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Mandates Absent in Draft Electric Bill

Mandates Absent in Draft Electric Bill

A discussion draft of Rep. Joe Barton's (R-TX) much-anticipated retail electric legislation that was unveiled last week appears to be most notable for the two things that were missing from it - a renewable-fuel mandate and a date-certain.

Absent was a gas producer-opposed mandate that would require a certain percentage of electric power each year to be generated by renewable fuels. Instead the draft called for the reauthorization of the Renewable Production Incentive (REPI) program, which would direct the Department of Energy (DOE) to provide incentive payments of 1.5 cents/kilowatt-hour to facilities that generate power "solely by use of solar energy, wind, biomass or geothermal." The legislation, which would authorize the payments over a 10-year period, called for Congress to appropriate $50 million for the REPI program during fiscal years 2000-2004.

Gas producers lobbied vigorously against any kind of legislative mandate that would give a competitive advantage to renewable fuels or other fuels in the generation market. The gas industry is counting on power generation to provide it with much of its demand growth over the next decade, and it believes a mandate guaranteeing renewables a specific share of generation would deprive it of a fair shot at the market. Although Barton's proposed incentive payments still would give renewables some edge, they're likely to be more palatable to gas producers than a mandate.

The mandate wasn't included in the draft measure mainly because of Barton's dislike for it, and it would never have survived the Energy and Power Subcommittee, of which Barton is chairman, a Capitol Hill observer said. "That's not going to pass." But lawmakers "would like to do something along the lines [of incentives] to say that they helped" green electricity, he noted.

Even more than the absence of a mandate, the observer thinks the biggest boon for natural gas in the draft is the requirement that utilities disclose to retail customers information about, among other things, their electricity's generation source and emissions characteristics.

Barton's draft also didn't specify a date-certain by which the states would be required to open their electric markets to retail competition. Instead, it defers to states on this issue. It does take a backdoor approach to encourage retail competition by barring utilities in states closed to competition from selling to customers in open states. The reciprocity provision also would extend to utilities in Canada and Mexico. Lastly, the draft proposes some tax adjustments to further encourage state and municipal utilities and electric cooperatives to embrace retail competition.

Barton's silence on the date-certain issue wasn't surprising, the Hill observer said. "I think that's becoming less and less of an important issue because 24 states have already passed bills" opening their retail markets to competition. These states represent about 65-70% of the electricity consumers in the nation, he estimated.

The draft has been circulated to lawmakers on the House energy and power panel for their comment. Actual legislation from Barton is not expected to emerge until September, said a spokeswoman for the Texas Republican. Commerce Committee Chairman Thomas J. Bliley (R-VA) has sent Barton a letter requesting legislation by Sept. 21st, according to a subcommittee aide. Mark-up on a House restructuring bill is "still up in the air at this time."

Extends FERC Rule

The Barton draft would enhance FERC's jurisdiction over the power transmission grid, extending to it authority over the 34% of the system that is currently non-jurisdictional (state and municipal utilities, cooperatives and federal electric utilities). It further clarifies that the open-access provisions under Order 888 would apply to all transmission systems.

A gas lobbyist anticipates there may be a "big debate" over how much new authority to award the Federal Energy Regulatory Commission. "Personally, I don't think the Barton measure does" give the Commission an inordinate amount of authority, he said.

To further reduce barriers to transmission access, the draft proposal urges transmitting utilities to form and/or join regional transmission organizations (RTOs) within three years after the enactment of the bill. If utilities fail to act by then, it would give FERC the power to order their participation in RTO groups, which would oversee the operation and control of regional utility transmission facilities. The draft measure also directs the Commission to establish incentive rates for the removal of significant transmission constraints by RTOs.

It proposes the establishment of an electric reliability organization (ERO) to develop "enforceable" reliability standards for the transmission grid. In the United States, FERC would have jurisdiction over the group and would have approval authority over the standards. The draft proposal further directs the ERO to take "all appropriate steps to gain recognition" in Canada and Mexico, and directs the administration to use its "best efforts" to enter into agreements with the two countries to ensure effective compliance with reliability standards.

Barton also attempts to remove some of the barriers to transmission facility siting by authorizing interstate compacts to coordinate with states on the planning and siting of facilities on a regional basis. This has been a key concern for utilities, many of which say the siting problems are responsible for transmission constraints that have resulted in the spikes in power prices during the summer months. Additionally, the draft gives FERC the authority to order a utility to expand its transmission system, after convening a joint federal-state board to discuss the need for the expansion.

To further enhance competition, the Barton draft proposes prospective repeal of the mandatory purchase provision of the Public Utility Regulatory Policies Act of 1978 (PURPA). Contracts between utilities and qualifying facilities that were in effect as of Jan. 6, 1999 would remain whole, however. It also proposes repeal of the Public Utility Holding Company Act of 1935 (PUHCA) one year after the bill's enactment.

And in an attempt to further reduce market-power abuse, the draft proposes that review of electric utility mergers be transferred from FERC to the Department of Justice and the Federal Trade Commission, which have authority under antitrust laws. FERC, however, would have oversight over all sales of utility generation and transmission facilities.

Susan Parker

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