give customer-choice states the authority to bar
utilities from non-choice states from selling power to customers in
their states. Moreover, it would mandate the labeling of
electricity, requiring suppliers to disclose information on price,
terms and conditions of sale; the type of energy resource used to
generate the electric energy; and the environmental attributes of
the generation, including air emissions characteristics.
Under the administration's measure, the states would continue
their role as the final arbiter of the recovery of retail stranded
costs under state law, but it added that utilities should be
allowed to recoup "prudently incurred, legitimate and verifiable"
stranded costs that cannot be mitigated reasonably. It reinforced
FERC's authority to act as a back-up for recovery of stranded costs
in certain cases.
The legislation also gives broad authority to FERC in several
areas. It would extend the Commission's jurisdiction over
transmission services to municipal and other publicly-owned
utilities, cooperatives, the Tennessee Valley Authority (TVA), and
the Federal Power Marketing Administrations. The proposal would
permit the Commission to suspend or modify application of its
open-access transmission rules to these entities in the event
adequate stranded-cost recovery mechanisms aren't in place for them
Moreover, the administration's legislation would amend the
Federal Power Act (FPA) such that it would give FERC explicit
authority to require transmission-owning utilities to turn over
operational control of their transmission facilities to independent
system operators (ISOs). In addition, it would grant the Commission
the authority to "register and oversee" an electric reliability
organization that would prescribe and enforce mandatory reliability
standards for the power industry. Until then, existing standards
established by the North American Electric Reliability Council and
regional reliability councils would be mandatory and enforced by
FERC, it noted.
The bill further would amend the FPA to streamline FERC's review
of utility mergers. And it would repeal the Public Utility Holding
Company Act of 1935 and replace it with the Public Utility Holding
Act of 1998, which would give FERC and the state regulatory
commissioners greater access to the books and records of holding
companies and the affiliates of public utilities within the holding
Another key section of the legislation calls for prospective
repeal of the "must buy" provision (Section 210) of the Public
Utility Regulatory Policies Act of 1978. Existing power contracts
would remain intact, according to the proposal, and the other
provisions of Section 210 would continue to apply.