The electricity restructuring legislation that survived markupby the House Energy and Power Subcommittee last Wednesday is ashell of the bill that was sponsored by Chairman Joe Barton (R-TX),energy industry lobbyists say.

“There ain’t much of a bill left. Markup was not a pretty scene,but it got done…..There were several amendments passed thatpretty much took what remaining [federal] authority the bill hadand kind of sucked it away,” said a gas industry lobbyist. “Ithought it was a pretty weak bill to begin with. And they have made[it] even weaker. Some might argue that it even goes backwards”from the status quo in the industry now.

The marked-up bill, which squeaked past the subcommittee by avote of 17-11, included several amendments that “pretty muchgutted” provisions that would expand FERC’s authority in certainareas, such as utility mergers, and it weakened the federal role inothers, such as requiring states to adhere to retail reciprocity,establishing uniform standards for interconnection to thetransmission grid, setting up aggregation to market power tosmaller customers, the creation of regional transmissionorganizations (RTOs), requiring utilities to provide net meteringfor small generators, and over consumer protection.

“All of the powers will be kept to the state level. Nearly allof the new authority that was proposed for FERC has in my humbleopinion been gutted,” the gas lobbyist noted. He said probably themost damaging amendment that passed was the one offered by Reps.Albert Wynn (D-MD) and Robert Ehrlich (R-MD), which he estimatedscrapped “about five or six sections” of Barton’s bill. It eitherpurged or watered down “nearly all of the areas where there waspotential federal authority,” he said.

“I’m certainly concerned [on this score]. I think that there wasa movement or belief by the subcommittee that more things needed tobe decided by the states. And as a consequence, things likemergers, things like interconnects and so on were all basicallypunted to the states to decide,” noted John Sharp, vice presidentof governmental affairs and counsel for the Natural Gas SupplyAssociation. “In the end, they gave too much stuff to the statesand took too much from FERC.” He especially was concerned by anamendment sponsored by Rep. Cliff Stearns (R-FL) that eliminatedthe reciprocity section of Barton’s bill.

“I don’t agree at all with what was done to the reciprocityprovision. Basically, the original Barton provision said that ifyou [a generator] are in a closed state, you cannot sellelectricity into or compete in an open state. But the subcommitteedecided [during markup] that these reciprocity provisions on thefederal level were inappropriate and struck them.” Sharp also saidthere were “a lot of changes to the distributed power section,”which he hopes will be either eliminated or modified by the fullCommerce Committee. He noted distributed power is a big user ofnatural gas.

“I would give the bill a D minus, minus, minus,” said LynneChurch, executive director of the Electric Power SupplyAssociation, which represents power marketers and competitivegenerators. “Its fundamental problem is it does not send themessage that Congress wants a competitive wholesale power market.The subcommittee missed the opportunity to create an atmosphere fora seamless grid across the country.”

She, too, was concerned the subcommittee has taken away orcurtailed FERC’s authority over mergers and grid interconnections,which she believes “sets the stage for a very balkanized situation”in the power market. And although Church had “mixed” feelings aboutthe reciprocity provision, she noted “it was at least the one partof the bill that was going to provide incentives to states to openup their retail markets.”

Marty Kanner, coordinator of Consumers for Fair Competition(CFC), doesn’t see it as a FERC vs. state issue. For him, “it’s aquestion of having a referee [in the power market], or having noone and leaving it to the monopolists. The bill didn’t give powersand take powers from FERC and [then] give them to the states.Rather, it either took from or failed to give the FERC authority tolook at things that would be exclusively within [its] jurisdictionbecause they’re interstate commerce issues. [But] it’s not leavingthem to the states. It’s leaving them to nobody,” he said. A goodexample would be the creation of regional transmissionorganizations, Kanner noted. “States can’t do that. The billdoesn’t give FERC the tools to do that. So, it leaves it tonobody.”

Commerce Chairman Thomas Bliley (R-VA) has pledged to bringrestructuring legislation before the committee early next year.”My guess would be that Chairman Bliley [first] would want tore-write this bill. It doesn’t represent anything close to what hebelieves in,” the gas lobbyist said. And, he added, getting arestructuring bill through the full committee won’t be an easytask. “I don’t think that there’s very many members who are willingto tinker with the status quo on this at all. They’re just veryrisk averse.”

Kanner agreed that a re-write of the bill was in order. “I thinkthat’s the only chance for the interests of competition to beserved, and I think it’s the only chance for getting a billenacted. Candidly, if this is the same proposal that’s in play atthe full committee, our organization and a lot of others will doeverything they can to defeat it.” Kanner’s group represents a widerange of transmission users, including power marketers, industrialcustomers, utilities, small business groups and consumerrepresentatives.

Americans for Affordable Electricity (AAE), which represents abroad coalition of power users and marketers, also was disappointedwith the bill voted out by the subcommittee, saying it would notresult in a competitive or reliable electricity system. It stripsaway federal oversight for wholesale electricity transactions thatoccur on the interstate grid, the group said, adding that it hopesto see a “more balanced and fair process” as the bill advancesthrough the full committee.

Prior to markup, even Bliley conceded he had reservations withthe Barton bill. He said that while he was “pleased” thesubcommittee was “finally taking this initial step” towardsrestructuring the power industry, “I would be remiss if I did notmention that I still have concerns about this particular bill.” Forexample, “I don’t know if this bill strikes the right balance forconsumers. I have questions about the [Public Utility Holding Act]provisions and the market-power provisions.” Following markup,Bliley didn’t comment on the substance of the amended bill. Hisoffice released a statement saying the chairman was “pleased tohave received the subcommittee product,” and that he “had a numberof options at his disposal” when the full committee takes uprestructuring next year.

Unlike Bliley, CFC’s Kanner didn’t hesitate to list the bill’sdrawbacks. The amended Barton bill “doesn’t do the things that areneeded to have a competitive marketplace. It doesn’t separate thetransmission system from the merchant function. It doesn’t providefor meaningful review of utility mergers. It doesn’t address overlyconcentrated generation markets. And it doesn’t look at utilitiesleveraging captive ratepayers to finance competitive affiliateventures.”

Susan Parker

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